Saving pennies now could rack up the pounds later – here are a few ideas on how to cut spending and save cash for your pension or other savings.
If you’re in your 20s or 30s, it’s likely that your parents or grandparents have tried having the ‘Are You Paying Into A Pension?’ conversation with you at some point. You probably gave an answer along the lines of ‘I can’t afford to pay in more than the bare minimum to my pension, if at all…’
It’s true that younger workers today have greater financial pressures on them than previous generations; there’s the burden of student and personal debt, rising housing costs that are making it harder than ever to get on to the housing ladder, and the effect of the financial crisis, which has hit the pay packets of those aged 22-39 the hardest.
But it’s equally true that there’s a lot more to spend your money on these days – and cutting down just a bit on ‘treats’ and other outgoings that older generations either went without or did not have, can free up cash for your pension or other savings. Here are just a few ideas of where saving pennies now can rack up pounds down the line - whatever your age.
1. Give up the daily coffee
Ditching the daily takeaway coffee habit could save a surprising amount over the course of a year. Giving up a £3-a-day coffee could save around £700 a year. Invest in a half-decent coffee machine and make coffee at home for pennies instead.
2. Skip the odd takeaway or meal out
Save a few pounds (cash and weight) and break out the cook books rather than takeaway menus. Cutting back on one £25 takeaway or meal out a month will save £300 over the year, as well as being good for your waistline. Plus, it’s a well-known fact that homemade food tastes better than anything you buy.
3. Downgrade your phone contract
With contracts for the latest flagship phones easily costing £50 or more a month in many cases, trading down to a much cheaper SIM-only deal can save a small fortune. By shopping around, you may be able to shave off £35 or more from your monthly bill. Over the course of a year, that could add up to £420 .
4. Slash that massive pay tv package
Are you paying for satellite or cable tv channels or a package that you hardly use, like sports or movies? A top-of-the-range pay tv subscription can cost as much as £70 a month. Opting for a more basic package could save around £50 a month. Opting for streaming services, which are typically around £8 a month, could save over £700 a year.
5. Axe your gym membership
How many people signed up to the gym in a bloated, post-Christmas pang of guilt, only to trail off by late January? Get your running shoes on instead, hit the local pool or join the craze for bodyweight workouts (that’s doing press-ups and sit-ups for the rest of us). You could save £300 to £600 a year .
6. Skip the night on the town
Spare yourself the hangover and the embarrassment of looking over the previous night’s Facebook posts with the odd night in. With a night out weighing in at as much as £60, giving your wallet and liver a break once in a while can be a good idea. Stay home one extra night a month and save up to £720 a year.
7. Have some patience with gadgets and games
Are you the kind of person who just has to have the latest gadget or game as soon as it comes out? Maybe you time your phone upgrades around the Apple release cycle? The price of phones, consoles and other gadgets all tend to fall quite rapidly after their initial release – so having a little patience and waiting a few months can often be a shrewd move. Depending on how many you buy a year, you could save a few hundred pounds.
The bottom line
Nobody expects that you will live like a monk, and we know that doing everything on this list isn’t realistic, but if you did, you could save around £3,500 a year to put towards retirement.
Many employers will match what you save in your pension, effectively doubling your contribution – and that’s without adding in tax relief from the Government.
If you paid in that amount a year from age 25 with a view to retiring at 55, assuming the fund returns 5% a year, you could have a pension pot worth well over £500,000 - retire at 65 and your pot could be almost £1,000,000 .
Retiresavvy is brought to you by Skipton Building Society. This article has been commissioned by retiresavvy and any opinions voiced are the author's own.