Get motivated to save!

Are you being left behind in the race to save? Here's how to kick-start your squirreling habit!

This article was first sent to readers as a '360 degrees' email.

At first glance, it looks like we Brits are finally getting into the savings habit.

According to the latest Savings Survey from NS&I, regular savers are becoming more committed to putting money aside. Those who put money aside each month managed to save more during the winter months than the full year 2008 average.

And despite the deterioration in the economy, the number of people who save money regularly each month remained constant throughout 2008 - around 47% of the population.

Good news, eh?

The gap is widening

Well, it's certainly good news for those disciplined regular savers. But what about people who weren't already in the savings habit?

Unfortunately, that's where the picture gets gloomier. Recent research from Nationwide suggests that the gap is actually widening between those who do and those who don't put money aside.

Some 60% of those questioned admitted they were saying less than they needed to. And worryingly, around a quarter of the population seems to be saving nothing at all.

So - the evidence suggests that while existing savers are polishing their squirreling skills, people who have never saved aren't radically changing their behaviour.

Advice for new starters

If you're new to the savings game, don't panic. It's never too late to get started - but it is really important you take action now.

What would happen if you lost your job tomorrow? How long would it be before you were using credit cards to pay the bills and falling behind on your mortgage or rent payments? It's not a pleasant thought, but it is important to figure out what you'd do in a worst-case scenario.

Here at lovemoney.com, we recommend you build up a savings stash equivalent to at least three months' salary. In the current economic climate (and with unemployment rising quickly) you should ideally have savings equivalent to six months' salary, preferably more.

How to save when you're skint

Easier said than done, you're probably thinking. If you're not saving anything, it may well be because you feel you can't afford to.

In fact, most of us can afford to put away some cash at the end of every month - even £10 can make a difference. If you're not sure where that £10 is going to come from, How to find £100 a month should point you in the right direction.

Getting into the savings habit

For people starting to save for the first time, I think a regular savings account is a great option.

This sort of account generally offers a relatively good, fixed rate of interest. In return, you're committed to paying in a certain amount of money every single month.

That isn't as scary as it sounds. Many regular savings accounts have low minimum payment thresholds - so you don't necessarily need to conjure up hundreds of pounds on a regular basis!

And this sort of commitment should help build your savings habit naturally. You don't have to remember to put the money in every month - you just set up the standing order to transfer the dosh from your current account, and away you go.

Just remember that if you underpay in a particular month - or if you withdraw money before the end of the term - you're likely to face a serious loss of interest and possibly even the closure of the account.

Starting small

So if you can only save a small amount every month, which regular savings account should you go for?

Here are my top picks if you're looking to save £20 or less:

The Barclays Monthly Savings account offers by far the best rate of interest (6%), although it is paid monthly rather than being built up and paid at the end of the year.

If you can commit to saving £20 a month, this is the obvious candidate to choose.

If you're only able to put away, say, £10 a month, the Monthly Saver Issue 4 from Dunfermline BS comes into its own. You can make a monthly deposit of as little as £1 - although I would encourage you to choose the biggest amount you can afford.

The emergency option

If you think you might need to access your savings in an emergency, think about setting up an easy access savings account instead.

The interest rate you receive probably won't be as good as that from a regular savings account. However, you'll still have the option of setting up a standing order to pay money into the account regularly.

And if you do need to withdraw your savings, you shouldn't face any financial penalties or delays.

The debt dilemma

One word of caution: It's not usually a good idea to start saving if you're in debt. This is because the interest you're paying on your debts will undermine the benefits of saving. Even if you have a 0% credit card, your debt won't remain interest-free forever.

So - clear your debts first, get rid of the interest bogeyman hanging over you, then concentrate on saving. For lots of debt-busting tips, read this excellent article.

Good luck!

More: The best savings rates for first time buyers | Your four step financial health check

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