Moneywise's 10 golden rules of saving

1. Write a budget

Only when you know exactly how much money you have coming in and going out on a monthly basis can you work out how much you can afford to put in a savings account. Be realistic - commit to save too much and you'll end up busting your budget and going overdrawn.

2. Free up more spare cash

Go through your budget and see if they are any regular expenses that can be trimmed or scrapped altogether. Do you really need that mobile phone insurance, could you get a better deal on your home or car cover, are you spending too much at the supermarket? Once you have a budget it's easy to see what areas of your spending can be cut.

Watch our Moneywise TV episode: Cut your weekly outgoings in a flash

3. Save at the start of the month, not the end

If you just save whatever you have at the end of the month you'll invariably save very little. Instead, set up a standing order for a fixed sum to be transferred from your current account into your savings account the day after pay day. That way you'll have no opportunity to spend it and you'll quickly get used to the money going and manage to live within your new budget.

Watch our TV episode on how to choose a savings account

4. Make the most of your ISA allowance

Each year you can save up to £5,100 a year in a cash individual savings account where all interest is paid tax-free. If you have a non-ISA savings account paying 3%, that rate is effectively reduced to 2.4% for basic rate taxpayers and 1.8% for those that pay the higher rate.

For the best current deals on offer check out our best cash ISA rates article

5. Review your savings accounts once a year

Just because your savings account was at the top of the best buy tables when you opened it, it probably isn't now. Banks reduce the rates on savings accounts over time, particularly once they are closed to new customers and replaced with better deals.

So, if you've had your account a few years or more there's a good chance it's paying less than 1%. Check out the Moneywise savings and cash ISA round-ups which provide you with all the details of the best accounts.

6. Don't fritter away your cash

Think about how much you spend in a typical working day - £1 for a newspaper, £2 for a coffee, £4 for lunch - the money quickly racks up. Keep a money diary detailing everything you spend for a week and you'll quickly identify your spending weak spots.

7. Don't save if you have debts

Saving feels good - but there's absolutely no point ploughing your spare cash into an account paying 1,2 or even 3% if you've got a big credit card bill that's racking up interest of around 20% a year. It's sensible to have some money in an emergency fund but try not to prioritise building this over clearing your debts.

8. Fix if you can afford to

If you can afford to tie your money up for a year or more it often makes sense to plump for a fixed rate account. Fixed rate accounts typically pay a higher interest rate (the longer the term, the higher the rate) and as penalties for withdrawing your cash are steep, there's no temptation to raid your account.

The potential downside is that if bank base rates rise you may find your account looks less attractive and you can't access your cash and switch. You can avoid this by sticking with short-term fixes.

9. Don't sit on piles of cash

It's important that you have some money you can access in a hurry - experts suggest around six months salary in a no-notice account. However it doesn't always make sense to keep all your money in cash accounts. If you have at least five years before you'll need your money then it's worth considering investing, especially when interest rates are low.

One option is to transfer an existing cash ISA into a stocks and shares ISA or you can start by investing a small sum each month into a well managed investment fund - again within the ISA wrapper to ensure you don't pay any tax. The danger with investing is that the value of your investment could fall, but if time is on your side you should be able to ride out any volatility and end up with a higher return than you would have got if you stuck with a cash account.

Check out
our investment pages to find how to get started and get our tips on the right funds for you.

10. Don't forget your retirement

We all save for a rainy day - but what exactly constitutes a rainy day? It's probably the day your car or boiler breaks down or the day you fall sick or lose your job. But the day your retire could also fall into this category if you haven't made preparations. According to recent research from Defaqto, only 40% of Brits are currently saving for retirement.

The easiest option is to join your employers scheme or, if that's not an option consider taking out a simple stakeholder pension. Although pensions have suffered a hard press they are very tax efficient. Tax relief at 20% means it only costs basic rate tax payers £80 to invest £100, while higher rate taxpayers get tax relief at 40% meaning a £100 investment only costs £60.

Check out our pension pages to help you make the right retirement choices.

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Your Comments

"Each year you can save up to £5,100 a year in an individual savings account where all interest is paid tax-free"

The limit on an individual savings account is actually double this amount - £10,200 in the current 2010/11 tax year (increasing to £10,680 in 2011/12). A maximum of half of this amount may be deposited in a Cash ISA in any one tax year.

Any amount previously accrued in Cash ISAs may be transferred into a Stocks & Shares ISA at any time. Note that if you are considering this option, you should request a 'transfer form' (rather than withdrawing and attempting to re-deposit the amount in the Stocks & Shares ISA) to ensure that the cash retains its tax-free status.

Shares offer far greater rewards over the long-term, particularly as there are hardly any Cash ISAs currently available which offer a return in real-terms (i.e. after RPI inflation) unless you're willing to lock up your cash for 5 years.

There is obviously more risk involved with shares than with cash - but look at figures over the long-term and you'll see that the possibilities of making a positive return in real-terms are greater than with cash.

Your feature about money saving is good and easy to understand. I would like to tell you about a tip in the section 6 about frittering away cash. Here it is below
Reducing charges: Using wisely a cash advance facility of an account with a plastic card.
Suppose a cash advance or withdrawal from an account with a plastic card is required and the cash advance fee is 2.45 percent with a minimum charge of 2.70 applying and a cash advance limit has not been exceeded. How much cash can I have from the card?
Use the minimum charge and divide it by the advance fee ignoring the percent or symbol, then multiply the result by 100. This example has the answer 110.20 and the amount can be rounded up or down to the lowest denomination or currency unit of note or bill dispensed by an ATM or cash machine. In the UK this is 10 GBP and rounding down to 110 GBP to not exceed the minimum charge is done, or rounding up to 120 GBP is done and a charge of 2.94 GBP would apply to that advance if taken. Interest at the rate for a cash advance may also apply from the date of the withdrawal. For larger amounts it is sometimes better to make one full withdrawal than two smaller ones within a period of 10 to 28 days and this depends on the fees and minimum charges. As an example, one advance of 160 attracts a charge of 3.92 and interest while ones of 70 and 90 taken 17 days apart would be charged 5.40 and interest. However, the difference in total costs is not 1.48 as interest would not start to be charged on the 90 advance until 17 days after the 70 advance and that can be taken into account but the two advances would still cost more than one.

There are also ways you can be crafty about keeping your lifestyle 'extras', but make them impact your bottom line considerably less than they otherwise might. For example, I am a Starbucks addict, but after a friendly chat with one of the Baristas at the end of last month, she handed me a book of 50p off vouchers for the whole of January.

I also have a Starbucks Card, so this makes the 'extras' and syrups free. I have a Starbucks flask for takeaway drinks, and that shaves 30p off the cost every single time. Because I work within 1 mile of the Starbucks I go to, I get a 10% Alliance discount. And finally, topping up my Starbucks card on my Cashback credit card effectively shaves another 2% off the cost.

So, for a coffee that would cost someone paying cash off the street £3.15 (Grande extra shot, extra hot, sugar-free vanilla latté... and yes try saying that 5 times fast), I actually walk away paying just £1.47 (after adjustment for the cashback card usage), which is *less than half price*.

Sure iit still adds up to £45.57 a month on a non-essential, but it's a luxury I like to have, and budget accordingly. But £45.57 a month is quite a change from £97.65 for just simply paying cash, and with no real effort on my part!

Don't necessarily cut back on your luxuries, but shop for them smarter!