Use rigid foam insulation, which will provide a thermal break and not trap any moisture. Make sure you Tuck Tape every seam, and spray-foam all corners and joints to create a seal and a perfect thermal break.
How to Finish a Foundation Wall - We show two good ways to insulate and finish a basement or concrete wall. A wall saves space and a wall is easier to assemble and insulate. Both will create that snug extra room you need. By the DIY experts of T