Saving for a rainy day
Written 10th June 2025
We are living more and more in a cashless society. It's quite often that I go into a shop and there is no longer the option to pay with cash. This means that in all likelihood you have a bank account, or multiple bank accounts.
Current accounts will accept payments from your employer, pension, investments or benefits and from there you can withdraw the monies via a cashpoint or your debit card etc.
The money that is in your account, the bank provider will be using it to lend to others in the form of loans or mortgages or they'll be investing it themselves. This is one of the ways financial institutions generate their income, basically from your money.
Some current type bank accounts are free to have and provide you with safe storage for your money, a card to access your funds and facilities to pay your bills by direct debit or make one off or regular transfers to elsewhere in the form of standing orders. They will also offer overdraft facilities for emergencies or regular use should your own available funds not be adequate for a period of time and generally there will be a fee and or interest payable to the bank for using that facility.
Some provider's add other benefits to bank accounts but might charge a monthly fee for the privilege. Thing's like travel insurance or cashback on your debit card purchases. This wealth of options means there is bound to be an account suitable for your specific needs at one of the multitude of financial institutions available in the UK.
Very few pay you interest on the money you have sitting in a current account. Some pay you a bonus for using your debit card so many times a month, or as an incentive for opening an account with them.
If you regularly have spare cash in a non interest paying current account, it's wise to have a savings type bank account as well which will pay you some interest on your credit balance.
Lets calculate an example :
You get £1000 per month income. You have £50pm left over and put that into a savings account paying 4% per year. That would pay you £2 in interest if you kept it in the savings account for a whole year. Not much by todays standards. But if you have £50 spare every month and at the end of a year have £600 spare, that would generate £24 if the full £600 balance was in a savings account for a full year.
The next year you start with £624 in your savings account plus you add another £50 each month to the account. Obviously you will only earn interest from the day you add each months £50 but by the end of another 12 months you have £1224 plus the interest.
And that's how savings begin to grow. Small, regular amounts begin to add up. You have a little pot available to you to cover an emergency or to treat yourself with or to pay your car insurance in one go instead of paying for it monthly. And you haven't had to borrow (loan, overdraft, credit card) and pay interest or charges so you're better off long term.
Every penny always counts!!
LFx
