Best way to save?

djbum_syd

Hi everybody,

I'm very dense when it comes to the world of savings, but I've decided I need to start putting something away.
I'm looking at saving over a period of 3 years and whatever is there at the end spending it on university or a little holiday.

My question is, as I don't really know a thing about a savings accounts, ISA's, etc.
What is the best way to save and earn good interest?
Are there fixed rate 3 year ISA accounts?
As I said, I don't know a thing. Any advice would be appreciated and taken on-board.

I'm looking to save £20-30 a week. (£80 at least a month)
Many thanks.

opinions4u

I think the main thing at this stage is to make savings a habit.

There are two key elements to this habit:

1) You save before you spend. Get paid, stick money in savings account, spend what's left over. Not the other way round.
2) You don't "dip in" to your savings. You spend them for a specific pre-determined purpose.

Additionally, I'd suggest any extra money you get (e.g. overtime, bonus, gift etc) you automatically save 75%-100% of what you get. Otherwise you can end up consuming it in the pub, buying stuff you never use or having a wardrobe full of very nice clothes that you never wear.

At this early stage, I wouldn't worry too much about 3 year ISAs (they normally need a lump sum up front anyway) but you can research good deals at places like www.moneyfacts.co.uk/savings. In your circumstances I would look at cash ISA, regular savings and easy access accounts.

For convenience, you may prefer to use your own bank. This may, however, have an element of temptation to it. If you feel that you may lack discipline, saving with a provider other than your own bank may be more appropriate.

It is useful to know what your savings objectives are. You look to be in a good place on this. I'd suggest considering the following in order of priority:

1) Building up a contingency fund that would allow you to fall back on 3-6 months net pay should something unexpected happen like illness or redundancy.
2) Preparing for known events (usually annual ones) like Christmas, birthdays, car insurance renewals and servicing, holidays etc.
3) Preparing for unknown events that are, at some stage, inevitable - like replacing an electrical item that is failed or dates (e.g. TV, laptop, iPod, mobile, washing machine, PS3 etc) or fixing a damaged car.
4) Thinking more medium term, as you seem to be and looking at education, car replacement, getting on the property market etc.
5) Thinking longer term and looking at the education of your own children (even if they aren't born yet) and your own retirement (even if you're still in your teens - starting at 20, rather than at 30 can double your income in retirement.

Initially, I'd open a decent paying easy access cash ISA (assuming you pay tax) and look to throw as much money in there as I can. Make a point of reviewing your interest rate every 3 months or so. One of the ways that banks make a lot of money is by gradually lowering the rate of interest that they pay you. Customers who can't be bothered lose out. Those on top of their finances will move to the new "best buy" or similar and stay ahead of the game.

While saving is a good habit, and far better than overdrafts, credit card debts etc, don't forget to enjoy life too!

Rob_192

Good advice there from Opinions4u, especially the bit about saving before you spend and getting into the savings habit.

R

27col

Agree with Opinions4u. Many many years ago my twin brother said to me that he did not have any money left over to save at the end of the month. I distinctly remember saying to him then, that you had do the saving first, and spend what was left after you had done the saving bit. He died a few years ago, so I am not sure whether he took my advice.

djbum_syd

Hi,
Thank you for your help.
Many thanks Opinions4u for that vast help.
I intend to pay in weekly to my savings, as I get paid weekly, so I should be ok with saving before spending. (I hope! Lol)
I'll speak to my bank about ISA's, see what they offer me and then shop around to see if I can find a better deal.
Thank you all, again.