You need to work at your savings.

In the struggle to make ends meet on a day to day and week to week basis it can be easy to forget the reasons that we need to put some money aside for the future, as well as the benefits of doing so. Saving money is not difficult, but it doesn’t just happen automatically. It’s all about planning and figuring out how to keep some of the money you have today to use at some point in the future, whether it’s next week, next month or in twenty years’ time.

If you don’t save it’s generally because you don’t plan to save.

You have to make it happen. You have to start by considering the timescales involved. Break down your savings into three areas – and this is the really easy bit. Short term, medium term and long term are the timescales you need to consider. Short term should cover day to day needs and make sure you have some ‘rainy day money’ for emergencies, medium term can help with things like a deposit for a new car or house, and long term is essentially retirement planning. Try to move some money every month from your everyday current account to a savings account. And do it as soon as you get paid so that you know it will happen. don’t leave it until the end of the month with a vague promise that ‘I’ll transfer whatever’s left’.

Apart from the need to have money put aside for the future it’s also usually the case that the rate of interest paid on a savings account will be higher than that paid on your current account, although interest rates are so low at the moment that you really need to do your homework to make sure you are getting the best deal you can find.

Remember that interest on building society and bank accounts may be taxed at your highest rate of tax, so if you have unused ISA allowances it may be worth using them first.ISA allowances go up to £20,000 next month so there is a significant amount that can be built up there safe from HMRC.

Pensions are very tax efficient for your longer term savings since you may well be able to claim tax relief at your highest rate of tax. The fund you invest in is able to grow in a tax free environment, and under current legislation you are able to take up to 25% of the fund as a tax free lump sum at retirement.

So, dead simple. Short term, medium term and long term. And do it!

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