Saving for your future

In the course of my work, I speak to a lot of people who tell me that they put money into savings every month. Yet somehow their savings don’t seem to increase. We often save up to buy something, such as work on our home, or pay for something, such as a holiday. This is short term savings, or savings to spend. We need to think more about saving for our future, when we either can’t work or don’t want to work any longer.

Why don’t we save for our future?

For many people retirement seems a long way off until they reach their 50s. They then try to catch up on savings they should have started earlier to benefit from compounding (more on that later). It is important to save not only for things we would like in the short term, but also for our future self. This gives us choices later in life. So why do so many people not do this?

The research suggests that there is a disconnect between the person we are today and the person we will be in the future when we need this money. It seems to be a possible lack of imagination. One research study, undertaken by Hal E. Hershfield, Daniel G. Goldstein and Jeremy N. Bailenson “Increasing Saving Behavior Through Age Progressed Renderings of the Future Self” suggests that seeing an aged photograph of ourselves connects us more with the future and helps us to save more. If that helps, there are plenty of phone apps which show you your aged self.

How much should we save?

How much you should save depends on how much you want to be able to spend in the future. You need to have a look at your own lifestyle, what it costs now and what it is likely to cost in the future. Then think about other things that you would like to do. This might include gifts to your children for weddings or house deposits, big holidays, new cars or a holiday home abroad; I’m sure you have your own ideas as well.

You may never have thought about these things before. Sometimes it is easier to think about what you don’t want. For example, I don’t want to have to move to a smaller house or I don’t want to have to shop at a discount supermarket. Most people don’t want to have to change their lifestyle because of a shortage of money.

The value of compounding

The longer you can leave your money invested, the more it will grow. Let’s look at an example. If you saved £1,000 and got 5% growth each year, at the end of the first year you would have £1,050. At the end of the second year, you would have £1,102.50 because you get growth on the growth as well as the original amount.

If you wait for the right time, you will probably never start but once you have begun, you will find that you don’t miss the amount that goes out of your account. Also, this money is not disappearing, it is yours for your future self, the one in the aged picture.

How can financial planning help?

You need to understand what your hopes, dreams and fears are before you can start to put a monetary cost on them. A financial planner will talk to you about these things. They will ask questions that you have never considered before. Once we know what you would like your life to look like, we can begin to work out the cost and the steps that you need to take to make that a reality.

If you would like to talk to us about saving for your future self, please drop an email to or arrange an initial chat by clicking on the link

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