The cost of delay - earn £1,000s more by saving sooner

07th June 2018

Why it makes sense to start saving sooner rather than later.

The cost of delay

First and foremost, by starting to save as early as possible, it will encourage a great savings habit. A useful starting point is to plan a budget, identifying all the details of your expenditure each month, so you can work out just how much you can afford to set aside.

This exercise can be very revealing. Not only will it show you how much you are potentially wasting on unnecessary items, it will also indicate the amount you will be able to save on a regular basis. Once that amount is decided, setting up a standing order from your bank account means that it will become just another bill – but one that will give you money back when you need it.

Starting earlier is also better for your pocket. It's staggering how important the early years of saving are; with the impact of compounded interest, you can build up a substantial savings pot for the future with an early start.

For long-term savers, a delay of just 10 years could halve your savings pot.

For example, if you were to save £200 per month from the age of 25 to 65, assuming an average interest rate of 5% gross, you could build up almost £300,000 –a significant nest egg.

However, if you started just 10 years later at age 35, you'd end up with around £164,000, almost half.

Or, to put it another way, you'd need to save about £365 per month instead of £200 in order to match the £300,000 – so you'd need to save an extra £35,400 in total.

The prospect of putting all of your long-term savings into the stock market or in a pension plan that can’t be accessed until retirement is not ideal for everyone. It makes sense to have access to some of your money ‘just in case' – and as already emphasised, the earlier you can start, the better.

Even though the base rate remains at a low level at the moment, there are still attractive rates on offer from some providers. Of course, it’s difficult currently to find a savings account offering 5% interest on an ongoing basis. You will find that there are regular savings accounts available, although you will need to also have a linked current account - and hopefully we’ll see more of these in the future as interest rates rise. 

But, in the meantime, it's vital to shop around for the best rates available or speak to one of our specialist savings advisers on 0800 011 9705.

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