Putting in the effort to save will be worth it

IN THE struggle that many have had to make ends meet over the last 18 months or so it can be easy to forget the reasons that we need to put some money aside for the future, as well as the benefits of doing so.

Saving money is not difficult but it doesn’t just happen automatically.

It’s all about planning and figuring out how to keep some of the money you have today to use at some point in the future, whether it’s next week, next month or in 20 years’ time. If you don’t save, it can often be because you don’t plan to save.

You have to make it happen. You have to start by considering the timescales involved. Break down your savings into three areas – and this is the really easy bit.

Short term, medium term and long term are the timescales you need to consider.

Short term should cover day-to-day needs, medium term can help with things like a deposit for a new car or house and long term is essentially retirement planning.

Try to move some money every month from your everyday current account to a savings account.

Apart from the fact that this will give some peace of mind that you have a bit of an emergency fund, you will also find that the rate of interest paid on a savings account will be higher than that paid on your current account.

Remember that interest on building society and bank accounts may be taxed, so if you have unused ISA allowances it may be worth using them first of all.

You can save up to £20,000 a year in an ISA and not pay tax on the interest. Pensions are very tax-efficient for your longer-term savings since you may well be able to claim tax relief at your highest rate of tax.

The fund you invest in is able to grow in a tax-free environment, and under current legislation you are able to take up to 25 per cent of the fund as a tax-free lump sum at retirement.