Choose squash plants which are healthy and mature. Healthy plants have healthy seeds and the cycle continues. When the plant is ripe and starts getting slow, pluck it. You can also keep it on the windowsill to let the seeds get more mature and develop.
If you do not intend to use the squash plant, it is better to let the plant get over ripe so that the skin goes hard. The plant will go to seed. Pluck it and let it dry in the sun for a couple of weeks.
Place the squash on a cutting board and use a sharp and heavy knife to cut it through. You will have to exert great pressure because the dried skin is usually tough to break through.
Use the knife to separate the mature seeds from the plant. The mature seeds will be large and hard ones. Do not worry if you draw the flesh with it. It is going to be cleaned in the next step.
Collect the seeds in a large bucket or bowl. Pour them on to a strainer and place it under the sink. Rinse with warm water to get rid of all the flesh. The seeds will totally be clean of the flesh to prevent any rotting during storage.
Dry the seeds with a towel. Spread them out on a cooking tray and keep in the sun and open air. Make sure that they do completely dry. Flip over the seeds when one side is dry using your hands. Choose clean air tight containers. Fill them with seed and store in a cool dark place.