We all have short-term financial aims, be they saving up for a holiday, finding the money for a wedding, buying a house or paying for a new car.
While it is easy enough to borrow money for these events, the convenience is offset by the cost of the interest payments. If you set some of your own money aside at regular intervals, however, then not only will there be no interest to pay on a loan but you will be the one earning the interest on your savings.
The most effective way of funding short-term needs will depend on how long you intend to save for, and how much you can afford to put away each month. If, for example, you are looking to save pounds 50 a month for the next year, the best place to put your money will be in a savings account.
There are several types of account to choose from and a large number of banks, building societies and even insurance companies to choose between.
As a rule of thumb, the more notice you are prepared to give before withdrawing your savings, the better rates of interest you can expect.
Many savings accounts have tiered rates, so the more you invest the higher the interest you are likely to receive on your savings.
By putting all your money into one account, you may qualify for a higher rate than if you spread your money around several accounts. So if you already have a savings account, perhaps for your emergency money, you may find the best way to save for a specific event is to put your regular savings into this account.
To illustrate the benefits of this approach, high-interest cheque accounts will pay good rates but you often need a minimum of pounds 2,500 to open one. If you save regularly, you may well find that after one or two years you are able to move your savings into an account which requires a high opening balance and so pays good rates of interest.
But in the meantime, as the features here and on pages 15 and 16 demonstrate, there is a wide range of alternatives for those who do not have a big lump sum but want to seize the benefits of regular savings.Reuse content