Top tips to help start the savings habit

Steep living costs are making it harder than ever before for people to save, but putting away just a few pounds a month is better than nothing at all.

Worrying new research from MoneySupermarket has found that the average age people start saving in the UK is 25, and four in ten Brits aren’t currently saving anything.

Those who have never saved at all will only start at an average age of 38, thirteen years behind the national average of those who already save or have done in the past.

Perhaps more disturbingly, 64% of people who have never saved said they didn’t know when they would be able to start, or didn’t ever expect to start saving.

You don’t have to put away large sums every month to start building a nest egg – plenty of easy access accounts pay high rates of interest on as little as £1. Here, we take a look at why saving is so important and the best ways to kick start that rainy day fund…

Reduce outgoings to make savings

Nearly two thirds of those currently not saving have managed to put away money in the past. When asked why they had stopped, 57% of this group blamed lack of disposable income.

If you’re struggling to find any spare cash to put away, sit down with your bank statement and look at any ways in which you could make savings. Could you cancel that gym membership, or can you start taking your own lunch to work rather than buying it every day?

Take a look at some of the other ‘luxuries’ you might spend on – if you splurge on magazines regularly you could agree with friend that you each subscribe to different ones and then swap at the end of the month.

You should also try out different cheaper food brands when you are shopping – they often taste the same but can help your reduce your grocery bills.

These changes might seem trivial, but they should enable you to start saving a few pounds each month.

Opt for easy access

If you are a novice saver, then an easy access account is a good place to start.

Kevin Mountford, head of banking at said; “Simple 'easy access' accounts are probably the best option for first time savers and those taking a ‘jam jar’ approach to saving, as they can be accessed via a number of different channels and some can be opened with as little as £1.”

Despite the fact the Bank of England base rate is still at 0.5%, it is possible to earn more than six times this in interest with some easy access accounts.

Coventry Building Society’s Poppy Online Saver account, for example, pays 3.15% annual interest on a minimum investment of just £1 and allows you up to four penalty-free withdrawals a year.

The rate includes a bonus of 1.15% payable for the first year so you may want to move your money when this disappears.

The NetSaver account from Derbyshire Building Society, part of Nationwide Building Society, pays 3.11% annual interest before tax on balances from £1 and allows unlimited, penalty-free withdrawals.

However, this headline rate includes a hefty 2.11% introductory bonus lasting until November 30, 2012, so you will need to move your money then.

ING has just increased the rate on its Savings Account to 3.10%. This rate is fixed for the first 12 months after which is drops to ING’s standard variable savings rate which is currently 0.5%.

Another option worth considering for savers with small sums to deposit is the Post Office Online Saver account.

This account, which pays 3.01% can again be opened with as little as £1 and you can make withdrawals whenever you want. The headline rate includes an introductory bonus of 1.36%.

Use tax-free allowances

Once you’ve built up some easy access savings which you can get your hands on quickly, you should make the most of your annual tax-free savings allowances.

You can invest up to £5,340 in a cash individual savings account (ISA) this year, without having to pay any tax on your returns.

Northern Rock’s e-ISA Issue 2, for example, pays 2.80% tax-free a year on a minimum investment of £1 and this rate does not include an introductory bonus that will disappear after the first year.

Principality Building Society’s e-ISA Issue 2 also pays 2.80% on a minimum investment of £1, although this rate includes a bonus of 1% for the first 12 months, so you may want to move your money at the end of this period.

Save regularly

One of best ways to get into the habit of saving is to get used to paying the same amount into a savings account every month.

There are plenty of regular savings accounts available which are specifically designed to encourage people to do exactly this. Another advantage of this type of account is that you usually can’t make withdrawals, which is useful if you think you’ll be tempted to dip into your savings.

Mr Mountford said; “As a rule, people should always try to avoid dipping into their pots.

Those with a tendency to do so may be better off with regular saving product such as a fixed rate bond, where the money is locked away and funded monthly with required deposits typically ranging from £20 to £250.”

For example, West Bromwich Building Society’s Regular Saver Adult account pays 4.10% annual interest if you pay in at least £10 a month. 

The maximum you can pay in each month is £250. You can’t make any withdrawals during the one year term of the account, but you can miss up to two calendar monthly payments.



Whichever account you choose, remember that while putting away just a few pounds might not seem like much now, over several years it will build into a nest egg that could be a huge help in the event of an emergency.

Kevin Mountford, head of banking at, said: “The perceived wisdom is that we should all have between three and six months’ worth of salary as savings, but clearly in the current climate many will feel that this is out of reach and as a result don’t bother trying to save anything at all.

“However, every little helps, and savers who can only afford to put small amounts aside shouldn’t be disheartened, it’s all about shopping around and making sure their money is working as hard as possible for them.”

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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