The need to save money has perhaps never been greater. Unemployment is a major concern in the UK and real wages have fallen. State-backed pension schemes lack bite, yet the credit crunch is still nibbling away at personal wealth. Not only is the cost of living increasing, disposable incomes are shrinking. How exactly can people save for the future when surviving in the present has become such a challenge? Provided below are a few useful tips for savers.

Clear Outstanding Debts

Personal finance is undoubtedly useful, but people who rely too heavily on debt can encounter problems. Big problems. According to Credit Action, the average UK household is £5,946 in debt. If mortgages are thrown into the mix, average household debt rises to £53,947. Every day in the UK, 277 people are made bankrupt and a little over 1,500 County Court Judgements (CCJs) are issued to debtors. Perhaps most worrying of all is the statistic that Britons pay more than £165 million in interest on personal debt every day.

Paying off debts should be a priority for all people. Savings accounts yield little interest compared to the amount that is repayable on loans and credit cards, so saving money before clearing debts is largely pointless. Debts that are subject to the highest rates of interest should always be cleared first, while secured homeowner loans may be useful for clearing multiple debts (especially credit cards and store accounts). Secured homeowner loans are typically subject to low rates of interest, enabling borrowers to consolidate their debts.

Individual Savings Account (ISA)

An ISA represents excellent value for savers. Introductory rates of more than 2.5 per cent are available and accounts can be transferred between banks every year. More important, ISAs are exempt from tax, so interest need not be declared to HM Revenue & Customs (HMRC). Savers can experiment with cash ISAs and stocks and shares ISAs, but the latter is subject to more risk. During the tax year, an individual can invest up to £11,520 in a stocks and shares ISA (from April 2013), or £5,760 in a cash ISA.

Reduce the Cost of Living

Savings can be made in all areas of everyday life to increase disposable income. Food bills can be pegged by drafting an itemised weekly shopping list, while the cost of fuel can be limited by driving sensibly, using public transport or walking to work or school.

Savings can be made on non-essential expenses, including trips to the cinema and nights on the town. Homeowners can even install solar panels to benefit from ‘free’ electricity and the government’s Feed-In Tariffs (FITs), which are paid to those who generate clean, renewable energy. Further savings can be made on fuel bills by installing insulation (loft and cavity wall) and replacing an old boiler with a modern, energy efficient model. Installing a water meter can also provide savings.

Profit from a Spring Clean

Homes across Britain are filled with clutter that can be sold on auction sites such as eBay. Sellers should not expect to generate a huge profit, but unworn clothes or shoes, surplus electronic devices and old games, music CDs and DVDs can be sold for a small sum.

Investment Vehicles

People can also invest their savings in stocks, shares, commodities and foreign currencies, but the risks involved are substantial. One low-risk option is to buy limited shares in a small enterprise, or perhaps invest in a start-up through crowd funding. Long-term growth may be targeted on the foreign currency exchange, but novice traders usually make short-term losses, so professional help should be sought from a reliable brokerage and deposits should be managed carefully.

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