Saving Money

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Saving Money

Why do people save money? In those uncertain financial times, this is a question that is on everyone's lips. Money seems to be devaluing at an alarming rate, with sterling being the hardest hit. Not only that but bank interest rates in the last few years have been consistently low, so anyone with money on deposit can actually look at their annual bank statement and see that the money on deposit is actually decreasing in value. So the argument about how worthwhile it is to deposit money in a bank savings account may have some weight.

The increased awareness that we are going to live much longer than was anticipated even ten years ago, has led many people top begin saving for retirement much earlier than they used to. The discipline required in today's "I want it now society" is considerable and commendable. Saving through a pension scheme is the best long term investment that can be made, especially when the employer participates, and most of them do, often matching the employees' contributions by 100 to 150%. Not only are the income tax benefits considerable, but the savings accrued in a pension fund can reach pretty considerable amounts when pension time comes around. On the downside, the money in the pension fund notoriously does not earn too much interest, with the fund administration charges occasionally being very high.

If incidents over the last few days have taught us anything, it is that banks are safe, and that means something. Some other schemes that claim to offer higher rates of return may turn out to be pigs in the poke, and the question is if you and your savings can afford to take the risk. If you are adventurous by nature, then take a limited risk with some of your savings. Don't stay too long and if you make a worthwhile profit, be satisfied and don't get greedy. Transfer the money back into the comfort and security of your savings account till the next opportunity comes along.

If you are content just to keep your money on deposit in your bank, it doesn't mean that it has to be dormant. Banks will always offer you short term and long term deposit schemes that will provide some fairly attractive interest rates, especially if you are prepared to go long term and let the interest compound. If you leave, for example, £20,000 on deposit for ten years at 5.5% annual interest compounded, you will have £35,000 in your account. The longer you leave the money on deposit on these terms the more you will accumulate.

This form of saving money may not be the most exciting, but it will still produce the best and safest returns on your hard earned cash. The trick on saving is to always make sure that you have enough liquid cash around to make sure that your need for credit is at a minimal level. After all, what is the point of having your cash savings on deposit earning a maximum of eight percent annually in the best possible scenario, when you need to borrow money at twelve percent interest to buy a car, or a new refrigerator?

Sensible control of your income is as efficient a way of getting the most out of your money.