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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)

  • CuNNaXXa
    Love rating 362
    CuNNaXXa said

    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.

    Ah, but once you've earned the interest, you're going to spend it anyway. In fact, money only has value when it is exchanged for goods or services.

    Now the real question is whether putting aside £10 a month would actually benefit anyone? If you are poor, then £10 is probably a life saving amount that could be the difference between eating or not, or heating or not, and if you are rich then £10 a month would be a drop in the ocean.

    In fact, if you are rich, you would probably be looking at investing a much larger sum than a measly tenner.

    So, who would fall into the category of someone able to save £10 a month? I think most people would either save more, much more, or not at all.

    Maybe a better sum would be £50 as a starting figure for someone with expendable income. At least £600 a year plus interest would pay part of the annual heating and lighting bill, or go towards a third of their council tax bill.

    I find it amazing how much we need to put away for a rainy day. It appears that things just cost so much these days. How did we ever manage when we were earning a pittance?

    Report on 23 June 2012  |  Love thisLove  0 loves
  • Mike10613
    Love rating 599
    Mike10613 said

    If you pay everything monthly then you might have a small sum left over at the end of the month. I need at least £100 at the end of the month to save to replace things like my car, household appliances, my laptop and so on. I also pay my car insurance for the year rather than pay the extra 10% to pay monthly. I have no debts and so paying them off isn't an option. I don't buy on credit, not even so called 'interest free' credit. I do have investments, that aren't doing as well as I would like, but as well as can be expected considering. There does appear to be bargains on the stock market, but people have been saying that all along and it dropped even further. The past isn't a reliable indication of the future, be diverse; hope for the best, but prepare for the worst!

    Report on 23 June 2012  |  Love thisLove  0 loves
  • electricblue
    Love rating 643
    electricblue said

    When I was in primary school I became interested in electronics and used to spend money on buying surplus components. Buying or simply collecting surplus stock like this became a hobby with other family members becoming involved. My nephew was a production manager for an electronics company and used to legitimately have me clear things his company were discarding. Over the years I had a manufacturing business and was often in a position to say to customers and suppliers 'don't throw that away, I'll keep it'. I now have a collection of obsolete and very rare components which have proven to be a fantastic investment of little money but a lot of time, admittedly. There are still things you can buy and collect as an investment, £10 a month is quite sufficient if you can make the right connections and you stick with something you understand.

    Report on 23 June 2012  |  Love thisLove  0 loves
  • PDB11
    Love rating 72
    PDB11 said

    Another thing to do with an extra tenner a month: give it to charity. It doesn't matter in principle what sort of charity - animals, conservation, the elderly, the disabled, the homeless, foreign or at home - find a cause that really speaks to you. See what organisations are working in the field. Research them as you would companies to invest in. And pick one to give £10 a month to. They will be really grateful (although not grateful enough to stop sending you begging letters), and you will have a feeling of having done something really worth while. Win-win. (And don't forget to declare it as gift aid)

    @electricbue: love your story about collecting old components. A friend of mine did that. He is now on hard times, but won't sell any of them! He insists that there are just too many times when he "needs" a component that just cannot be had nowadays, and finds it in his junk box. I'm not convinced he is defining "need" correctly.

    Report on 25 June 2012  |  Love thisLove  0 loves
  • Mike10613
    Love rating 599
    Mike10613 said

    @electricblue, I used to do that in primary school and was often in the Army and Navy stores. There used to be a warehouse full of old equipment that was confiscated by the government that would be worth a fortune today; I expect it all went to the tip. I used to give kids electric shocks when I was in primary school; I'm still shocking people today! :)

    Report on 29 June 2012  |  Love thisLove  0 loves
  • 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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