It can be difficult, not to say impossible, to try to convince young people that saving for their later years is worthwhile. This is understandable to a degree. After finishing school, college or university and starting work, young folk are in a position where they may have real disposable income for the first time and when you’re young there seem to be so many better ways to spend that income than on some arcane savings or investment vehicle such as an ISA or a pension plan. The problem is that it has been shown repeatedly that starting saving early is the most effective way to ensure a comfortable retirement. What’s more if you do grasp the nettle at an early age and start putting away some of your hard-earned cash for a rainy day, you will find that you do not need to save as large a proportion of your income as you would have to do if you delayed saving until later in life.
Medical advances together with improved knowledge on health, nutrition and fitness have combined to mean that we are living much longer than our predecessors. Indeed recent reports have indicated that as many as forty percent of those born today can expect to celebrate their centenary, meaning that more people than ever before are going to be spending longer than ever before in retirement. Unless there are significant changes to the welfare system this is likely to place a considerable strain on the state’s ability to look after the elderly on state benefits. As a result, it is likely to be more important than ever to have made suitable provision for your own later years if you do not want to find yourself struggling to get by on what are likely to be in real terms lower state provisions than currently pertain. Committing at an early age to a regular savings plan means that you should be in pole position to take advantage of increased longevity to enable you to retire comfortably and make the most of the free time at your disposal.
So if we accept the general principle that it is a good idea to start saving early what is the best way to go about this? There are a number of obvious candidates such as maximising the generous tax allowances available by investing in an ISA or by paying into a retirement pension. One other area worthy of consideration is insurance. As we grow older so the prospect of having to fund some type of long term care arises. This could place a significant drain on your capital unless suitable provision has been made elsewhere. Long term care insurance may well be the answer, meaning that in the event the worse happens you will not be required to sell your family home or cash in any of your other savings to pay for care. And again, as with any insurance policy, starting early generally means you will pay lower premiums.
The other advantage of saving, whether you start at an early age or not, is that you will have something out by in the event an emergency strikes. No matter how carefully we plan things there are always those unforeseen events that crop up and put pressure on our finances. Having a nest egg allows us to cope rather than having to fall back on expensive forms of finance like loans from payday lenders. Many of them, likeBlue Sky Loans, are perfectly respectable but there are many who are not and are best avoided.
