Due to the current economic climate, many people are struggling to save a portion of their salary, which may lead them into problems later in life.
Prudential recently carried out some research and the results were staggering. The research highlighted that more than a third of British adults have stopped paying into their pensions.
Is this because people don’t know how to save money? Not so; a third of the people who have stopped paying into their pension have said they did so because of losing their jobs, whilst a quarter of those that stopped said they simply couldn’t afford to keep on making the payments.
Many of the people who said they stopped paying into their pension have said they don’t plan on starting again, and they don’t care what implications it may have on their financial future. I’d bet that every investing book in publication today would warn against this cavalier attitude in a world of an ageing population.
Research carried out by the Co-operative Banking Group found that many people may have given up on saving all together and that they may be relying on an inheritance boost later on in life from their family.
However, the same research highlighted forecasts that suggest inheritance amounts are going to fall dramatically for future generations, with this in mind, focusing on saving for your future is more important than ever.
Ensure your initial long term savings are tax-free
If you have decided that you want to save for your future, you should make sure that you make use of your tax free savings allowance using an Individual Savings Account (ISA), they are ideal for long term savings.
You also want to make sure you get the best possible interest rate for your savings, so don’t just apply for the first account you come across. Use a site like moneysupermarket.com to compare ISA savings accounts.
If you have used your ISA allowance
If you have used your full tax-free ISA allowance you may want to open a different type of savings account that lets you access your funds when you need to, an easy access savings account will do just that.
Many easy access savings accounts offer competitive interest rates but if you want something more long term that offers higher interest rates then a fixed rate bond may be what you’re looking for.
The advantage of a fixed rate bond (see definition of a bond) is that the interest rates are really high, however, the main disadvantage is that your funds are tied up for the duration of the bond and if you want access to your cash you will have to pay a penalty.