Saving money is a useful thing to do, and is something you can think about when you are planning your own budget.
Saving money means that you have spare money available when you need it, to spend on specific things, big or small. People usually save money for things which are quite expensive.
This might include:
- A computer
- A camera
- A bicycle
- A car
- A house
There are lots of ways you can save money. People usually put money in a proper savings account with a bank or building society. There are different types of savings accounts. Some of the most common include:
Individual Savings Accounts (ISAs)
ISA’s are savings accounts that you don’t pay tax on. Every year you are allowed to put in a maximum amount of money without having to pay any tax. This is called an allowance.
There are lots of different types of ISA. Some are “fixed rate” and some are “variable”.
Fixed rate ISAs offer a fixed amount of interest for a certain amount of time, usually for a year or more. This means that the bank will guarantee to pay you that amount of interest for that amount of time.
Variable ISAs are ISAs whose interest rates can change. They can become lower or higher.
Regular savings accounts
Regular savings accounts can be used to save small amounts of money on a regular basis. Most banks ask that you add a small amount of money to these each month. These accounts often offer higher rates of interest. The main difference between these and ISAs is that you have to pay tax.
Money Saving Expert provides advice on saving money and has lots of information on the different kinds of savings accounts available, and how to decide which one is right for you.
When you save money, the interest rate is very important. This is a percentage and represents the amount of extra money you will get back from the bank or building society every year as a “reward” for saving with them.
The interest rates are set by the Bank of England and can change regularly.
Interest rates are usually small percentages (like 3%). The higher the interest rate, the more money you will get back from the bank each year, as a proportion of the money you have saved in your account.
So, if you saved £1,000 in one year, and your savings account gives you 3% interest every year, the bank would add £30 to your account.
If you're struggling to manage money and debt problems, you can get help from Citizens Advice.
Four short films produced by the Citizens Advice Youth Forum show how Citizens Advice can help young people with money problems. These films can be accessed using the external link on the right of this page.