Never Too Young to Save for Retirement

Conversations regarding pensions, retirement and savings are all well known sleeping aids for people in their 20's. However unglamorous they may be, they are still subjects young people must address if they want to be secure in their retirement.

Saving money in a piggy bank

The state pension alone will not prevent you from a financial struggle in later years. Particularly when you consider that benefits under the earnings-related state scheme (Serps) have already been reduced and are only going to get smaller in the future.

Most people are aware of the need to cover themselves in later life, but awareness doesn't necessarily equal action.

But surely I've loads of time?

Starting to save early will make the process in later life a lot less stressful. You may have to rely on your savings for the best part of 30 years, so if you only start saving in your 50's it is likely you wont be able to put enough away.

If you wait, you'll either have to retire later or drop your living standards dramatically. If you work for fifty years, then you should try to save for most of them as a little each month over a long period is less painful than a lump sum in a short amount of time.

Should I start my pension straight away?

Most experts agree that you should start saving for retirement as soon as you can, but not necessarily into a pension account. There are some great alternatives for your savings which can give you back more interest in the long term.

A workplace pension is also great option as the money is taken out of your account automatically so you never really feel it go.

Should I pay back my debts first?

Many would call it crazy to be saving for retirement when the cash could be used to clear off debt. However, it is not as clear as that – if you're debts are expensive you should obviously pay them off first, but if you've a cheap loan or mortgage there is no reason you cannot save and pay your bills.

It may seem crazy to save for retirement when you could use the money to cut your debts. But it's not a clear-cut decision – look at the interest rates you pay before deciding.

How much should I put away?

If you want to retire on half of your salary, experts believe a total contribution of 10-15 per cent of earnings will leave you with this.

If you've just finished university and this is beyond your means, don't worry too much. However you should try to save something, because leaving it until you are middle aged will be too late. Saving while in your 20's and 30's will prevent pain and stress in later years and it will lead to a more comfortable retirement.

You don't need to be a financial expert to see saving at a young age is a great idea, so start now and you'll be thankful in later.