Cathy1, I don't know if you solved this problem yet, but in any case this is the solution - find the folder Haunted that the game creates in your document folder (on Windows XP it's My Documents, not sure what's the Windows 7 parallel but I'm sure you'll find it).
Inside this folder, create a folder named 'save'. After that saving will work.
For some reason the game fails to create this folder on some systems, so you have to create it manually. It's not specific to Windows 7, to me it happened on Windows XP.