It looks like you have a lot of questions, let's address them one by one
I would like to know how often I need to do scans with MBAM, and other scanning tools.
To be honest, a quick scan once per week should do the job, but it depends on how you use your computer and if you are a person at risk of being infected by malicious items: files, Registry keys, etc. every time you go on the web. What do you mean by "other scanning tools", which ones do you have in mind?
Please also do let me know which tools to use
Looks like this answer my last question. There's many tools that can be used to scan a system for malware, but I guess you would like standalone executables compared to complete programs, since you can just download them, scan with them and then delete them once done. AdwCleaner and JRT, both available (hosted) on BleepingComputer, will do a good job for that. However, these only targets specific adware, browser hijacker, junkware and PUPs infections, so no worm, rootkits, bots, etc.
And how often do I do the windows update?
You want to install every Important Updates
as soon as they come out. Usually, these are released on the second Tuesday of every month as part of "Patch Tuesday", but sometimes, when a critical vulnerability is found in Windows, they'll be released at a prior date to ensure the security of the user.
Also, should I get a paid version of my AV or will the free version work? It's Avira.
To be honest, this is your calll. Free Antivirus products can do a good job, but the paid version often offers more features, so it's your job to look on Avira's website if you need the feature provided by its paid version. quietman wrote a whole article on how to choose a good Antivirus product, I suggest you to read it here:http://www.bleepingcomputer.com/forums/t/407147/answers-to-common-security-questions-best-practices/#entry2316629
I would also read his whole thread if I were you, there's a lot of valuable information in it