"It's hardly worth it for that amount"

I've just suggested a transfer of twenty-five or fifty pounds a month, and you may have winced. Articles about money talk about saving a fifth of your income, or building a pot of many thousands. Against that, twenty-five pounds looks like a gesture. It seems hardly worth setting up a standing order for.

I'd like to defend the small amount on three grounds.

The first is arithmetic, and it's modest. Twenty-five pounds a month is three hundred pounds a year. Fifty is six hundred. Those won't change your life. Now look at what goes wrong in an ordinary year. The washing machine in chapter 1 cost three hundred and eighty-nine pounds. Tyres, a vet's bill, a broken phone screen and an excess on an insurance claim are all in the low hundreds. These are the shocks that push people on the leftover plan onto a credit card or into an overdraft. Six hundred pounds covers most of them. A small cushion won't see you through a redundancy. What it does is stop an ordinary breakdown from becoming a debt, and if you have no cushion at all, that's most of what goes wrong with your money in a normal year.

The second ground is what accessible money does for your state of mind. Peter Ruberton, Joe Gladstone and Sonja Lyubomirsky worked with a UK bank and 585 of its customers. They had the customers' real account balances, and they asked each person how satisfied they were with their life. People with more money readily to hand, in current and savings accounts, felt better about their finances, and that in turn went with greater life satisfaction. The link held after allowing for income, investments, spending and debts. It's a correlation from one bank's customers, and it can't show that building a balance would make any given person happier. But it suggests that the cash you can get at matters to how you feel, separately from how much you earn. Most people who've had both will tell you the same. Life feels different with five hundred pounds available than it does with nothing available, even though five hundred pounds isn't much.

The third ground is the one I think matters most, and it's my own reasoning. A small transfer establishes the order. For the first time, saving happens before spending, and the month shapes itself around what remains. Once that's in place, the amount is just a number on a standing order, and changing it takes half a minute. You'll raise it when you get a pay rise, or when you see you're not missing the money, or when a loan ends. The leftover plan never gave you an amount to adjust. It didn't produce any saving.

There's a trap here that's worth naming. Refusing to save a small amount because it isn't a large amount is a way of doing nothing while feeling that you have high standards. The person who won't bother with twenty-five pounds because it ought to be two hundred ends up saving nought. After a year there's a real difference between twenty-five pounds a month and nothing. One of those people has three hundred pounds, and a habit that needs no effort to keep up.

You may also be thinking that savings accounts pay so little that it's hardly worth the bother. Sometimes they do pay little, and rates move around. But interest isn't what a cushion is for. Its return is the borrowing it saves you. If six hundred pounds in a pot means that a repair doesn't sit on a credit card for six months, the pot has earned you whatever that card would have charged. That's likely to be several times what any savings account pays. How much interest a cushion earns matters far less than whether you have one.

So start with an amount that doesn't hurt, and don't wait until you can manage one that would impress anybody.