The theory of a rainy-day fund is something we can all understand. You just set money aside each time you get paid. The pile of cash under your proverbial mattress grows and grows. Before you know it, your financial troubles are over. Simple, right?

Actually, no. The reality is nowhere near as straightforward as the theory. Saving money is hard. No matter how much you’ve got coming in, it can seem like there’s never any to spare. Then, when you do manage to put something away, there’s always a reason to dip into the pot. Next thing you know, the pot’s empty again.

The good news is it doesn't have to be this way. Saving money is possible, even if you’ve not got the biggest income. We’ve included some of our top tips on how to save below. But first...

Why it’s important to save money

There are two big reasons to save money. First, for unexpected emergencies. Second, for something special; a holiday, that new sofa or the super-fast laptop you've always wanted.

Unexpected bumps in the road

Bad things happen: redundancy, a huge bill out of nowhere, an unexpected but unavoidable trip. Unfortunately, that’s life. There are things we can’t control, but have to deal with all the same. While it might not be the answer to everything, money in the bank can certainly help at times like these.

Everyone deserves a treat

As with exercise, it can be easier to save if you have a goal in mind. We’re better able to deal with temporary pain if we know there’s a reward waiting for us down the line. This is exactly how it works with saving. Pick your reward, set a goal that will let you afford it and you could be surprised how much easier saving becomes.

How much should you save?

As you might imagine, there’s no one-size-fits-all answer. Looking online doesn’t narrow things down either.

The Money Advice Service suggests an amount equal to three months’ outgoings, whereas Virgin Money says you should save whatever you can afford. According to an article on the BBC News, four in ten adults in the UK have less than £500 in savings, which is a worry considering debt charity Step Change says £1,000 in savings could stop half a million people falling into financial trouble.

If the idea of having a four-figure sum squirreled away seems impossible right now, start small. Why not aim to have one or two weeks’ wages put aside as an emergency fund?

If you’re saving towards a goal, it’s much easier to aim for a set figure: you just need to save whatever your special item or experience costs.

Where can you save money?

Did you have a moneybox when you were young? One you threw odd coppers or birthday money in? Just because you’ve grown up doesn’t mean a box (or even a jar) isn’t an effective way to save. Chuck your chump change into your chosen container at the end of each day and watch it add up.

It’s not a perfect method though. There are a few issues:

  • Your savings aren’t secure - they can be lost or stolen;
  • They’re like a bowl of peanuts - easy and tempting to dip into;
  • You’ll never earn any interest - your savings won’t grow as fast.

For long term secure savings, you’ll need a bank account. This should be separate from the account you use to pay your bills. Savings in a bank account should earn you interest and be protected. It’s also less straightforward (therefore less tempting) to withdraw your money.

The main types of interest-paying account are:

  • Savings account - Deposit cash when you can and it's easy to withdraw your money
  • Notice savings account - As above but you have to give around 30 days’ notice before you withdraw your cash
  • Regular savings account - You have to deposit a set sum each month
  • Cash ISA - Pays tax-free interest and has an investment limit of £20,000 (as of April 2018)

Some savings accounts limit the number of withdrawals you can make in a year. This can help you save, but it can also get in the way of you accessing cash in an emergency.

You’ll need to shop around to find the best savings account for you. Some accounts pay higher rates of interest; others offer incentives, such as cash bonuses or vouchers.

You can compare savings accounts on price comparison websites. Ideally, you’re looking for an account that offers a higher rate of interest without being too restrictive. The higher the interest rate, the more your money will 'earn' for you each year.

Help to Save account

This is a new government scheme aimed at helping those on low incomes. If you receive Working Tax Credits, Child Tax Credits or Universal Credit, the government will pay up to £1,200 in tax-free bonuses if you can save up to £50 per month. You can learn more about the Help to Save scheme here.                  

The easiest way to save is to set aside a fixed amount every time you’re paid. It could be a fixed amount, say £50, or a percentage of your wages.

The most important thing about the amount you choose to save is that it’s affordable enough to put aside every single month. To help you work out what’s affordable, make yourself a budget and decide how much you’re able to save from your disposable income.

Set yourself a goal and try keep to it. It might be as simple as sticking £10 a month in a jar. Or you might choose to transfer £50 to your savings account every payday.

Saving money isn't easy, but if you start small with regular amounts, you’ll soon get into the habit. When you see your savings start to grow, you’re more likely to continue saving.

Save or spend?

Once you get to grips with the saving habit, there’s bound to come a time when you’re tempted to dip into your nest egg. If you’ve set yourself a goal, you’ll know when it's time to spend. For example, when you reach the amount you need for that holiday you’ve had your heart set on.

If you haven’t reached your goal, resist the temptation and keep saving. Don't forget, the aim of saving isn't just stockpiling cash. You're saving so you can pay for an activity or item you really want. After all, you've worked hard to earn the money, so why not enjoy it?

If you’ve been squirreling money away for an emergency fund, you might want to move it into a different account. Keep your emergency money separate; the whole point is that you never know when you’ll need it. Any savings above and beyond the amount you decided on for your emergency fund can be used for something fun or useful.

Basically, there are no hard and fast rules about when you should stop saving and start spending. It's entirely up to you and depends on why you started saving in the first place.