There may never been a better time to save money than now. Recessions make it clear that having a financial buffer against unforeseen events can really help until times get better.
Short term savings rates are not good. Deposit rates linked to major banks tend to reflect the current base rates, so are currently running below inflation.
That means that savings are losing their value in real terms unless you can get a rate that exceeds inflation. Fixed term bonds have become one way for savers to get a higher rate of interest.
Fixed term bonds can be for periods from 3 months to five years. Depending on the economic outlook, three year bonds can give a much better return than leaving cash in a bank deposit account.
One disadvantage with bonds is that the money is locked in until maturity. Gaining access to money before maturity can involve significant redemption fees, making any expected gain disappear.
But there are other ways to save money. One is to set up a fixed debit each month from your pay cheque. That way no decision has to be made as to how much to save, it just happens.
Many people are not aware of just how much they spend. Make a budget and look at bank and credit card statements over a six month period and analyse where savings could be made.
In tough times, discretionary spend has to take a hit. Look hard at club memberships and regular subscriptions and cut back where you can.
Selling unwanted items on auction sites such as Ebay can help raise some cash too. Whilst the amounts made may not be huge, every penny made is one less to be earned. Any income made here can go towards treats, for example.
Some hobbies actually make money too! Find a new pastime that utilises your skills and can generate some cash, either by making things that can be sold at markets or by trading your time.
Even though times are tough, there is no harm in asking for a raise. Whilst the general policy may be for no or small pay rises, you may be a valued employee that the company cannot afford to lose.
Look for part time work that can bring in some extra cash. Consider bar work or waiting at table, working in retail or gardening. Any cash earned will add to the savings pot.
Additionally, you generally do not spend whilst you are working, which is another bonus and another way of saving.
Eat more at home. Eating out is fun, but costs at least twice the amount that eating at home does. Family meals at home together help reinforce family bonds.
Buy own label goods rather than brand items. Not all own label goods are poor quality – many are brand named contents in different packaging, so try a few and be surprised at how much can be saved.
Use coupons. Retailers are desperate for business and use coupons or other discount incentives as a way to get you in store and spending. Although you must resist impulse buys and stick to the coupon items.
Written by Sam, a finance blogger from the UK