A recent study has found that around one in three people in the 18-40 age bracket not only are not saving any money for when they retire, but also don’t consider it likely that they will begin paying towards their pension in the future. Many people aged between 30 and 40 said they now felt they had left it too late to begin putting money away for their retirement, and planned to rely on the state pension alone when they finish working.
The reason behind these alarming figures is the financial pressure many feel during this period in their life. In a survey of those aged between 35 and 44, around a third said they felt their financial position was ‘squeezed’, meaning that they struggle to meet regular financial commitments including bills, debt repayment and raising a family. Those in this group also ranked saving for retirement as one of their lowest financial priorities behind saving to buy a house and living for today.
When asked about improving their savings habits, most said that they would put away more if they had a change of circumstances. This could include an increase in pay, an unexpected windfall, or even an existing financial commitment coming to an end. These could be referred to as ‘Savings Moments of Truth’ (MOTs), and recognising them can help to create an environment of saving, rather than spending.
Let’s say you’re spending £245 a month on childcare (the national average). There will probably be a temptation to spend that extra money once your children no longer needs childcare. However, you could identify this MOT and put that money away, into a pension or ISA say, which will steadily manage to build up your savings without impacting upon your everyday finances, as your monthly outgoings will remain the same. Other MOTs like this could be paying off a credit card or personal loan in full. What about keeping your car for a little while longer, once you have paid it off?
Embracing these MOTs when they occur can help build up a substantial pension pot of savings cushion before you retire. Even someone aged 40 paying £240 per month towards their retirement could end up with a pension fund in excess of £100,000 (above the national average pension pot size) by the time they reach 65. It’s never too late to begin saving for your retirement, and seizing your savings MOTs when they happen can be a manageable way of accruing a worthwhile nest egg.