With the latest figures showing that one in four Brits spends 40% of their monthly income on non mortgage debt repayments, it seems that its now harder than ever to save.
Recently, inflation increased to 4.5% with experts suggesting that it could be up to 5% by the end of the year. With Christmas countdown already beginning for retailers and the rise in price winter utility bills, the prospect of saving could be overwhelming.
Whether you want to save a £100 or £10,000 there are many ways this can be done without it becoming an overwhelming task.
Here is a quick guide on saving for different amounts and which method of saving might be best for you.
How to save £100
If you need to save any cash at all, one of the first steps you should take is by opening a savings account. The Post Office currently offers one of the best interest rates on the market for a savings account. The Online Saver Issue 4 account has an annual gross interest rate of 3.01% when you deposit any amount between £1 and £2 million. You can also withdraw your money without any penalty fees or charges, which can occur with tax free savings accounts.
By setting aside regular amounts and cutting down on non-essential expenditures you could soon save £100.
Compare savings with Money Expert
How to save £1000
If you wish to save up to £1,000, one of the best ways of doing so is by saving regular amounts.
You should also consider the time frame in which you want to achieve your financial saving goal. For example, if you want to save £1,000 over the course of a year you could set aside a minimum of £84 each month to reach your desired amount. It would be unlikely that you would make a significant amount of interest on your savings due to the base rate remaining so low. Yet a savings account is still an integral starting place to make any kind of saving.
How to save £5,000
If youíre looking to save £5,000 in a year there are many ways you can do this, just be changing a few simple habits. It all comes down to making sure that you get the best deal for your money and working out what you really need. For example, by switching your Sky+ subscription and swapping it for a Freeview box you could end up saving well over £100 a year.
Next year the analogue terrestrial TV signal will be switched off so everyone will need a digital receiver in order to watch TV. If you are new to digital TV, a Freeview box, without a monthly subscription, is one of the cheapest options to go digital.
Along with switching your broadband provider, energy suppliers and finding the cheapest place to do your weekly shop, you could save £1,000s over the course of a year.
With all these savings youíre going to need an account that is the most suitable for you.
Individual Savings Accountsís (ISAs) are tax-free savings accounts where you can save up to £5,340 in one tax year with a cash ISA account. With the ISA being tax free this means that you do not pay the basic tax rate on the interest earned. However, again with the base rate being so low, any return at the moment is minimal.
Compare cash ISAs with money Expert
You can only open one cash ISA in any tax year and it is similar to a normal savings account in the sense that you can take cash out whenever you want. With the interest gained in the account, basic taxpayers would earn a quarter more interest at the same rate in cash ISAs.
The highest tax free interest rate on an ISA account is 2.80% from Northern Rockís Cash ISA. Yorkshire Bank offers cash ISA fixed rate interest at 3.30% for 1-year accounts and 4-year accounts according to the latest study by This is Money. However the Yorkshire Bank rate of 4.5% for a 4-year account is only fixed until 29th September 2012.
As of November 1st Junior ISAs will be available to the public. This is a new form of tax-free child savings, which will replace the government Childs Trust Fund (CTF). Anyone under the age of 18 who does not have CFT is eligible to apply. However, you cannot save as much, as the limit will be up to £3,6000 a year across cash and stocks and shares ISAs.
Stocks and shares ISAís are similar to cash ISAís in that they are an effective way of saving tax free, however they let you put your money into a range of investments.
Some ISA accounts have a minimum deposit.
Compare investment ISAs with Money Expert
How to save £10,000
ISAs can also be a good way of saving if you want to save more than £5,000 as every adult has an overall allowance of £10,680 each tax year; however the maximum for a cash ISA is £5,340, leaving you up to £5,340 to invest in stocks and shares ISAs if you wish to do so.
A stocks and shares ISA (also known as equity ISAs) is a riskier investment than a cash ISA because you are investing your money into the stock market in the hope of making more than you would on any interest account.
Experts and investors have tipped gold as the next hot financial investment. Gold has become fashionable again in the world of finance, and prices have shot up over the summer. Between 11th July and 11th August 2011 the price of spot gold traded from $1,544.2 per troy ounce (31.10 grams) to $1,800.
With inflation hitting savers hard and the likelihood that it will increase to 5% before the end of the year, many savers are looking to inflation proof their savings. Yorkshire Building Society has an inflation linked bond which pays a total of 16% gross over a 6-year period or 100% of any increase in the retail price index.
The Protected Capital Account 8 from the bank allows the bond to be held in an ISA account with a minimum investment of £3,000 and a maximum of £85,000. You can also transfer money from other ISA accounts so that large sums can be protected from the increasing rate of inflation.
If investing and ISAís are not for you, a long term savings account might be more suitable. Scottish Widows offer a 5 year fixed Term Deposit with a minimum investment of £10,000 and a gross rate of 4.25%. This rate is paid annually and the deadline to apply is the 13th October.