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Be Smart With Your Money-3 Tips to Save - August 2012

Saving, like all human behaviour, has an emotional component. If you can tap into the positive emotional responses associated with saving and develop a means to overcome the ‘fear’ associated with not having your money sitting in a current account - where it can be immediately accessed with a click or a PIN - then you have an excellent chance of developing an effective personal savings programme that will become a lifelong habit.

Here are three tips on how to get money into your account:-
1. Know why you are saving.
We all know we should have some money in some sort of savings vehicle, be it a savings account or some easy to liquidate investment. But most of us do not know precisely what we are saving for or how much we should save. There is no goal and because there is no goal there is no plan.
To give an example, it could be that the ageing family estate van has reached its end-of-life span and you want to “save up” for a down payment on a new set of wheels. Figure out how much the down payment should be and how long you have before your current car dies on you. Divide the goal by the number of months available and you’ll get the amount you have to contribute each month. Studies show that a savings programme that has a specific objective is more likely to be successful than one that does not. That means you may end up with multiple savings accounts, each targeted at saving for a particular goal.
Every time you effect your monthly savings deposit imagine buying the new car. Studies show that the human brain experiences nearly the same amount of pleasure when it thinks about buying something as it does when you actually make the purchase.
2. Pay off your credit card or overdraft debt.
Setting a savings goal and drafting a plan is the easy part. Finding the spare euro to fund it can be difficult. However, if you carry any credit card debt, you are sitting on an investment that can yield between 6% and 9%. If that percentage spread sounds familiar, it is because that is what your credit card providers are charging you as an APR. For every euro of that debt that you settle, you are saving on interest. This is the fastest way to increase your discretionary income, which can then be used to fund your savings programme. Use a debit card for your purchases and keep the credit cards out of your purse or wallet.
3. Switch to Online Savings
If you are running high balances in your current or traditional savings you should consider parking these funds in an online savings account.  Internet-based savings products typically offer  higher interest , and a quick search for current rates will confirm this claim. The principal reason the former can offer more advantageous rates is the fact that they incur much lower overheads. If you are going to put your money to work, why not put it where it will return the highest yield?

There is no question that saving takes discipline. However,  if you have a plan to achieve your goal and are determined to get into the habit of putting away some cash you are more likely to achieve your objectives.  One final tip: there is no better time than NOW to start saving money.