Saving money

Saving money on a low income is difficult but even by saving the odd 50 pence your savings can soon mount up. You can save money in an old jam jar if you like but it’s a good idea to think about the benefits of saving in a more formal way. Your money will be safer and you won’t be so tempted to ‘borrow’ it. The amount you have should also grow because the bank or building society will give you interest. That means they’ll give you a bit of extra money as a reward for saving with them. See our section on Interest for more on this.

You can open a savings account at a building society, bank or through the Post Office. Or you could choose to save with a credit union.

Credit unions

Credit unions are great for people on low incomes. They are financial organisations run in the community by the community. They offer a place to save your money as well as providing low-cost loans.

You have to become a member of a credit union. Each one tends to have conditions of membership: for example you have to live or work in a particular area. Once you’re a member, you save your money with the credit union and, in return, you get what is known as a dividend. This is an extra sum of money, like interest, that is usually paid to you once a year, so it will help your savings grow. The paying of a dividend is not guaranteed and is dependent on the year’s profits for the individual union.

As a member of a credit union you will be offered other benefits such as:

• Free life insurance on your savings. This means that if you die, your family will have a small amount to help them during this difficult period. Do check with the credit union of your choice as they may have their own terms and conditions. These may include an age restriction.

• Cheap loans.

For more information on credit unions, you can contact the Association of British Credit Unions.
www.abcul.org
Telephone: 0161 832 3694

Planning for the unexpected

Even if we’re really good at sticking to a budget, life has a way of throwing up things that we weren’t expecting. For example something might need to be replaced or repaired. We may have to spend extra money because of an emergency. Any of these can cause problems for your budget. That is why it makes sense to try to save up a bit of money rather than spend everything we have. It’s also important to think about the extra money we usually end up spending at times like Christmas, birthdays and holidays.

What happens when you lose control of your spending?

If you spend more money than you have, you end up getting into debt. This means that you owe someone else the money you’ve spent. It may be a friend you’ve borrowed money from or perhaps a catalogue company or your bank. You can also run up debts by not paying for the things you’re supposed to, for example your tax or rent.

Unfortunately, if you get into debt and don’t pay back what you owe, your debt tends to get bigger, even if you stop adding to it. This happens in lots of different ways. You may get a fine for not paying for something on time and this will be added to the original amount you owe. You’ll also probably be charged interest on the money you owe. This means that whoever has lent you money will charge you some extra money for borrowing it. The longer you go without paying it back, the more interest they’ll add to the original amount you borrowed.