You want to be putting cash into your savings for a rainy day, right? Well yes, but only after you've done a few other things:

  1. Pay off your credit cards (they're a terrible way to borrow money), or at the very least convert the debt into a bank loan - then pay that off instead.
  2. Get a mortgage. I know it's hard, and it might not be the perfect time right now, but on average house prices double every 10 years, you'll avoid having to deal with the fluctuation of the rental market (plus the regular move costs, landlord charges and unreturned deposits etc) and any repayment you make quickly mounts up. If you can't afford it on your own consider going in with a friend - worked for me, and even if you fall out, as long as it's been a year or so you'll probably recoup the move costs.
  3. Get an offset account for that mortgage. You save on interest, which as borrowing interest will always be higher than savings - and it's effectively tax free, because it's money you're not paying rather than money you're being paid.
  4. Start a pension - the payments come off your wages before tax (so £60 = £100 if you're lucky enough to be a top rate taxpayer) and it'll be handy when you get wrinkly.
  5. Finally, if you still have any cash left you're ready for that savings account. For your first £3k a cash ISA's a good place to start as the interest comes tax free. After that you have another £4k per annum that can go into a longer term stocks and shares ISA. You might also consider National Savings, as any winning from that are tax free too, and you never know - you could win the million and not care about any of this ever again.

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