Starting small with savings

Even if you only have a few pounds to set aside each month, those small amounts add up over time.

08:16 14 December 2013

The word “savings” means different things to different people. You might feel that unless you have more than a hundred pounds to set aside in savings that you will not bother to save. This can be a disheartening view if you are already scraping together enough to make ends meet. In reality, you can still save, but you need to decide how to best maximize the return on the funds you save. Saving a little goes a long way.

• Compare:  even if you do not have a lot of money to set aside for savings, you should still devote some time to comparing different savings options. Some accounts may have minimum amounts that are beyond what you can currently afford. Do not let that discourage you from choosing what appears to be the best option. If you cannot open that account right away, put the funds into a regular savings account or even a jar at home until you have enough to open the account you want.

 

• Effective savings:  it is important - especially if you are not able to set aside a lot of money for savings - that you try to find a way to earn compound interest on the money. This just means that you will be earning interest off previously earned interest, in addition to the funds you deposit.

 

• Reduce expenses:  even if you still have debt, try to set a small amount aside each week if possible, like the cost of a drink at a bar or a coffee. If you have a lot of debt, it is even more important for you to have savings for emergencies so you will not go further into debt. Reduce expenses as much as possible to free up money and start paying a little extra on any small debts that are only a few hundred pounds.