What should you do with £10 a month?

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

[SPOTLIGHT]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% 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 the Consumer Credit Counselling Service, says thatyou 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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