The main types of saving product are:
You may have also heard about cash or deposit ISAs (Individual Savings Accounts). These are a type of savings account available from banks, building societies or National Savings and Investments. For an explanation of ISAs see the Directgov website.
In addition to regular savings accounts, you can also save in special Christmas savings accounts offered by some building societies and most credit unions.
Banks and building societies in the UK must be regulated by the Financial Services Authority (FSA).
Savings accounts and ISAs are a low-risk way to keep your money safe. The Financial Services Authority provides information about different types of savings on its Money made clear website.
Having some money set aside can really help you to feel confident about managing some of life's little eventualities, for example, you may have to have some repairs done on your car, or your washing machine may need replacing. If you set aside £5 a week into a savings account as an emergency fund, by the end of the year (providing you haven't had any emergencies) you will have saved £260.00.
Then there are savings for happy events such as birthdays, religious festivals, weddings and holidays. If you plan in advance how much you're going to spend on an event and set an amount aside each week or month, you will be able to enjoy it without the pressure of wondering where the money is going to come from. For example, if you think you'll need £200 for next year's Christmas presents and you start saving just after Christmas, you will only need to set aside £3.85 per week to achieve this.
For more information on different types of savings, see Savings Made Clear and Types of Savings at Money made clear from the FSA.
The higher the interest rate on your savings account, the more money you'll earn on your savings.
Your money grows from interest being added either monthly or yearly. Be aware of the impact inflation can have on your savings.
There are also other ways to save, for example, saving stamps or schemes but your money doesn't earn any interest, so doesn't grow.
Interest rates change all the time so it might be good to check regularly to make sure you're getting the most out of your savings.
You might decide to check once a year, or when interest rates change. If you find a better deal, you might decide to switch to a new account - if you do, check first for any penalties or loss of interest on closing the old account.
This doesn't apply to term accounts, where you can't usually take your money out before the end of the set term.
Under the Banking Code Standards, your bank or building society must tell you if the interest rate on your account changes. They also have to give you the right to switch accounts for free if the interest rate changes significantly. To find out more about this, visit the Banking Code Standards Board's website.
You can compare different savings accounts available from various banks and building societies using the FSA's Compare savings accounts tool.
There are various types of investment - some will be right for you and others won't. It all depends on your attitude to risk and what you are trying to achieve with your investments.
Think about why you want to invest. Perhaps you are looking for an investment to provide money for a specific purpose in the future. Alternatively, you might want an investment to provide extra income.
The investments section of the FSA website will help you understand the key issues to consider when investing.
Some common types of investments include shares, bonds and Individual Savings Accounts. There is more information available at Investments made clear at Money made clear from the FSA.
The FSA website also has useful tables to compare savings products.
Inflation happens when prices go up throughout an economy. The effect of inflation on your money means that the money you save will buy less each year.
To protect your savings against this, you could look for an after-tax interest rate that is more than the rate of inflation. Or if you want to put your money away for a longer period and are prepared to take the risk that your money could fall in value (as well as rise), you could put some into an investment linked to the stock market. For more information visit Investments on the FSA website.
If you are at all worried about savings and investments then you can contact an independent Financial Adviser or similar service. You will most likely be charged a fee for receiving this advice. A useful starting point for obtaining advice is the FSA website that includes a register of all regulated financial services firms, individuals and other bodies. If the firm you use is registered with the FSA and something goes wrong you will be able to access a complaints procedure and possibly compensation.
If you have a mental health problem you may be worried that
There are a number of options available to people, depending on income and circumstances.
A key phrase within pensions is "qualifying years", which means the number of years you have worked or claimed benefits. For every year that you work, or week that you claim benefits, you amass National Insurance Contributions (NICs), that count towards your state pension. The number of years that you work and/or claim benefits relates to whether you receive a full or basic state pension.
Qualifying for a full state pension
At present, women need 39 qualifying years, and men need 44 qualifying years to get the full basic state pension. But, if you are 60 after 6th April 2010, you will only need 30 years, whether you are male of female.
Choosing a pension
State pension amounts are not fixed, and whilst you may have worked all your life, there is no certainty that the pension you receive will provide enough money for you to live on. That is why people are encouraged to save for their retirement.
Read about the different types of pensions on the Financial Services Authority (FSA) website or in the FSA's booklet about pensions (PDF file).
Topping up your personal pension or stakeholder pension following periods of absence from work
Most commonly you can do this via Additional Voluntary Contributions (AVCs). You could do this in advance of a period of absence/sickness from employment, or afterwards. For more information see the section of the FSA page on Receiving and renewing your pension.
For a definition of stakeholder pension and other terms see the FSA's pensions jargon buster.
If you have left work (due to sickness or any other absence) and started a new job - and have a pension scheme with both employers
You may consider whether you want to transfer your pension with your previous employer, into the scheme you have with your new employer. This is called a "pension transfer." This can be quite a complicated process, and can result in fees and loss of pension income earned thus far.
For more information on this see the page on transferring your pension on the FSA website.
Topping up National Insurance Contributions (NICs)
This is only available for parents or those who have/had had long-term caring responsibilities. Basically, it means you can top up your National Insurance Contributions following a period of absence from employment so that you have the required number of qualifying years, and so qualify for a full state pension. Some people with mental heath problems who have been parents or long-term carers may be eligible. See the section Understanding the basic state pension on the DirectGov website.
Qualifying for basic state pension
For every week that you claim Jobseeker's Allowance, Incapacity Benefit, Carer's Allowance, or the new Employment and Support Allowance, you claim a National Insurance Contribution, which counts towards your qualification for the state pension. If you have the required number of qualifying years (see above), you qualify for the full state pension. If you have fewer qualifying years, you may only qualify for the basic state pension. This is why parents and carers choose to top up their NICs.
Out of work and not claiming benefits
If you have worked and/or claimed benefits in the past, and amassed 25 per cent of the required qualifying years, you will qualify for the basic state pension. This may be topped up with pension credit.
But if you have less than 25 per cent of the required qualifying years, you will not qualify for any state pension.
After 6 April 2010, anyone who does not have 30 qualifying years will qualify for one thirtieth of the full state pension amount for each of the qualifying years they do have.
For more information on the full and basic state pension see Understanding the basic state pension on the DirectGov website.