Savings For All Ages

October 06, 2017
Taryn Lee-Johnston

Savings generally fall into two categories. “Cash cushions” provide a soft landing for life’s bumps. “Goal-orientated” savings help us to make key purchases, large and small. Perhaps the clearest example of this is saving for the deposit on a house. Whatever your stage of life, savings can make a big difference to it, particularly if you plan ahead.

Childhood years

In the very earliest childhood years, it will probably be older family members who make savings on behalf of the child. Junior ISAs are a popular choice for this, but there are other options such as trust funds. As soon as children begin to develop an awareness of numbers, however, parents can start to give them their earliest lessons in financial management by teaching them how saving now can pay off later. Young children can watch their cash in a jar, while older ones can start to get to grips with bank accounts.

Sweet sixteen

At this point, 16 is a very important age in financial terms. The reason for this is that Junior ISAs run until the child’s 18th birthday, but 16 year olds can open cash ISAs, which means that for two years, you have the opportunity to make extra-large tax-free savings, right before those expensive post-school years.

The post-school education period

Regardless of whether or not a person goes to university, they will probably need some sort of training after they leave school and may also need to get some form of private transport. It may be very difficult for them to save any money during this time, in fact it is more likely that they will need help from the savings made on their behalf during their childhood years. If they can save at all, it’s probably advisable to ensure that the savings are easy-access, just in case they need them.

The young-adult working years

These can be some of the most financially-critical years of a person’s life, handled well, they can set a person up for a prosperous future. For many people, their next major financial priority will be to get on the housing ladder, which means building up as big a deposit as possible. The Lifetime ISA is one way to do this, but there are other options and hence it may be worth getting professional advice on the best route. The Lifetime ISA can also be used to save for retirement but if a person is working then it may be better to go down the workplace pension route to benefit from employer contributions. This again, is a good place to get financial advice.

The family years

Once you are on the housing ladder, a person’s two key concerns are often saving for their children and saving for their retirement. We’ve already discussed children, so the next issue is retirement. While there are ways to fund retirement other than pensions, they are a mainstay of retirement for many people and for good reason, so if you haven’t started one already, then this should probably be high on your list of priorities. You will probably have other goals as well and hence may well have a need for other means of saving and investing, for example making use of your standard ISA allowance. You might wish to seek professional advice here too, so that you can decide how best to allocate your available funds, for example in the earlier period of your family years, you may be want to make some higher-risk and/or longer-term investments for the best rewards, whereas later, a more conservative investing strategy may be more appropriate.

Retirement

Perhaps it would be better to say, “the post-employment years” since the concept of retirement is changing dramatically and hence so are the financial needs of retirees. Getting the maximum value out of a pension pot can make a huge difference to the quality of a person’s retirement and again, professional advice can be invaluable.