This is a guest post by Fiona Lippey. Fiona is the author of the bestselling book The $21 Challenge and founder of Australia’s largest frugal website, SimpleSavings.net.

If you want to save money, and I mean really save money, then you’re going to have to stop buying Stuff. You have reduce the amount you consume. Today I want to share the system I’ve been using for the last 15 years to reduce my spending and make sure I don’t get tricked out of my hard-earned cash.

Question 1: Stop! Is this a good decision?
Before you reach for your cash, before you grab your credit card, before you pick up the item up from the sales rack, pause for just a minute. Stop yourself and think about whether or not you are about to make a good or a bad decision. A marketer or salesperson’s job is to make you think you need something that five minutes earlier you didn’t know existed. Find a way to trigger your internal alarm bell, so you can stop for a second and move on to question number two.

Question 2: Are you hungry?
If your belly is empty then your decision making is impaired. Our bodies get confused between the desire for food and inedible objects. So if you are hungry, step away, eat something, then wait for 15 minutes before moving on to question three.

Question 3: Is there something else?
There are so many other things you could buy. Is this item really the one you want to spend your hard-earned money on? There are other things you could achieve with this money. Will you be limiting yourself by making the purchase? If you have decided that this is the only thing you want, go to question four.

Question 4: Is it worth the effort?
Every time you reach for your cash, ask yourself if it is really worth the effort. If every $15 you spend is an hour you’re going to have to work, is it worth the effort? Or should you leave your money in your wallet? (It’s so much easier than having to earn extra money!) Now, if you have decided the purchase is really is worth the bother, move on to the fifth question.

Question 5: What will you gain?
Next, work out what you or your family will gain by buying the item. What are the longterm consequences? Will it improve your health and happiness or genuinely give you more free time? How? If you cannot answer these questions positively, then leave your money in your wallet. It is important that you be really skeptical when you answer this question. Now move to question six.

Question 6: What will you lose?
When you buy an item, you both gain something and lose something. If you are lucky, the only thing you lose is cash and the time it took you to earn that money. But this is not always the case. A great example of this is a computer game. You gain entertainment, but you might lose quality time with your family. Once you are certain you have accounted for everything you could lose, move on to the next question.

Question 7: Is there a better way?
Now it is time to shop around for a better price and work out the smartest way to buy it. How can you get the best value for your dollar in the minimum time possible? Occasionally, working it out for yourself will take more time than you save (when calculating your time as an hourly wage), but you will get satisfaction in knowing that you’ve found a great deal and are doing the best for your family. Once you have researched your purchase and found the best way to buy it, go to question eight.

Question 8: Do you have the cash to spare?
Most of the time, buying things on credit is stupid. So if you don’t have the cash, remain free, walk away, and live happily ever after. Consumer purchases aren’t worth burdening yourself with debt. This means you should avoid credit cards, layaways, interest-free loans, mortgage refinancing facilities, etc. Only buy something if you have the spare cash — and if you don’t, go home and save until you do.

If want to save yourself some money, write down the eight steps and put them in your wallet! Every penny you save is one you don’t have to earn!

My name is Christine, and I’m a school teacher. Last year, I set a goal for myself. I’d been renting homes and apartments to live in for eight years, and the last two rentals were particularly bad. The houses themselves were nice, but after one rental foreclosed underneath me and the next was leased by an awful realtor who couldn’t even get me a key to the pool that was 100 feet outside of my door, I knew I needed a change. That’s when I decided to buy a house.

When I made the decision, I started getting all my ducks in a row. About six months before my lease was up, I met with a good friend who was a realtor, and he hooked me up with a lender he trusted. We sat down and both spent half the day getting me pre-approved for my loan and answering every question I had. After crunching some numbers, I knew the price range I could afford for the monthly payment, principal, interest, insurance, and taxes. (This range was well under the maximum I was approved for.) I took notes, and with this new knowledge under my belt, it was time to save.

Actually, therein lay the problem: saving money.

Financial Obstacles
Months before meeting with the realtor and lender, I had begun to stash away money here and there to meet my goal. However, after talking with the both of them I began to feel wholly unprepared to buy the house of my dreams. My meager savings was far from what I needed to make my first home purchase.

Not only that, but I wanted to be sure I was financially sound after buying my first house. I wasn’t going to wipe out my savings to buy a home; I wanted to make sure I still had a cushion of money in the bank in case there was an emergency or some sort of surprise repairs.

At the time, I had almost $5,000 saved to go towards my down payment and closing costs; I needed about $3-4,000 more in order to be able to be able to afford to buy. This meant I needed to save between $500-$1000 a month to be able to purchase and close before my lease was up. I needed help — and fast if I was going to be buying before the end of the year.

That’s when I got lucky.

The Money Fix
Daily Worth — a financial website for women — ran a contest asking readers about their financial problems. If you wrote to describe your situation, you could receive advice from a financial expert and $200 for writing two posts reflecting on your experience.

I wrote in, and one morning I received a phone call telling me I had won, and financial expert J.D. Roth would be getting a hold of me soon to discuss my problem. (FYI, Daily Worth is currently taking applicants for their third season of this contest, so if you have a money problem its probably worth checking out!)

This next part may sound cheesy or cliché, but from the moment I won and began getting advice from J.D., my life changed.

J.D. called me one morning and I laid out my problem: I wanted to buy a house but didn’t know how to save enough money in a short amount of time. I admitted I wasn’t financially perfect, and I probably spent too much on silly things, like going out to eat, when I should be more frugal. I had experienced some financial troubles in the last few months, like paying off medical bills, dental work, and car maintenance, which were putting a dent in the amount I was able to save.

J.D. asked me a lot of questions in order to figure where I could make changes in order to save. When I put down the phone I was not only relieved that I was getting some help, but I also felt like just talking to someone helped me realize what flaws I was making financially. I was ready for a change and awaited J.D.’s advice eagerly.

A few days later, I received J.D.’s financial plan. There were no curveballs or any strange tips; actually all the suggestions he mentioned were things I read before (mainly at Daily Worth or GRS). The difference is that when J.D. laid out his advice for me, I had no more excuses. I couldn’t read the same advice in a blog or website and think, “Oh that’s great advice for someone, but not me,” because the suggestions were tailor-made for me. I had no more excuses for dismissing good financial advice.

What did J.D. recommend?

Save First
In the past, my plan was to save all my leftover money; however that wasn’t working. There was always an extra expense (car repairs, dental work, a pretty pair of shoes, etc.) to take that extra money away. J.D. suggested I automatically transfer about 10% of my paycheck to my savings every pay period, and that I should aim to gradually increase this amount to 20% or more of my take home pay.

This would force me to learn to live on a smaller chunk of my income and stretch my money, because the money that went in my savings wouldn’t be readily accessible to me in my checking account, and I could no longer fall back on the “extra money” that I knew would be there at the end of the month when I wanted to go buy something I could live without

Keep Multiple Savings Accounts
J.D. suggested multiple savings accounts, so I will always have a back up stash of cash to cope with new tires, dental work and other such emergencies. This will also allow me to have a separate account solely for saving for the down payment and closing costs of my future home. He also suggested a third account for other things, like Christmas or birthday gifts or future vacations.

He suggested using an online savings account, as having an account separate from my existing bank would make my money more difficult to access. Multiple accounts for specific purposes would give my money a specific purpose and give me an idea of what I can and cannot afford.

Track Spending
I had been tracking my spending prior to J.D.’s suggestion by keeping a spreadsheet in Excel. I would make two pages for each month: One with all my regular monthly bills and expenses (rent, electricity, my car payment, insurance, etc.) and one page keeping track of the charges I put on my credit card.

I know it seems silly to write down all the charges I put on my credit card, because anyone can just look online and see how much they have spent, but that never worked for me. Writing my charges in Excel gave me an idea where I stood (even if I didn’t always follow the budget I laid out). However, J.D. suggested using Mint or Quicken to get a clearer picture of where my money was going. I could use the software to set targets on how much money I wanted to spend each month on expenses like gas and groceries.

J.D. also suggested I use the Balanced Money Formula to set my spending targets. Using this formula, you aim to spend 50% or less on needs, save more than 20% (including debt repayment), and use the rest, around 30%, to spend on wants.

I liked the idea of using a software to track my spending because keeping the spreadsheet can be a lot of work, and it doesn’t tell me too much about what percent of my spending is on things I need, like food, versus how much of it is on my wants, like going out to eat, makeup, and clothes. The 50-20-30 formula gave me a guideline to use in regards to my spending.

Take a Second Job
This was another thing I was already doing. During the school year, aside from teaching, I also worked as a habilitation provider. The problem with my second job was that I always looked at the extra income as extra spending money, when what I needed to do was think of it as extra saving money. I need to change my viewpoint and think of that income as my primary source of savings, and pick up extra work until I have saved enough for my down payment and closing costs.

Plan into Action
From there I put J.D.’s advice into action. I used Get Rich Slowly: Best Savings Accounts for 2011 to guide my search for an online savings and narrowed my search down to ING Direct, Ally Bank, and Sallie Mae. In the end, I chose Sallie Mae, because not only did it have one of the higher compound interest rates, but it also offered up to a 10% match of your rewards through Upromise, a service that allows you to earn a small percentage of money from your everyday spending.

About a month later, I also opened a Perk Street checking account. I now had four separate accounts for specific purposes: my checking and savings accounts at my brick and mortar bank for regular bills and unforeseen repairs and expenses, my Sallie Mae account to save for my home (which would later turn into my emergency fund after buying my home), and my Perk Street checking for all wants, gifts, and vacations.

I picked up some extra work tutoring and created an Etsy store to bring in some extra income. All surplus income I would not normally have to pay bills was put towards saving for my future home. I also redistributed my regular income, arranging for 10% of my income to automatically deposit into my savings each month.

I switched to Mint to track my finances, and abandoned my former budgeting spreadsheet. Since I am a visual person, I like that Mint shows my spending using graphs, which allows me to see how close I am to the individual budgets I have set up. Mint.com showed me that I was over spending on groceries, and when my Money Fix story ran readers gave me great suggestions to help me slim down this area of my budget, like making a monthly menu to help me plan out what I need to buy at the grocery store. This also means that I am not only going to the store with a list and a plan, but I’m also only going to the grocery store about once a month and filling in with small trips when I need to.

However, Mint didn’t just help me trim my grocery bill; it helped me trim my overall budget. I cut back my restaurant spending and started going out to eat only once a week, instead of 2-3 times. I’ve been going out less on the weekend, and therefore have been spending less on gas. When it was time to get new clothes when I had to go back to work this school year, I resisted the temptation to go to the mall and hosted a clothing swap.

Mission Accomplished
The bottom line is that the plan worked. I was able to cut my overall spending by 30%. I made saving a priority. After putting the plan into action, on November 15th, I closed on my first home.

The journey to saving for my first home has taught me that I need to make saving for my future a priority. Savings shouldn’t be whatever money is leftover, but the money that is taken out first, because there will always be a need to have money in the bank (especially now that I have a home to maintain). My savings now comes first and completely shapes the way that I budget my money.

One of the tenets of personal finance is to pay yourself first. And one of the most sure-fire ways to make sure you do that is to automate your savings: setup your checking account to make an automatic deposit to your saving accounts.

Automation has been incredibly effective for me. I have targeted sub-accounts for property taxes, auto repairs, house savings, and more — a tactic I learned about here. The first year my husband and I had to pay property taxes, however, the billing statement felt like it came out of nowhere — was it really due already? Luckily we had the cash, thanks in part to a very generous wedding gift sent the month before, but that was pure luck. If not for that, we would have had to suspend our debt repayment and possibly dip into our tiny (but growing) emergency fund. When we paid property taxes the next year (and every year since), all I had to do was transfer the money from savings into our checking account, then pay the bill. Much less stressful!

Automation on uncertain income
One of the downsides of being self-employed, however, is that my income is irregular. Irregular income is a reality for most freelancers, as well as people who are paid on commission or on tips, to name a few.

We still have the important expenses — like home insurance, taxes, and retirement contributions — on automation, but a large chunk of our income is being directed toward saving to build our house. Since I’m never sure exactly how much I’ll make each month, I’ve been hesitant to designate a set amount to be automatically withdrawn for that particular savings account. What if a client was late sending payment? And what if that automatic transfer slipped my mind and I forgot to cancel it for the month?

Instead, I’ve waited until bills were paid and automated withdraws cleared, then transferred the remainder (minus some padding that I leave in checking) to our house savings account.

This has worked out okay, but sometimes I forget to make the transfer, and then I’m stuck trying to sort through how much was left at the end of last month, along with whatever expenses we’ve had since then. Also, I like having a system — with automated payments, I can predict how much will be in our account in six months or a year. This is particularly helpful for our house savings account, since we’re paying cash to build our home. Finally, there’s no temptation to spend the money. We’re pretty good about that, but with automation, it’s becomes a certainty.

Found savings
This month our income and expenses had some big changes. In order from smallest to largest, here’s what has changed:

• Yoga membership. I was paying $70 per month for unlimited yoga classes, but cancelled my membership because there were no longer enough classes I liked on the schedule. For now, I’m paying about $44 a month for a per-class pass, and my fellow yoga practitioners and I have set up group practices (free). I also revived my home practice, but cancelled a $15-per-month subscription to online yoga classes. This is a total savings of $41 per month.
• Fuel expenses. I no longer drive to yoga class every day. When I do drive, I make a list of all errands I can run while I’m out to prevent additional trips to the store. And once a week my husband works right around the corner from my yoga studio, so I carpool with him, go to class, then work from a library or cafe until he’s done. After doing this for almost a month, I estimate I’ll save at least $45, which I think is a conservative figure.
• Student loans. My husband’s student loans came due in December, meaning a new $202 payment each month.
• Paid off land. Five years ago we bought an unimproved 2.5 acres where we’re now building our home. We elected for a 5-year loan to force ourselves to pay it off quickly, and guess what? As of January 15, we own the land free and clear! This frees up $710 each month.

With these savings and the new expense, we now have $594 of “found” money. This money used to be tied up in other expenses, and even after I quit my day job a year-and-a-half ago, we never had a problem paying them.

I realized this is a perfect time to automate our house savings. Instead of making the transfer of the extra $600 each month (may as well round up, right?), I set up an automatic transfer of $600 from our checking account to our savings. Of course I’ll still have to transfer anything above that amount, but for now, the $600 inches me closer to automation.

Additional income, snowballed
A little excited about the idea of automating our house savings (I’m kinda nerdy like that), I started to think about other ways to automate more of our savings.

Right now I’m talking with a client about working together on a more regular basis. This client has always paid on time, and I’d be writing for them biweekly. This new income source could be funneled into our automated house savings, since it will be predictable (well, as predictable as an income source or job can be). I can do the same thing with any future, regular work.

I held off on automating our house savings because of my irregular income, but even people with a fluctuating salary can automate a good portion of their savings. Start with found money from paying off debt or cancelling a subscription you haven’t used in months, then increase the amount even more if you have extra, regular income (above what you need to pay the bills). This might be income from a second job, a side business, or overtime you work regularly, as examples.

Finally, remember that even small amounts will start to add up. That’s something I dismiss sometimes because a few dollars doesn’t seem like enough to make a difference. But if we downgrade our Netflix membership, something I’ve been considering based on our rental history, I plan to add the $8 savings to the automatic savings deposit — I guess I’m feeling extra motivated!

If you have an irregular income, what is your savings system? Do you automate your savings, or do you have a hybrid system like mine?

Unfortunately, I’m not qualified to answer questions as specific as these. (And I don’t have time to answer them all!) That said, there are often certain themes, such as: “Am I saving enough?”

For instance, Kailey wrote recently with the following question. To me, it’s clear she’s saving plenty — but how should she allocate what she saves? That’s the question. Here’s her e-mail:

I’m 25 and about three years into my professional career. I’m pretty diligent about savings and contributing to my 401(k). Of course, I never feel like I’m saving enough, even though I’m fairly confident that I save much more than many of my peers.

One-third of my income goes directly into my ING account for my emergency fund (which is fully funded for approximately one year of living expenses) and now is being used to accumulate money for a down payment on a house/condo. Unfortunately, I live in Southern California, and in an area where that 20% down payment doesn’t seem to be within reach in the next couple of years. In addition to the 33% of my income being directly saved, I also contribute 8% to my 401(k). This 8% allows me to take full advantage of my employer’s generous matching contribution each year. I also have an automatic annual 1% increase to my 401(k) contribution.

The problem lies in that I never feel like I’m contributing enough to either my savings or my 401(k). How many GRS readers actually max out the federal contribution limit of $16,500? I don’t feel that this even seems realistic or attainable on a decent life style. And is it really a good idea to increase that amount by significantly decreasing the amount going into my savings each month?

Taking advice from GRS, I opened a Roth IRA a few month back with $3000 of the $5000 limit. This definitely increases my percentage of income saved. However, it would still be interesting to hear other readers percentages and/or thoughts on my progress given my age.

First of all: Wow! Kailey is saving almost half of her income. That’s awesome. Although she’s fretting over how to maximize her money, I think she should congratulate herself for what she’s been able to do at such a young age. If she continues down this path, she’ll be in great shape twenty years from now.

So, Kailey’s problem is a good problem to have. But if you were in her position, it’d still be a problem. How much should she save for the near future? How much should she save for retirement? These sorts of decisions can be perplexing, and unfortunately, there are no easy answers. Because we can’t know the future, we can’t know what the best choice is for our individual circumstances. Instead, we have to make best guesses based on who we are and what our goals are.

That last part is important. I always preach the praises of conscious spending — the notion that we should spend lavishly on the things we love while cutting back ruthlessly on everything else — but I think there’s something to be said for conscious saving also. (In a way, this is why I’m a fan of targeted savings accounts.)

When you have specific goals, goals that mean something to you, you’re much more motivated to save. If I have a trip planned, I’m more diligent about saving than if I’m saving for some undefined future, for instance.

In Kailey’s case, it sounds as if buying a house is important to her. That’s a good goal, and it will help keep her motivated to save. If I were her, I’d stay focused on that. She’s already putting 8% of her income into her 401(k), plus $3000 a year into her Roth IRA. That’s a good start, and if she can maintain those contributions as she saves for a home, I think she’ll be fine. Then, once she’s accumulated enough for a down payment, she can attack her retirement saving even more aggressively.

Really, though, I don’t think there’s any one right answer in this case.

What do you think? If you were in Kailey’s position, would you save more for retirement? Would you save more for the down payment on a house? How do you find a balance? And, at the same time, how do you make sure you’re not depriving yourself in the present?

The Financial Services Authority (FSA) is introducing new rules which will require banks and building societies to display clear signs at branches and on their websites, telling customers their savings are protected.

The sign will tell savers: “Your deposits are protected up to £85,000 by the Financial Services Compensation Scheme, the UK deposit protection scheme. Any deposits you hold above this amount are not covered.”

The Financial Services Compensation Scheme (FSCS) is an independent scheme established on 1 December 20011 as a compensation fund of last resort for customers of authorised financial services firms in the UK.

It will compensate customers if a bank, building society or financial firm stops trading or has been declared in default and is unable to pay claims against it.

The new rules are designed to improve consumer confidence in the safety of their savings and to raise the profile of the scheme.

Despite a £4m publicity campaign last year, many customers remain unaware of the protection available.

Hector Sants, chief executive of the FSA, said: “The posters and website notices we are going to be mandating will help to prompt consumers to get more information and to make informed decisions about how much money to deposit with one bank.”

Banks which operate in the UK but which are headquartered abroad will have to display signs stating that deposits are not covered by the FSCS and offering information on which other national scheme is providing the protection.

The FSCS has paid out £26 billion in compensation, it was revealed today, representing an average payment of £1,448 for each family in the UK.

The FSCS advises that savers should check their savings are with Financial Services Authority-authorised institution, or they may not be eligible for FSCS protection.

A study by Santander, one of the world’s largest banks, has revealed that people are funding Christmas this year by dipping into their savings.

High unemployment, inflation at around 5 per cent and the threat of another recession are all putting pressure on people’s pockets and causing them to use their savings to pay for their Christmas celebrations.

According to Santander’s research, a third of Brits will withdraw an average of £391 from their savings accounts this month and around three quarters of this will be used to buy gifts.

Matt Hall, head of savings at Santander, said: “With many people dipping into their savings to cover the cost of presents as well as increased winter bills, this year looks set to make a significant dent in the nation’s savings.”

Santander also found that people are having to use savings to pay their heating bills this winter.

An annual survey by insurer LV found that parents will spend a total of £2.4 billion on Christmas presents for their children this year.

Children between the ages of seven and 11 will have the most spent on them, with parents expected to spend around £220 on each child.

Across all age groups, parents will spend an average of £178 on presents for each child, £10 more than last year’s average.

Yesterday, David Cameron’s adviser on childhood, Reg Bailey, called for parents to spend less on presents for their children.

Mr Bailey warned that commercialisation is ruining Christmas and said that parents should not get into debt in order to buy expensive gifts as children would benefit from having fewer possessions.

Mr Bailey is the author of a Government-commissioned report on the commercialisation and sexualisation of childhood, which was published earlier this year.

The Post Office has extended its promise to match the Bank of England Base Rate percentage changes on its savings products, until 1 January 2013.

The promise, which was originally planned to run until 31 March 2012, covers the Post Office’s Instant Saver, Reward Saver, Cash ISA and Easy Saver accounts.

The Post Office has also announced unlimited free withdrawals from Instant Saver accounts with effect from today, replacing the previous limit of six free withdrawals a year.

There was previously a £1 charge for each subsequent withdrawal.

Richard Norman, Post Office Director of Savings and Investments said: “We want to help make saving easier, more flexible and more rewarding.

“We understand that sometimes you need to dip into your savings for one reason or another and that’s why we have introduced unlimited free withdrawal, to help you access your money in a way that suits you.”

Santander has also boosted its savings range with the launch of a new range of ISAs in a limited offer which is available from branches and over the phone.

The new fixed rate ISAs offer rates of up to 3.5 per cent and are
available in one and two-year formats.

Savers can transfer existing ISA funds into the new products at the time of opening.

A minimum initial investment of £500 is required and the maximum investment per annum is £14,000.

Matt Hall, head of savings at Santander, said: “Fixed rate Isas offer certainty of return with the advantage of earning the interest tax free and therefore continue to prove popular with savers looking to lock in their cash.”

Santander has also launched a new, two-year fixed rate bond which offers 3.55 per cent AER to customers who deposit more than £25,000.

Customers who deposit more than £5000 will receive 3.50 per cent AER and those who deposit more than £500 will receive 3.20 per cent AER.

New data from the Bank of England suggests that house owners are focusing on repaying their mortgages as part of their efforts to reduce debt.

Consumers are concerned about the state of the economy and their incomes are under pressure from pay freezes, rising unemployment and high levels of inflation.

These pressures, together with falling house prices, are contributing to a trend for households to cut spending and reduce their borrowings.

A record £9.1 billion of mortgage repayments were made in the second quarter of year, representing 3.5% of households’ post-tax income.

The amount of money owned on mortgages has fallen by £92.9 billion since the 2008 credit crunch.

In contrast, during periods when house prices are rising, consumers tend to withdraw equity from their homes.

In late 2006, when the property market was booming, mortgage equity withdrawal represented 5.6% of households’ post-tax income.

Alongside general economic gloom, the current low level of return on savings also means householders are less likely to take equity out of their property.

With the Bank of England keeping its base rate at a historic 0.5% low, many people are using any spare cash they may have to reduce their mortgages rather than saving it.

However, the latest figures from the Building Societies Association show that mortgage lending by building societies and other mutual societies increased by 20% last month to £2.3 billion.

Savings balances also grew, to £0.4 billion in October, compared with an outflow of £1.1 billion in October 2010.

Adrian Coles, Director-General of the Building Societies Association, said: “This improvement is likely to be because of the cash savings accounts on offer at mutuals which provide security that equity investments cannot in these uncertain times.”

Santander has launched an innovative new product which allows customers to receive £1,000 interest almost immediately, on an investment of £12,000.

The Upfront Interest Bond has a minimum three-year term and a minimum initial deposit of £10,000 is required.

It is only available to Santander current account customers and interest on the bond will be paid into the account within six weeks of the date the bond was opened.

It offers an interest rate of 3.36 per cent gross AER and although the offer of three years’ worth of interest up front is tempting, savers who are willing to wait for their interest could find a higher rate of elsewhere.

No withdrawals can be made during the life of the bond, so once the interest has paid, the money is tied-up for the three-year term.

Earlier this month Santander launched its inflation-linked Issue 7 Bond, with a minimum deposit of £500 and a maximum of £2 million.

The bond is linked to the retail price index (RPI), so that any increase in RPI inflation will trigger an equivalent increase in returns for the bond, preventing the investment being eroded by inflation.

If the RPI increases by 20 per cent over the six-year term of the bond, the investor would receive 20 per cent on top of their initial investment.

However, if the RPI falls the bond doesn’t look quite as attractive as it offers a minimum interest rate of 10 per cent before tax, which would mean the investor would receive just £1,000 interest on an initial deposit of £10,000, equating to 1.6 per cent a year.

The six-year term of the bond could also be off-putting for some investors, as no withdrawals are allowed during this period.

New figures from financial research company Defaqto reveal that UK savers are pessimistic about their pensions and many are failing to make adequate provision for their retirement.

Dafaqto reports that the proportion of savers who fear that their needs won’t be adequately met when they retire has grown 6 per cent to 44 per cent.

Just 11 per cent of those surveyed said they were confident that their pension would enable them to have a comfortable retirement compared with 16 per cent previously.

The survey also highlighted the failure of younger people to make adequate provision for their old age, with 35 per cent of the 25 to 34 age group, and just 9 per cent of those aged between 18 and 24, saying they had a pension in place.

Andy Leggett, Defaqcto’s Insight analyst for wealth management, said: “It is important for people to plan for their financial future to ensure that their and their dependents’ needs will be met.

“The later you leave it, the more of an uphill battle you face.”

The Prudential today revealed that many older couples are failing to plan for their joint retirement and in fact many of them are hiding savings from their partners.

New research by the financial services company reveals that 15 per cent of people over the age of 40 are hiding savings, either as a security measure or because they don’t trust their partner’s ability to make sensible financial decisions.

In total the Pru estimates that 4.5 million people aged over 40 have a total of £4.6 billion in savings accounts that their partners know nothing about.

The company warns that much of this money is in accounts offering a very low rate of interest and suggests that savings should be regularly reviewed to ensure that they are attracting the best possible return.