Use the recession to kick-start your savings

Saving should be even more of a priority now that we have slipped back into recession again.

Building an emergency savings fund is vital for everyone, particularly in these uncertain times, and even though it might be difficult to put money away each month, every penny really does count.

Kevin Mountford, head of banking at MoneySupermarket, said: "The recent news that Britain has once again fallen into recession confirms that the pressure is still on Britain's wallets so it's important to be prepared in case your circumstances change for example, you lose your job or even if your employer cuts overtime."

He added: "Having some money set aside for a rainy day or in case of an emergency can help you keep your head above water should the worst happen."

The good news is that the top 10 savings easy access savings accounts now pay an average of 3.00% before tax - that's six times the current Bank of England base rate of 0.50% - so there are plenty of competitive homes for your cash.

Here, we take a look at some of the best ways to build your savings pot.

How much should I save?

You should save as much as you can afford to. Write down a list of what goes out and comes into your account each month including general spending money, and put the surplus into a savings account. Don't leave yourself short though - there's no point saving if you then have to rely on credit to make ends meet.

Kevin Mountford said: "In an ideal world, you should have at savings worth at least three months' salary, but for many this may seem an ambitious goal. However, in the current climate, putting something away, no matter how small, can soon add up. Getting into the habit of putting money aside in a savings account on the day you get paid and budgeting to make the most of your remaining salary is vitally important."

Where are the best homes for my money?

You should choose an account which enables you to make withdrawals without penalty, so that your savings are readily accessible.

If you haven't yet used this year's individual savings account (ISA) allowance, you should do so, as you will earn interest tax-free. Recent research conducted by Santander Savings found that only 17% of savers were expected to take full advantage of their 2011/12 tax-free cash ISA allowance, missing out on an estimated £242million worth of tax-free interest.

This year you can invest up to £5,640 into a cash ISA, and the same amount into stocks and shares.

Both ING Direct's cash ISA and Halifax's Online ISA Saver accounts pay 3.00% annual interest tax-free and can be opened with a minimum deposit of just £1, so even if you are a newcomer to savings, you can still benefit.

The ING Direct rate is guaranteed to remain at 3.00% for a year, while the Halifax's ISA rate includes a 2.75% bonus which is only payable for the first year. In both cases then, you may want to move your money after 12 months.

Alternatively, the Post Office Premier Cash ISA pays 3.01% on a minimum deposit of £100, making it a good choice for savers with smaller sums to invest. This rate includes a 1.26% bonus for the first 18 months, and you are only allowed two free withdrawals per tax year.

What if I've already used my ISA allowance?

With your ISA allowance exhausted, you should then consider building up savings in an easy access account. Coventry Building Society's Online Saver account, for example pays 3.15% annual interest before tax on a minimum investment of £1, making it the current market-leading easy access account for balances of less than £50,000. This rate includes a 1.15% bonus which is only payable for the first year, so savers will need to move their money once this disappears.

You can only make up to four penalty-free withdrawals a year from this account, and if you wish to make any more than this, you will lose 50 days' interest on the amount withdrawn.

ING Direct's Savings account, which pays 3.10% annual interest before tax on a minimum investment of £1, is also worth a look, and you can make as many penalty-free withdrawals as you want. However, this rate includes a hefty 2.56% bonus for the first 12 months, so you will need to move your money once this period finishes.

Alternatively, Derbyshire Building Society's NetSaver account pays 3.06% annual interest tax-free on a minimum investment of £1,000, and again you can make unlimited withdrawals. The rate on this account includes a bonus of 2.06% which is payable until the end of June next year, so you will need to move your money then.

What are the best easy access accounts without a bonus?

If you don't want to have to keep moving your money around there are several accounts available which offer high rates of return without bonuses.

Sainsbury's Bank, for example, pays 2.90% annual interest before tax on its eSaver Special without any short-term bonus included. The account, which is only available online, can be opened with a minimum investment of £1,000 and savers can make unlimited withdrawals without penalties.

Similarly, Virgin's Easy Access E-Saver account, which is provided by Northern Rock, part of Virgin Money, pays 2.85% on a minimum investment of £1. Again savers can make unlimited withdrawals without notice and the account also offers a choice of annual or monthly interest, which is useful for those looking to supplement their income. Savers can choose whether they want to operate their account online, or at branches and by post.

Those who don't need such regular access to their cash may want to consider West Bromwich Building Society's online WeBSave Plus 2 account which pays 2.81% with no short-term bonus. This account can be opened with a minimum investment of £1,000, but only permits one penalty-free withdrawal a year.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.