Top tips to help you save money at each stage of your life

Metro

6 days ago

Saving money is a habit we should prioritise throughout our lives.
There will be times – like when you're just starting out in the world of work or you have children to look after – this falls by the wayside.
But changing lifestyle and spending needs doesn't need to stop you saving altogether. Instead, it's about changing your strategy to fit.
Here, we look at what to focus on depending on your age, from building a rainy day fund in your 20s to maximising a pension pot in your 60s.
People in their 20s find it particularly hard to save. Many have just graduated with student debt and, unless they're living with family, are likely to be spending a large proportion of their income on rent and household bills.
Figures from Yorkshire Building Society show that many members of Gen Z (aged 17-24) are struggling to build up savings balances, with 5 millionhaving not saved anything in two years.
However, starting small with savings in your 20s can pay big dividends, as money you put away for your old age will have time to grow thanks to the magic of compound interest.
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It's important that you also put money into a savings account you can access in the short term, so you're not blindsided by unexpected costs such as having to replace a car or broken household appliance.
If you pick the right accounts, you can even benefit from tax breaks or free money from the government.
Consider doing the following: Automating your savings so they come out of your account each month after payday before you pay for anything else.
Using your £20,000 a year ISA allowance to grow your savings in a tax-free environment.
Opening a LISA (Lifetime ISA) if you want to save for a first property. You can put up to £4,000 into one every year and the government will top it up with up to £1,000 a year. This money can only be used to buy a first property worth less than £450,000 or withdrawn at the age of 65 to help pay for retirement.
If you have an employer who will contribute to your pension, make sure you don't miss out on the chance of these contributions.
It can be tempting to opt out of your company pension scheme if you need the money now, but if you do, you're missing out on the chance to save tax-free for retirement as well as additional cash from your employer.
Expenses are high in your 30s, with people often getting married or having children.
The average age of a first-time buyer is 34, meaning many will spend the early part of this decade scraping together a deposit and the latter part paying a mortgage.
Between the ages of 35 and 44, the average person ends up with total wealth of £209,000, but this includes housing equity as well as savings and investments.
So while you're prioritising a house deposit and the various outgoings that crop up, make sure you also consider: Your emergency fund. Target having easy-access savings of between three and six months of basic expenses.
Target having easy-access savings of between three and six months of basic expenses. Your pension. Money saved for retirement now will have time to grow.
Money saved for retirement now will have time to grow. Tax-free savings options. If you're a higher-rate taxpayer, even £12,000 of savings at 5% results in you paying tax on some of your savings interest — unless you continue to shelter your savings in an ISA that is.
Have children? Starting to save for them early could make all the difference to their later years.
Contributing regularly to a tax-free Junior ISA in either cash or shares could grow them a nest egg that could help with university, driving lessons or even a house deposit. Put £50 a month in a savings account for them from birth and they could have over £17,000 by 18 if the money grows at 5%.
Many of us reach our highest earnings potential in our 40s and 50s, giving us more money to set aside.
As such, now's the time to ensure your savings are in the highest-paying accounts possible, considering your tax-free allowance of £20,000 a year. More Trending
Financial planner Ryan Kingsley describes this as the 'catch-up decade' for saving, telling Metro: 'This is a time to get intentional if you haven't already, and you should be looking to save around 20% or more of your income.'
Some of the savings techniques to consider: Once you have an emergency fund, consider locking up some of your money for longer. You may receive better returns by fixing an account for several years.
Spread your savings into pots that mature at different times so that you get the best rates available but are also able to hit financial goals.
Continue to prioritise pension saving. Once you hit 55 – rising to 57 in April 2028 – you can take 25% of the money from your pension tax-free. But consider the tax implications of doing this – especially if you are still working – and take financial advice if you're unsure.
Now's the time to check your state pension records to ensure you'll receive a full state pension after you retire. You'll usually need
35 full years of national insurance contributions to receive the full amount.
You can check online on the government website whether you're close to the necessary years of contributions and can pay to 'buy' extra years of contributions if you're not.
As you approach retirement, you may be thinking about spending some of your hard-earned savings. Many people in this age bracket have quite high savings balances amassed over time – government figures suggest that over-65s have an average ISA balance of £63,365.
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However, you can still maximise your savings: If you have large balances in savings, ensure you get the highest interest rate possible so that it doesn't decrease in value with inflation. Most best-selling savings products drop their rates after a set time, so ensure you check yours regularly.
When withdrawing from savings and using your pension, consider the tax implications. The government offers a free PensionWise appointment to those with defined contribution pension pots once they reach 50 or more, and this may help with your strategy.
Ensure your emergency fund is keeping track with your expenses and top it up as necessary.
Want to give some of your savings to your children or grandchildren? Check the inheritance tax (IHT) rules to ensure you give away money tax-free.
Under the current rules, any gifts you give seven years or more before your death are free of IHT, while you also have a 'gifting allowance', meaning you can give a certain amount away each year without attracting tax on it.
The allowance includes £3,000 of gifts every tax year, plus some other exemptions.
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