Although starting a pension seems like a simple idea, it is actually quite tough. We have so many demands on our salaries right out of university. From paying off student debt, to buying your first house, getting married, having children…through to bills we didn’t expect to be paying just a few years ago such as your children’s university fees and your parents’ healthcare. The list goes on and on!
And suddenly you’re in your mid-forties and you haven’t even started.
There are three reasons to start early:
1. The earlier you start, the more you won’t miss the money you’re putting aside. Our video gives the example of the money saved from a couple of cups of coffee every day and how that builds up. But once you’re hooked on the caffeine and love that five minute break from your day for your mocha-choca latte…
2. We all understand the power of compounding as a concept. You put away £100 in an investment and you may earn 5% on that money. So next year you earn 5% on £105. Not only are you adding to your pot each year, but those extra percentages tot up over the years to reach a surprising amount.
3. Investing over the long term means that the volatility of your portfolio (i.e. the amount by which your pot of money rises and falls in line with market movements) reduces as the timeline stretches out. That means you will have much greater certainty about the amount you’ll be retiring on and can plan on carrying out a lot more of your bucket list than if you were only looking at investing over a much shorter period.
So start now with what you can. You’ll be surprised at how the pounds and pence add up. Common sense really.