Where and when to save money for your future

Saving money for the future is an important but often neglected consideration. It’s particularly under-appreciated by younger people, who may consider time is on their side and that saving for the future can be dealt with ‘one day’.

The fact is that saving for your future is something that should be done without delay; the more you can save and the sooner you can start means more money for the future, assuming of course that you select the best savings options.

When to save

The short answer is ‘now’. For example, it’s becoming more common for parents to organise savings for their children sometimes as soon as they’re born so that they’re literally saving for the whole of their lives.

In general terms, ‘when’ to save is really as often as possible. Rather than thinking of putting a lump sum away ‘when I can’ or when that expected work bonus comes in, it’s far better to try to save regularly, then it becomes second nature and doesn’t get forgotten.

Savings triggers: changed financial circumstances

Increased income or reductions in your general expenditure are key ‘triggers’ to either start or increase the amount you put into your savings. For example, if a major loan is coming to an end, then why not consider saving the amount you were spending each month on repayments?

Another ‘savings trigger’ could be when your income increases, such as a pay rise. If you can live comfortably on your previous salary, why not consider saving the bulk of your increase?

Savings triggers: life changes

If you’re expecting a child then this clearly changes priorities. Not only will you likely wish to save for your child’s future, you’ll likely want to plan for the inevitable costs of raising offspring. Planning for everything from school fees to future weddings can really help in the long run.

Of course, your savings decisions depend on your goals. What are you saving for? How much do you need and when do you need it? Clarifying these goals makes it easier and more ‘real’ to plan ahead rather than the vague ‘putting money away for a rainy day’.

Where to save

Savings accounts – These are a safe pair of hands, but choose carefully. Do you need access to your money at any time or can you leave it alone for a while? Generally speaking, you’ll get better returns on accounts designed for long term savings.

National Savings and Investments (NS&I) is a government-owned savings accounts provider and, as a result, carries an added degree of safety.

Individual Savings Accounts (ISAs) – ISAs are a good tax efficient way of saving. You can save up to £15,420 per year in an ISA. They’re available from banks, building societies and other investment providers.

There are two basic types of ISA; a cash type which is basically a savings account, or a stocks and shares version; this is effectively a fund that selects shares and bonds to invest in.

They’re considered a good option as, over a longer period, stocks and shares are likely to perform better than basic savings. To understand stocks and shares better – whether it be for ISAs or full-on investments of this type, read up with a resource such as the IG Community.

Pensions - Once universal, our relationship with pensions is changing. Generally, a pension favours the higher rate tax payer and are a way of getting contributions from your employer. ISAs and maybe property investments are seen as a strong alternative and may suit certain people better though.

Seeking advice

Getting into the savings habit is important, as is finding the best places to invest to achieve your savings goals. Choose carefully based on sound advice.