This is alarmingly muddled thinking. Cutting down on meals out and shopping for the “millions weighed down by high lifestyle costs”, as Axa puts it, may feel painful. But abandoning Isas and Sipps instead, just as the property market turns, will prove far more costly.

First off, few dispute that gravity is now reasserting itself on UK house prices – the IMF’s latest forecast predicts a 30% drop for UK property, while March saw the largest monthly fall in UK house prices since 1992, says the Halifax. This should snap more people out of the delusion that their house will not only provide a place to live, but will also pay for their eventual retirement, when they will free up lots of capital by downsizing.

The Turner Report on pensions a few years ago exposed this logic as flawed. The latest Land Registry figures reveal why. The gap between an average detached house and a semi-detached house or flat in England and Wales is about £100,000 – enough to buy an income of just over £6,000 per year using a retirement annuity – while the gap between semis and flats is zero. Since we all have to live somewhere, then even assuming you can face selling the family home on retirement, the pickings from downsizing look slim – unless you move to a much cheaper area, or downsize to a shoebox, or both.

So we can’t rely on bricks and mortar to fund our retirement. How about shares? Some worry that buying now, when prices might fall further, makes no sense; and yes, in an ideal world we’d all buy right at the bottom and sell exactly at the top. But that would require extraordinary amounts of luck. What most private investors actually do is to hold off buying until share prices are in an uptrend and are already expensive. They then compound the problem by delaying selling until prices are clearly falling, not realising that by then shares may be relatively cheap.

This is the main reason why, says Dalbar.com, the average investor only made 3.9% over the 20 years to 2005, when the S&P 500 averaged over 11%. The easiest way to avoid this trap is to drip-feed an affordable amount into a cheap tracking product, such as an exchange-traded fund, through a tax-effective wrapper, such as an Isa or Sipp.

If you really don’t want to invest in stocks, there’s always cash. Right now, there are plenty of decent savings rates out there as banks compete for custom – see our compare savings accounts page for more details. Whatever you decide, the main point is that you need to save more than ever when times are hard. So if you plan to cut back, ditch the takeaways, not your piggy bank.

http://www.moneyweek.com/file/45482/why-cutting-back-on-saving-is-unwise.html

Given the attention focused on how creditworthy our banks are, some may well be tempted, as The Daily Telegraph’s Stephen Ellis notes, to “stuff it all under the mattress”.

However, that is not only rather risky, but also should be unnecessary, thanks to an investor safety net – the Financial Services Compensation Scheme (FSCS) – which pays out if a bank or building society holding your cash goes bust.

At first glance, the scheme is pretty simple; if a bank goes bust and a customer is unable to recover a cash deposit via the normal liquidation process, then they are entitled to claim 100% of any amount up to a maximum of £35,000. So far, so reassuring. However, there are some quirks to be aware of.

First off, the £35,000 applies per person and not per account. So if you have two accounts with a single bank, say a current account and an online savings account, the balances are combined to test the £35,000 threshold. Also, some banks, such as HBoS, have a single Financial Services Authority (FSA) registration for all of their operations – including the likes of Intelligent Finance, Birmingham Midshires, Halifax and Bank of Scotland. That means you only get a single £35,000 claim to cover balances across the whole group. So a cautious investor should limit single deposits to £35,000 and, ideally, spread them across different banks.

It’s also worth noting that the scheme only pays out if your bank is FSA-authorised. You can check this on the FSA Register, or call them on 0845-606 1234. Be aware too that certain banks, such as Bank of Ireland, ING, Landsbanki and Fortis, get their primary authorisation to operate here from local regulators rather than the UK FSA. Although you would still be entitled to claim from the FSCS should the local scheme pay less than £35,000, the process may take longer, given the complexities of dealing with two different regulators.

If this all sounds like a lot of homework for a simple cash deposit, remember that the Government’s bail-out of Northern Rock suggests a major UK bank is unlikely to be allowed to fail, so the FSCS may never be tested. That’s perhaps just as well, given that under new FSA rules from 1 April it can only raise a maximum of £4bn a year in funding, hardly enough to cover all the deposits in a major retail bank.

But if you still have doubts, consider investing with the Government-backed National Savings Bank instead. One savings product stands out if you don’t mind locking up your cash short-term – index-linked certificates. Running for three or five years, the investment limit for each is £15,000. They each pay tax-free interest at 1.35% above the retail price index (a key measure of inflation) currently sitting above 4%. For a higher-rate taxpayer that’s equivalent to a gross annual return of just over 9%, with your deposit guaranteed by the Treasury.

The causes? A tumbling housing market, where prices have fallen for five consecutive months according to Nationwide building society, plus rising mortgage rates, household bills and food prices. Added to these headaches it now seems that our jobs are under threat – the CBI confirmed this week that up to 11,000 could be lost in financial services alone whilst chief economic adviser, Ian McCafferty, opined that the credit crunch, “would remain serious for quite some time”.

So, what to do? Assuming I have not sent you running for a stiff drink already (don’t let me stop you mind), here is a selection of money-saving tips that won’t guarantee financial survival but should help you to save a few pounds. They are all straightforward so only apathy stands in the way of trimming back the cost of four essentials – your mortgage, your energy bills, your food and your car.

Keeping remortgage costs down

According to our regulator, the FSA, around 1.4m homeowners are due to remortgage this year, having struck a competitive deal on their interest rate anywhere between two and five years ago. The problem is that although the Bank of England are tipped to cut the base rate this year, and perhaps as soon as April, the rates at which cash-strapped banks and building societies are prepared to lend to us seem to be heading in the opposite direction.

Only last week for example, the Nationwide commented that things are getting difficult for mortgagees and then, rather unhelpfully, pulled its cheapest mortgage deal, as did the Cheltenham and Gloucester. Standard variable rates are now well over 7% – scary if you are used to paying more like 4.5% on a fixed rate deal.

So, if you are due to remortgage soon, it’s vital to shop around for competitive rates and get organised so you don’t delay the process and end up on your lender’s SVR by default. You can compare deals on sites such as moneyfacts.co.uk and moneysupermarket.com. First Direct, for example, offers a two year fixed offset deal at an attractive 4.95% but with an arrangement fee of £1,498, whilst the Co-op has a two year tracker pegged to the based rate plus 0.09% and a more modest fee of £999.

To ensure the application process runs as smoothly as possible, moneysupermarket.com offers some sensible advice; check you have a clean credit file using an agency such as Equifax or checkmyfile.co.uk, make sure mortgage payments arrive on time, be realistic about how much your house is worth and get an “agreement in principle” from your lender before applying.

One final thought – don’t simply sign up for the life assurance cover offered by your mortgage provider. As moneyfacts.co.uk points out, shopping around can reduce the premium by up to 30%. We chuck away £310m a year by not doing so.Stepping beyond mortgages, consider double-checking the council-tax banding for your home. If your property’s banding has not been confirmed by an inspector recently you could well be overpaying. This is particularly relevant if the previous owner extended the home – The Times reports that adding an extension automatically pushes your home up a council tax band, “even if the extra space does not warrant” it. You can check your banding against your neighbours at voa.gov.uk (saa.gov.uk for Scotland). Do be aware that if you are reassessed for council tax, there is the chance that you could be pushed up to a higher banding.

Cutting household bills

Electricity and gas prices are a sizeable chunk of the average £230 added to a typical annual household bill this year according to the Telegraph’s Patrick Sawer. So, it’s more important than ever to do what you can to keep energy costs down. You can compare what you pay against other suppliers at uswitch.com although bear in mind that changing your supplier if the saving is only small does involve some legwork and may backfire if they subsequently hike their prices. You can also usually extract discounts by choosing the same company for both gas and electricity and also paying by direct debit.

Don’t forget that other money-saving energy trick by the way – turning stuff off when you don’t need it!

Reducing the food bill

If you’ve filled a shopping basket recently you’ll have been cursing food price inflation, which, according to the Scotsman, is now running as high as 11% if you live north of the border. If like me, you buy pretty much the same staples from one of the big supermarkets week in, week out, try comparing what you might pay at another supermarket using mySupermarket and consider switching.

If you already help the environment by using online delivery rather than hopping in the car, here are three simple tips; book ahead to reduce the delivery charge, always scroll down each product page to find the cheaper “own brand” items, and take up any offers (such as “two for one”) on stuff that won’t perish.

Cutting car costs

The typical family car owner spends around 50% more than a decade ago on running costs according to the AA. Obviously the smaller the car the better and not buying new ones saves a fortune in depreciation. But do you need one at all? Whilst I am not suggesting we can all easily hop on a bus, city dwellers in particular could ditch their money munching motors altogether and join a car club instead.

For example, the AA reckons the average cost of owning a car driven twice a week is £2,749 per year whereas Streetcar claim it can be done for £707 with them. You simply join, book a car, turn up and drive it and then get a bill based on the time of day chosen and miles driven. Try Car Clubs for your local club. Finally petrolprices.com can save you 7p or more per litre of fuel by identifying the cheapest garage within three miles of your postcode.

Happy bargain hunting!This article is taken from Merryn Somerset Webb’s free weekly personal finance email, Money Sense. Click here to sign up now: Money Sense