As a Financial Planner, a question I am often asked – especially by people in their twenties and thirties – is “How much should I be saving?” Closely followed by “How much should I invest?”, “Should I increase my monthly investment?” and “How much should go into my pension?”
Starting to save and invest can be daunting to anyone who’s never done it before, especially for younger people for whom retirement is a long way off, and who might only recently have found themselves in a position to save money on a regular basis. As parents of young people, too, it can be daunting knowing what to advise them.
I thought I’d share a few of my words of wisdom for you to pass on to anyone you know who might be in this position.
The long and short of my advice is: How much should you be saving? Loads. How much should you save? More. Should I increase my monthly saving? Definitely. And how much should go into my pension? As much as you can put in.
What prompts my ‘more is more’ philosophy? Well, I have never, ever, met someone who has ever declared that they regretted investing or saving too much. It has never happened. I have only ever met people in their fifties, sixties and seventies who have regretted not saving and investing more.
But where exactly to start saving?
My main advice would be to utilise as many tax-efficient options as possible – namely ISAs and pensions.
Quite simply, save as much as you possibly can. The more you put away while you’re in your twenties and thirties, the more you have to spend in the future, without having to work 50-hour weeks. It really is that simple. Money saved or invested now is money for spending in the future.
That said, this advice is slightly at odds with my other firm belief that you should absolutely live for the moment, enjoy yourself, take adventures, invest in yourself, treat others and do whatever else makes you happy and content. No one lives forever, so enjoying the here and now is priceless.
The art is to achieve a genuine balance between the two, making sure you factor regular saving into your monthly finances, alongside the spending you can afford. Savvy planning is the key, rather than winging it until reality bites later in life. In savings, more is always more. You will NOT regret it.
I’ve asked some of the Emery Little team to share where they started.
Starting with our CEO, Jo Little – “Going way back, I’m fairly certain I actually saved into a physical piggy bank, rather than an actual bank. Good habits started young although I hope I’m a little more sophisticated now and follow my own advice”!
Financial Planner, Marcus Farnfield – “I saved up my 20p pocket money to buy an action man. I remember being 50p short when the time came to make the purchase and my mum helping get me over the line! But with respect to ‘real’ saving as an adult, it all clicked for me when I started doing so monthly and tracking progress – first of the month, fill in a spreadsheet and see how it’s all going (Nerd alert)”!
And on a similar spreadsheet theme, Financial Planner Woods Mullan – “My first savings account (which is still my savings account) was opened when I started my first job (at 13) – working in a fish and chop shop. I can’t remember what I saved for but I imagine it would have been related to sports in some way or another.
Real saving became a thing for me when I tracked my monthly earnings and all my expenses; fixed (bills, car, phone, insurances, savings and investments) and then lifestyle costs. I look at the month ahead and give myself a monthly lifestyle budget depending on what’s coming up that month, but as always, save/investing is first.
I’ve been using the same spreadsheet for over 10 years. Very simple, but great”.
So there you have it. In short, start early, prioritise saving, find ways to save more and you won’t regret it.
I hope this has given you pause for thought. If you are working through complex financial planning questions, I’d recommend seeking professional advice. Perhaps we can help.