Ask any financial expert when you should start saving for the future and you’ll get the same answer – as early as possible.

But how do you know whether you’re saving enough? What do you do to keep you on track? Read on for some helpful tips

Am I saving enough?

It may seem a long way off, but what you save now lays the foundations for your retirement. The earlier you start, the longer it has to appreciate – and the bigger the difference it will make.

A common rule of thumb for how much you should pay into your pension is to divide your age in two, then save that percentage of your salary each year. So, if you started when you’re 24, put aside 12%. If you start at 30, aim for 15% of your earnings. The older you get, the higher the proportion will be.

Ultimately, the exact number depends on what you can afford, once you have deducted all essential living expenses – such as mortgage, rent, food and travel. In the UK, all employers must now offer a workplace pension to those eligible for automatic enrolment. This includes paying minimum contributions, so you can factor this into your calculations.

Remember, every savings pot is different

Some estimates say you should have around double your annual salary in your pension by your mid-thirties. But the truth is there is no magic number.

You can look at how much different age groups are saving across the UK below to give you an idea of whether you’re on track. But it’s important to bear in mind that every savings journey is different.

It can be useful to compare yourself against the national average, or even swap notes with friends or colleagues. But what you save depends on you – your annual income, personal savings goals, and lifestyle.

Be clear on all your financial goals

Your savings are not just about your pension. The financial goals you set are a mixture of near-term and long-term aims. It’s important to balance what you need for the future with more urgent requirements.

– Building a rainy-day fund – having an accessible emergency fund is essential. This depends on your living costs rather than your age. Savers should build up to have three-to-six months’ worth of their regular outgoings, such as household bills, groceries, and bills.

– Saving for a new home – buying a home is one of the biggest financial commitments you can make. Around one third of potential homeowners struggle to save up for the deposit. The UK average deposit size is now at £59,000.

– Paying off your debt – paying off student loans and other debts from university is another priority for young savers as they leave higher education and move forward in their careers.

Speaking to your financial adviser can help set priorities on your objectives and the best approach to saving for them.

Essential tips to reaching your savings goal

  1. Keep track of what you’re spending: Go through your monthly bank statements or use apps such as Money Dashboard to get a firmer handle on your monthly expenses. This will help limit unnecessary drains, such as subscriptions for magazines or products you no longer use.
  2. Keep your savings separate: Keeping your money separate from your current account reduces the temptation to dig into your savings for everyday items.
  3. Automate your regular payments: Set up a direct debit from your current account early in the month. Many banks also offer facilities which top up your savings pot after payday with ‘unused’ cash from your current account.
  4. Make your goals bite-size: Breaking your financial objectives down into manageable chunks can lead to a substantial fund over time
  5. Download an app: Platforms such as Monzo, the mobile-only bank can help you track your spending and set budgets. Digital assistants such as Plum, Chip and Squirrel encourage you to meet savings goals and identify areas where you can economise in your spending habits.

Investing – making your savings go further

For longer-term goals, such as pensions, investing in markets will boost the growth potential of your money.

Historical data for stock markets over the past century and more shows that in longer holding periods, such as five to 10 years, returns on money invested in the stock market have beaten those from a cash savings account.

Markets can be volatile, which makes this method unsuitable for short-term goals, but can make a significant difference for the longer-term financial objectives. Taking advice before you invest is essential.

It’s never too late …so start saving now

Worried that you’ve not put enough away – or maybe not even begun your savings journey? It’s true that the best answer is always to start saving as early as possible.

The next-best answer though is ‘right now’. And It’s never too late to take control of your financial future.

This article was prepared by AdvisorStream and is legally licensed for use by AdvisorStream.

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