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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

How to save money

You don’t have to be rich to save money. Anybody can do it, and it’s easier than you think. It doesn’t matter how much – or how little – you have, its all about building good habits so that you can maximise the value of your money.

When should I start?

There is an old proverb that says the best time to plant trees was twenty years ago. The second-best time? Today.

Even if you can only afford to save £10 today, that could represent the seed that grows into a big hulking money tree in your future.

So how do you begin?

Choose a savings account

First and foremost, you need to where to save your money. If you wanted to be comical you could keep your money under your mattress or in a shoe, but money has this annoying tendency to become less valuable over time. It’s called inflation and it’s the reason why we have to jump through so many hoops to keep our money growing.

Banks offer an array of savings account options, so it’s just a matter of shopping around until you find the best one for you. You don’t have to save your money with the same bank that you use for your everyday account. And you don’t have to stick with a traditional high street bank either – digital banks and challenger banks sometimes offer more competitive rates, as they do not have the same costs that an older bank has.

Understand your interest rate

Until recently, the UK, Europe and the USA have been low interest environments. It’s therefore difficult to find a savings account offering inflation-beating interest rates. Easy access savings accounts tend to offer lower rates than notice savings accounts, as you are paying for the privilege of being able to withdraw your money at any time.

Banks encourage savers to choose savings accounts that require one, three, six or 12 months notice before any withdrawals are made. The bank can then use that money to earn more money by lending it to others. How do they encourage longer-term savings? By offering better rates on these accounts.

If you are saving for the long term, notice accounts are a great way to maximise the interest paid on your savings. But if you think you may need to dip into your savings in an emergency, then an easy-access account may be the better option for you.

Create a savings schedule

If you are earning a regular wage, the easiest way to save money is to set up a direct debit or standing order which takes money straight out of your weekly or monthly paycheck and into your savings account of choice. Try to do this as close to payday as possible before you have the chance to get used to the extra money in your bank account!

You can amend your direct debits every month, if need be, saving less one month and more the next – the important thing is just to save something on a regular basis. This consistency will pay off handsomely in the future.

Not everyone is lucky enough to have a regular income, but that doesn’t mean you can’t save. Decide ahead of time what percentage of every amount invoiced you’ll put towards your future. When the money comes in, immediately move your allocated percentage to your savings so you don’t accidentally spend it.

Maximise your earnings

You can only save money that you don’t need to spend. With cost of living rising, everyone is spending more, and there is little wiggle room in household budgets. This means you may need to look at ways to maximise your earnings. Ask for a pay raise, look for another, better-paying job, or investigate side hustles or part-time jobs to top up your existing earnings. The more money you can make, the more money you can save.

Minimise your spending

Budget setting is an essential money management tool. While it can be hard to cut the cost of essential goods and services, there are a few ways to make some quick savings on your monthly bills. Look at your regular outgoings (for example, your broadband bill, your mortgage or rent, your electricity bill) and shop around to see if other providers are offering better deals. While it may be a bit of a faff to switch your mortgage provider after several years of inaction, if it means that you can save an extra £50 per month, this could be a huge boon for your savings plan.

Even small savings can stack up quickly. Consider switching from branded goods to supermarket own brands, and add the £1 or £2 that you save on your weekly grocery shop to your savings account direct debit. While it may not seem like much, those extra few pounds will add up to help you reach your savings goals a bit sooner.

Diversify your savings

Once you have gotten into a pattern of saving money regularly, you can look at maximising your returns by diversifying your savings. Rather than keeping all your money in a cash savings account, you could consider investing some of it. Even the most conservative investment portfolios can offer better returns than cash savings accounts, so it is worth considering taking a portion of your savings and turning them into investments instead. Just make sure that before you do this you are aware of your risk profile so you don’t make any hasty investment decisions that could cost you in the long term.

Keep at it

The key to saving money is consistency. This is particularly true when you are young. Over time, if you reinvest any interest earned on your savings you can benefit from the effect of compound interest, which essentially means that you are earning interest on your interest. This is one of the most effective ways to build wealth, but you need to be consistently adding to your savings pot.

Invest what you can, even if it is just a few pounds per week. Building this habit when you are young will stand you in good stead when you are older and able to afford to save a few hundred, or even a few thousand pounds at a time.

Most importantly – do not EVER take money out of your savings account. Siphon it away and forget about it if you are worried that this will be a risk. Your future self will thank you for it.

It’s never too late to start

Not all of us are lucky enough to figure out our financial situation when we are young. If you missed out on a few decades of compounding, don’t worry. You can still make up for lost time by saving a larger percentage of your income and allowing that to grow. £100 is £100, whether you put it in today or invested £80 years ago and earned the rest through compounding.

If you’re starting later the easiest way to know how much you should be saving is to set a clear financial goal. Knowing how much money you’ll need by when allows you to work backwards to determine how much you should be setting aside every month and by how much it should grow for you to reach your goal. Starting later also means you’re earning a little more than you were when you just started out.

Saving is a way for us to take care of our future selves through the actions we take today. All of our future selves deserve it.

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