If you’d asked me five years ago what I was doing to think ahead to my longer-term future I’d have had no idea. I part-owned a flat, I had a car and I saved enough to buy clothes and go on holidays. But fast forward to now and I’ve started thinking further ahead. No one had told me to save for your future. Retiring and getting old felt like such a long way off. And even though I’m only 31 it feels far more real now than it ever did before.
Here are some of the best ways to save for your future so you’re not caught out.
Employer pensions
If you are employed then you’ll automatically have been enrolled in your company pension which is a great thing! All employers have to make a contribution alongside yours, and most will match your contribution up to a certain percentage. My employer matches up to 8%. So if I save 8%, they also add 8% so I’m getting free money added into my pension pot.
If you are employed and want to save for your future you should ask yourself if you can up your contributions. The automatic contributions are likely to be quite low. And you may not even notice it coming out of your wages. But if you can afford to up it by £100, £50, or even £20 a month it will help you in the long run.
Save for your future with a LISA
I’ve spoken about LISA’s quite a lot as they’re a great way to save and get something free from the government. If you’re between the ages of 18 and 39 and haven’t opened an ISA that financial year you can open a LISA. They’re designed to help first-time buyers with a home deposit or for retirement. You can save up to £4,000 a year in it and the government will give you a 25% bonus to top it up.
So if you save £1,000 you’ll get £250. Or if you save £4,000 you’ll get an additional £1,000. To keep the bonus and not be penalised you can either withdraw it via your solicitor for a home deposit or after you turn 60.
We opened a LISA this year to begin saving to take out when we’re retired. It will be a nice top-up to our pension.
Stocks & Shares ISA’s
Investments in general are a great way to save for your future because of compound interest. Compounding is when an asset like an investment gathers earnings from interest. Investments tend to average around an 8% return. So if you invested £5,000 and then saved £5,000 a year for the next 30 years you’ll have saved £150,000. But thanks to compound interest you’ll have £622,042.06. And this is a massive difference.
The longer you leave money earning interest the better off you’ll be at the end. Naturally, there are always risks with investing, but if you’re able to tie it up for a longer period of time so 10+ years your investments are likely to be able to recover anything they may have lost over the years.