How to save more

Saving money is something we should all do more of - choose one of many savings accounts with an attractive rate of interest and you'll soon see the benefits. You might worry you haven't got enough money to save any but when you start to save youll soon find you have more money than you realised!

You may be one of those people who don't have a definite goal in mind for your savings but recognise the need to save for a rainy day. In that case, don't try to save money consciously - sneak up on yourself by opening a savings account and then set up a direct debit or standing order from your current account to pay money into on a regular basis. This way, saving requires no regular effort on your part to remember to pay money in.

Alternatively you may be focussing on a specific 'big ticket' item like a deposit for a house, a new car or a trip to relatives in Australia. Definite goals are highly motivational and you could surprise yourself by finding you have the discipline to cut down on day-to-day spending in order to save to reach your goal.

If you are saving seriously, your first step should be to work out your budget - be honest with yourself about your spending habits - and the work out what you can save and where you can cut back spending to save a little more. You should review your budget roughly twice a year to make sure you're on top of things.

Thanks to the miracle of compound interest your savings will grow each year with the interest you've already earned actually earning interest itself. Interest on interest gets very interesting when youre receiving it!

You should also make sure that you're saving money as (tax) efficiently as possible. If you're a non-taxpayer you should fill in HMRC Form R85 to receive your interest gross (i.e. free of tax). If you're one half of a married couple or civil partnership in which one partner isn't working, consider putting your savings in their name to dodge tax on the interest! If you're a taxpayer, you can still save tax efficiently through a Cash Individual Savings Account (ISA) and you should consider opening a Cash ISA first before any other type of savings account.

Last Updated: April 2008 © Moneyextra.com

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