Having some savings can make a big difference. You should try to save at least three months' worth (ideally, six months' worth) of your income, in case you're not able to work for a while.

But even a smaller amount is still well worth having.

How to save with a small salary

Like so many 'money matters', saving is something that works much better with a good budget. Our guide to Budgeting can help if you don't have a budget yet.

One thing a budget shows you is how much cash you can spare each month and still make all the payments you have to. This is very important - there's no point saving for the future if it means you're missing vital bills today.

What's the best way to save?

So your budget can help you decide how much to put aside. There's no reason it has to be the same amount every month, but setting yourself a target can help you stick to your savings goal.

You could arrange a Direct Debit to make sure the money goes into your savings account as soon as your main income arrives in your current account. That way, it'll go into savings before you have a chance to spend it on other (non-essential) things.

If you get a 'windfall' of some kind (bonus, overtime, small Lottery win, etc.), try to see it as an opportunity to put some extra into your savings account.

What kind of savings account should I open?

There are different kinds of savings account. Take your time to find the one that really offers what you need. For example:

• Notice account . An account that might come with a higher interest rate - but will mean you have wait to get your money out (typically 1, 2 or 3 months). Can be a good place to put money you're confident you won't need in a rush.
• Instant access account . An account that lets you get your hands on your cash immediately. You should keep your 'emergency fund' in an account like this - you can always open a notice account (as well) if you manage to save up more than you think you might need in a hurry.
• ISA (Individual Savings Account). A tax-free savings account (banks & building societies typically take 20% tax off the interest they pay on most savings accounts). There's a limit to how much you can save in an ISA each tax year.

Don't just look at the interest rate

A higher interest rate on an account means your money will grow more rapidly. That's obviously a good thing, but bear in mind:

• This won't make a major difference until you've saved quite a lot.
• Check how long that rate will last. A lot of savings accounts come with an introductory bonus rate - and the interest rate will fall after e.g. 6 or 12 months.
• Inflation will 'eat' into your savings - since prices are rising, your money will actually be worth less next year unless the interest rate on your account means it's growing faster than prices are.

What else should I consider?

It depends on how you normally handle your money. Think about things like this:

• If you're likely to be overdrawn a lot, you should look for an account with low overdraft charges.
• If your account has conditions (like paying in a minimum every month), make sure you can stick to them before you commit yourself.
• If you want online / SMS banking services, make sure the account provides them.
• If you want a bank that has branches on the high street, find one with a branch near you.
• If you're thinking of opening a packaged account (an account that comes with e.g. insurance / breakdown cover), make sure:

1. You need the services it provides
2. You're actually eligible for them
3. You can't get them cheaper / better somewhere else.

Why are savings so important?

If you run into a crisis of some sort (losing your job, for example, or needing to repair your car), your savings could help you cope with it.

Savings can help you pay yearly (rather than monthly) for things like insurance. This can cost you less.

Savings can be an excellent way to pay for things (holiday, new car, furniture, etc.) without borrowing. This can save you a lot, since the interest on debt tends to grow quickly.

Should I save or pay off debt?

It's good to have savings, but if you owe money, you're probably better off using your spare cash to repay the debt more quickly. That's because debts normally grow a lot faster than savings (since the interest rates tend to be a lot higher).

If you're looking for tips on repaying your debts more quickly, read this article.