Get the savings bug in 2012

Whether you have unhealthy debt levels or want to plan for your retirement, take the time now to rethink your finances and see the positive side effects throughout 2012.


Admittedly, interest rates aren't what they used to be. Savers could find accounts paying up to 7% in the heady pre-crunch days. The average is now a more subdued 0.93% on easy-access accounts. However, saving regularly is still a good habit to get into. The best place to put your money will depend on how easily you need to access it and if you have a small amount to put away each month or a bigger lump sum.

How to best invest a lump sum

Interest rates on easy-access accounts are lower than on fixed-rate ones, which pay higher interest in return for locking your money away for one, two or five years. Initially you should build up an emergency savings pot of at least three to six months worth of salary that you can get to easily. Always use your ISA allowance first, as you would pay no tax on the interest earned.

To illustrate, with an ISA rate of 3%, you receive all interest earned whereas with a savings account, a basic-rate taxpayer would receive 2.4% interest after tax and a higher-rate taxpayer would only earn 1.8%.

If your annual cash ISA allowance is already used up, see if your current account provider offers any preferential savings rates. For example, First Direct and HSBC current account holders can take advantage of their banks' regular savings accounts, both paying 8%.


A quarter of Britons (26%) don't give themselves a clear budget each month, according to the Institute of Financial Planning. It may seem like a dull process but it ensures you have no nasty surprises.

Divide your expenditure into two parts: essential and non-essential. Mortgage or rental bills, household costs, including food, travel and any bank or credit card loans fall into the essential category.

Non-essential expenses would include holidays, going out and leisure activities, such as gym membership and hairdressing appointments.

Note down how much you spend each month, or each week if you find it easier, and don't forget to factor in one-off costs, including the annual MOT and extra expenditure for Christmas.

You will now be able to see how your expenditure matches up to your total monthly earnings. Do you have any money left over you could put into a savings account? Or are you spending more than you're earning? If so, see if there's anywhere you could cut back - for example, do you use your gym membership - or could you get your purchases cheaper elsewhere?

Loyalty rarely pays and in these cash-strapped times, bartering could see you save on anything from your mobile phone deal to your energy bill.

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