The Art and Science of Saving

For most of us, putting aside a fixed amount of perfectly good money each month is hard work, but the fact is you can save, even if it’s only a small amount.

No matter what your age, gender, race or professional status, you should think of saving as a fixed monthly expense, a regular part of your budget, just like your car or mortgage payments. As a rule, you should aim to save at least 5 to 10 per cent of your pay each month.

Six Simple Saving Schemes

- Think of saving as fixed monthly expense. Saving is something you must do, like paying your mortgage, even if it’s only a small amount every month. While there is no magical number for how much you should save, 10 per cent of your monthly income is a realistic amount aim for. If you manage to save more than that, all better. Some financial professionals recommend that you put 10 per cent a month into your retirement scheme alone, and another 5 per cent into a savings account.

- Use the money in your current account to pay your daily living expenses, and keep the money in your savings account sacrosanct. You should aim to build up a cushion of no less than three month’s income in your savings account, for emergencies.

- To make savings enrol in a savings plan that automatically deducts money (the amount is determined by you) from your current account each month. That way you won’t be tempted to spend it.

- Don’t save your hard-earned money under the mattress where a mouse or burglar might find it; instead, invest in a pension scheme such as the state-sponsored individual Savings Accounts.  Inaugurated in April 1999 (they replace TESSAs and PEPs), ISAs allow you to put money away for the future on a tax-free basis.

- Invest in a money market funds pay a higher interest rate. Nearly as safe as a bank’s saving account, these funds pay a higher interest rate. You can buy a money market fund through a unit trust company, a brokerage firm or a bank. And you can have money automatically drawn from your pay cheque and placed in the fund before you get your hands on it

- Set a savings target for the year – 10 per cent of your annual income, at a minimum – to give yourself something to aim for. If you reach your goal early, treat yourself. Spend the equivalent of what you put away each month – new (not saved) money – on something you really want; it’s a treat that you have earned. If you don’t achieve your goal early.