If cash remains after paying monthly expenses, do not sit on it.
Make that money work by placing it in a regular saver account.
Though savings rates have recently declined, a disciplined approach to monthly savings can be a moneymaker.
Most easy access accounts pay two percent or less but a regular savings account can be more lucrative, offering steady savers an opportunity to earn more from their stash.
However, a critical eye is required to identify the most attractive arrangement.
Being wary of headline rates is the first rule to follow
A regular savings account headline rate may seem attractive but savers will not accrue as much interest through monthly deposits as they would by depositing a lump sum.
For example, paying £300 a month into an account that offers four percent interest will result in a £3,652 balance after one year. A lump sum deposit of £3,600 made when the account is opened will result in a £3,715 balance after the first year, provided that the account is taxable.
Some of the most appealing regular savings accounts are only offered to individuals with current accounts with that bank. If savers do not open a current account quickly, they may miss the attractive rate.
First Direct recently offered an eight percent interest rate for a regular savings account but it removed the offer at the beginning of February. HSBC is currently offering the best deal to customers with fee-charging HSBC accounts: six percent interest over 12 months for its Regular Saver account.
Building Society Saving Accounts
Building societies sometimes offer regular saver accounts that are not tied to current accounts. Cheshire building society offers the Platinum Monthly Saver Issue 6 that will pay five percent interest through January 2014 for balances above £100.
Savers are permitted one no-penalty withdrawal and may miss one monthly payment of £100 to £500. Kent Reliance and West Bromwich building societies offer regular saver accounts with four and 4.1 percent interest, respectively, and lower savings limits.
While those building society accounts must be opened and operated through branches, Peterborough and Norwich building society offers an E-Regular Saver account that can be opened and operated online. This account features a 2.5 percent interest rate and a 1.5 percent bonus for account holders who save up to £250 per month for a year and make no more than one withdrawal.
Regular savings accounts are ideal for consumers who are getting by but are far from wealthy. They typically pay more interest than easy access accounts, enabling regular savers to grow their balances modestly with no effort. At the end of a year, savers will be pleasantly surprised by what has accumulated in their rainy-day funds.
Anyone who has money to save each month should consider a regular saver account. Discipline is required because money must be paid into this account regularly and the balance should remain relatively untouched for an entire year.
Following these guidelines will turn a small amount of money saved regularly into a more attractive balance at the end of a year.