Regular savings: A bad day at the office

Think you could get by if you lost your job? Ken Welsby kicks off a three-page guide to savings with a salutary tale

Tom Parker will never forget that Monday morning. It was pouring down with rain, and as he pulled into the car park, he could see that something was wrong. "People were standing around outside the front door," he recalls. "I jumped out of the car and rushed over to see what was going on - and there was a notice stuck on the door saying that the firm had gone bust."

Two hours later, an accountant turned up to confirm the bad news: they had lost their jobs and were entitled only to basic redundancy pay. Commission and bonus payments - in Tom's case amounting to almost pounds 3,000 - were lost.

"I was devastated," he says. "I had a pounds 1,000 overdraft, owed about pounds 1,000 on Visa and had just bought some new furniture, charging pounds 500-worth on my Selfridges account."

Tom was lucky, starting a new job just five weeks later, but it was almost six months before he sorted out his financial difficulties - and he vowed never to be in the same situation again.

"Once I'd got everything sorted out, I started to put pounds 50 into a savings account, and it now goes in automatically on the first of every month. After my last experience, I literally think of it as money for a rainy day."

As well as having cash on hand in case of an emergency, it also makes sense to save regularly for occasional expenses such as Christmas and holidays. Undoubtedly the simplest form of saving is to put a few pounds away in a jam jar or in an old teapot perched almost out of reach at the back of a cupboard.

Of course that kind of saving is easy prey for burglars - or even your own sticky fingers - and doesn't earn a penny in interest. But there's a new kind of jam-jar saving that's almost as easy, and much, much safer.

The scheme in question is the latest Instant Access account from Direct Line, which allows you to create up to 20 electronic jam jars - sub-accounts which you can label and use for specific needs. Interest rates are stepped, based on the total balance, starting at 2 per cent up to pounds 499, 4.5 per cent from pounds 500 to pounds 4,999, and rising to 5.75 per cent over pounds 50,000.

The account also includes a pooling facility, enabling up to six people to share a savings plan and benefit from higher interest rates. This system can be used by family members, friends saving for a holiday together, or flat-sharers who need to put money aside for repairs or service charges. Individual passwords and ID numbers are required to access funds.