Personal Finance: Put a bit to one side

It's easy to live for the moment, but you should get into the swing of regular saving

ONLY half the adults in this country have any savings at all. If you are not one of them then you are missing out on a secure future.

"It's especially important for people in their twenties to start saving now," says Julie Lord, certified financial planner with Cavendish Financial Management. "There won't be the state provision that was in place for their parents."

When you start work you should pay off any debts and then start a savings plan.

"You should aim to set aside 10 per cent of your take home pay each month in a savings account," says Ms Lord. "To get you into the habit of regular saving, you should set up a standing order to your savings account."

The earlier you start, the better, but don't worry if you have reached your thirties without savings. Start now.

Eventually your savings fund should be big enough to divide into two parts: an emergency fund between pounds 500 and pounds 3,000, left untouched where you can get easy access to it, and a separate fund for expenses such as a deposit on a house or for buying appliances and furniture.

You don't have to queue up for hours to open an account. They are available over the phone from supermarkets, retailers, insurance companies, banks and building societies. If you're new to saving, the most basic type of savings account is an instant access one. You put in the money and earn interest monthly or annually. You can withdraw it at any time without giving notice. These accounts usually have interest linked to the amount you invest. Nationwide's InvestDirect pays 7.0 per cent gross on balances of pounds 1 to pounds 5,000 and comes with a cashcard.

Monthly income accounts pay out interest monthly. They often set a high minimum investment, typically around pounds 2,500 but Woolwich Premier Plus 2 Year Bond pays 6.31 per cent monthly on pounds 500. Notice accounts require you to tie your money up and give notice of 30, 60, 90 or 180 days, or longer. You can withdraw money without notice but if you do there are penalties, usually a loss of interest equivalent to the notice period.

Postal accounts are run as instant access or notice accounts, but operate by post and phone. They offer higher interest rates because they are cheap to administer. The Prudential's egg instant access postal account, which can also be operated by phone and internet, pays the highest rate of interest: 8 per cent for balances between pounds 1 to pounds 250,000. But egg has had some teething problems, and there may be a delay in getting your account up and running. If you want to open an account quickly you could try one of the supermarkets or Standard Life. It pays 7.35 per cent on pounds 1 or more. Fixed-rate accounts pay a set interest rate for a fixed period. For example, Portman Building Society's Fixed Interest Bond pays 6.75 per cent interest on balances over pounds 1,000 invested for a year. But fixed- rate accounts levy high penalty charges if you withdraw your money early.

Once you've decided which of these accounts suits you best, you should then shop around for the best interest rates. You can keep an eye on rates using Moneyfacts. Its fax service is updated daily on 0336 400238. Calls cost 50p per minute.

If you already have a savings account, for example one that was set up for you when you were a child, check it has not become obsolete, meaning it is not accepting new money. If it is no longer available to new savers, it may be paying a low rate of interest. Ask the bank or society to move your money to a better account.

There are tax-free ways to save, but at the moment this involves tying your money up for five years in a Tessa account. If you are still young and have not bought a house yet, then this may not be the best idea. Hang on until April, when we will all be able to save pounds 1,000 a year tax-free in a bank or building society account. This is part of the government's ISA (individual savings account) plans.

National Savings products may not be the most exciting investments but they do specify the interest you will receive and the amount of time you need to tie up your money. Fixed-interest Savings Certificates and index- linked Savings Certificates both offer guaranteed, tax-free returns for five years. This makes them particularly useful for higher-rate taxpayers looking for a safe investment. You can get account details and forms from post offices or by ringing 0645 645000.

Once you have a pot of savings, you should think about moving some onto the stock market. You can invest as little as pounds 25 a month into a savings plan which buys you a range of shares.

You can buy shares using unit or investment trusts. These are professionally managed funds that pool your money with that of other investors and use it to buy a range of shares. If you want to find out more, the investment industry trade bodies AITC and Autif produce useful leaflets.

Contacts: AITC, 0171-431 5222; Autif, 0181-207 1361; egg, 0845 600 0292; National Savings, 0645 715401; Nationwide BS, 0500 302010; Portman BS, 0800 807080; Standard Life, 0345 555657; Woolwich, 0800 606040.

Sarah Jagger writes for 'Moneywise' magazine.

A reason to save

Lyndsay Slaney-Parker (left) from Hertfordshire realises the importance of saving regularly but admits it is easier to save when you have got a goal. Lyndsay, 28, works in marketing for a large publishing firm. She and her husband, Paul, 38, a computer specialist, spent pounds 15,000 of their savings on their wedding and honeymoon.

"When we got engaged in December 1996, we had pounds 3,000 in a joint savings account. We worked out how much everything was going to cost and started saving pounds 700 a month. Now we're married, we've decided to save at least pounds 500 a month. We're also moving most of our savings to a 90-day notice account to get a better return but we'll keep pounds 3,000 on deposit for emergencies."