Money Insider: Get into good habits with a regular saver
Friday 13 December 2013
Whether it’s for a rainy day, to pay for Christmas, or for the annual holiday, many of us strive to put a little money aside. Despite the current low interest rate environment, saving regularly is always a habit worth adopting.
Even a balance of a few hundred pounds will help if you are suddenly faced with an unexpected bill and will save you having to rely on expensive plastic.
For most people the hardest part of saving is actually getting started. We may have good intentions of saving some of our salary at the end of the month, but by the time we get there it’s often been spent elsewhere.
A sensible solution is to set up a standing order so that your money is switched to your savings account the day after you get paid; that way it won’t be sitting around in your current account tempting you to spend it.
Many banks and building societies offer regular saver accounts – but although the interest rates are often two or three times higher than standard savings products, terms and conditions are strict.
Most regular saver accounts don’t allow any withdrawals during the 12-month term of the account, and you must also make a payment every month to qualify for the headline interest rate.
Although some may find the terms and conditions a little off-putting, for others it helps to instil the financial discipline they need to stick to a regular savings routine.
If you’ve got a current account with First Direct you can get a regular saver account paying 6 per cent AER; HSBC offers the same rate for its Premier and Advance customers and 4 per cent to Bank Account holders. Other deals worth a mention, and where you don’t need to hold a current account with the provider to qualify, include Kent Reliance, which pays 4 per cent AER, and the Skipton Building Society Christmas Regular Saver, at 3.50 per cent.
Once you get into the habit and have built a savings pot, it gives you many more savings options – maybe putting your accrued lump sum into a fixed rate bond or an ISA while you take out a new regular saver for the following year.
Don’t fall foul of the insurance small print
Just because you’ve bought insurance cover, don’t assume you’ll automatically be covered if something goes awry.
For example, with your car insurance don’t underestimate your annual mileage calculation: if you claim to be driving 10,000 miles each year when you’re really driving twice that, your insurer may throw out any claim you make.
Similarly, when applying for home cover you may have to state whether the locks on your front and rear doors comply with British safety standard BS3621. Given that many people would have to remove the lock to check, the question is often answered incorrectly. That could prove an expensive mistake because if your insurer finds, after a break-in, that the lock does not match the details on your policy, you may be refused a pay-out.
Another important tip is to ensure you always report a theft to the police within 24 hours of the incident. Insurers will ask you for a crime number as part of the claim process. Failure to obtain one could cast doubt on whether the theft has taken place and could result in a claim being rejected.
The annual premium is the key factor for most people when they receive their insurance renewal, but a read through of the individual cover and exclusions is equally important to avoid any nasty surprises.
Andrew Hagger is an independent personal finance analyst from www.moneycomms.co.uk
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