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What should you do with £10 a month?

Ed Bowsher
by Lovemoney Staff Ed Bowsher on 22 June 2012  |  Comments 7 comments

If you have £10 left over in your wallet each month, what's the best way to put that money to good use?

Let’s imagine you’ve got an extra £10 a month coming in – perhaps from a pay rise. What should you do with it?

One option is to spend it. That could give you pleasure now, but you also need to think about  your future. Saving money now could improve your life later on.

So what’s the best way to save?

Andy Smith, Head of Media Relations at Santander, reckons your best option is a Cash ISA., highlighting that the interest you earn is absolutely tax free. But with £10 a month, it is actually worth it?

"It's important to get into the habit of saving," Smith explained. "If you save now, the interest will compound up. It becomes bigger and bigger, and a nest egg grows."

Once you’ve built up a bit of a nest egg, you could invest in the stock market. Potentially your money will grow faster than if you leave it in a savings account. And if you save for the long-term – five years or more – you’ll reduce the risk as well.

Over the last 20 years the UK stock market has, on average, grown by 4.8% a year whereas your average savings account has grown by 2.1% a year*.  So over that period, £100 in the stock market would have grown to £255, whereas £100 in a savings account would only have grown to £152. That’s assuming no inflation.

There’s one last option to consider. Should you pay down your debts or should you save money for the future?

Matt Hartley, Media Office from debt charity the Consumer Credit Counselling Service, says that you should think about putting that money towards paying off your debt, as the rates of interest on your debt will likely be far higher than any return you could get from a savings account or investment.

He said: "Even £10 a month will make a difference to your debt burden. The lower you get your debts, the lower the rate of growth of your debts will be."

So there you have it. Four ways to use an extra £10 a month.  Three of them are good ideas. Spending it probably isn’t.

*Figures from the Barclays Gilt Equity Study

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Comments (7)

  • smithy
    Love rating 1
    smithy said

    I suggest putting the £10 per month into an account with a Credit Union.

    Then if you do need a modest loan at sometime in the future, you will be well placed to borrow from them at a low rate of interest (no hidden charges or small print).

    And if you do not need to borrow, your savings are there to help others in your community since the only money a Credit Union has to lend is the savings of others.

    Disclaimer - I volunteer at a Credit Union.

    Report on 29 June 2012  |  Love thisLove  1 love
  • leah AKA global leah
    Love rating 21
    leah AKA global leah said

    I am probably not the only person that cannot put the extra £10 away a month, although I did try by opening two accounts, one with ISA and one saving account, which I found that I broke into the saving account, but managed to not touch the ISA until much much later, since the pay rise I've got in April, I've continued to do the same, except it's £10 on each account, and so far, I'm doing pretty okay, dipped into the saving account, but not touched the ISA as yet.

    I think if you are careful with your money, and you didn't have this "extra" money in the first place, then you should be able to put it away and not think about it.

    Report on 02 July 2012  |  Love thisLove  0 loves

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