Start saving early and help avoid financial regrets

image of a phrenology head start saving early


MoneyPlus Features Team

6th October 2015 at 2:40pm

Regrets, I’m sure we’ve all had a few, and a recently published study confirms that for many of us our biggest ones are often money related.

The researchers compiled the top 50 things British people regretted the most and it produced a top ten overshadowed by money concerns.

  1. Save more money

  2. Be less wasteful with money

  3. Make more effort to stay fit

  4. Be better with money generally

  5. Travel the world

  6. Avoid debt

  7. Worry less about small things

  8. Work harder at school

  9. Explore more of the UK

  10. Be more confident / outgoing

Financial learnings fuelled by hindsight

Our regrets are often fuelled by hindsight – “with hindsight I should have saved more”, “with hindsight I should have been less wasteful”.

To quote the famed Hollywood director Billy Wilder, “hindsight is always 20/20”. Even David Beckham has declared its merits, proclaiming “hindsight is a wonderful thing”.

What they are both commending is the clarity with which you can look back on past events now you’re in the privileged position of being able to see what resulted from them. But this clarity often manifests itself as regret.

But hindsight doesn’t always need to revolve around regret, we can look back on things we did well and are thankful for too. When you take hindsight into consideration you realise just what benefits can be gained from listening to the experiences of others – their regrets and their successes.

A blogger’s view – start saving early

With personal finances dominating the top ten, we thought we’d ask some financial bloggers what advice, in hindsight, they’d give savers today.

As the feedback rolled in we saw a definite theme developing and one that supported this research –it was the need to start saving early.

Clive, who writes under the blogger title of ‘Take it easy: Retired not expired’, gave us an interesting insight based on his personal life experiences. “I wish I’d known how much effect unexpected changes in life would have on my retirement planning. I got divorced seven years ago and no longer have any investment in the family home. But as I’d been paying into my pension since I was 21, at least I could retire last year and have a fair standard of life. I’d have been lost without the pension!”

Julia of ‘Julia’s Place’ provided shrewd comment. “Putting a little away each week or month when younger is not hard, it’s surprising how quickly it mounts up from a nest egg to a nest.”

As well as some fascinating hindsight from our older bloggers, we had some encouraging foresight from younger ones. US blogger Andrew, co-owner of Money Crashers Personal Finance, advises his peers that “young adults wanting to financially prepare for retirement should begin saving for it as soon as possible to take advantage of interest to significantly improve savings”.

Compound interest adds up

So why does starting to save early matter so much? The answer is interest – or compound interest to be more precise. Even Einstein proclaimed its merit, the great man allegedly went as far as to call compound interest the eighth wonder of the world.

Simply put, compound interest lets you earn interest on any money that’s already grown. That means you get interest on your investments, which grows them, and then you get further interest on that growth.

Over time, it can really make a big difference to your pension, investments or savings – although there’s no guarantee these will grow.

Here’s an example; if you have £100 and invest it, any growth is applied to the £100. In the next year, any growth is applied not only to your original £100, but also to the growth that you reinvested. This happens year on year and a ‘snowballing’ effect can occur – every year the impact is slowly magnified.

If you’ve got investments, to see the true benefits of compound return it’s important to give them time.

The stock market experiences peaks and troughs, so by thinking long term your investments have some resilience to cope with any market turbulence and are more likely to earn that all-important compound return. American investor Warren Buffett, one of the richest men in the world, has said that his preferred time to hold a stock is, “forever.”

Save early and save pressure

Saving earlier takes the pressure off how much you need to save later. Once the bills mount up surplus income for saving can be in short supply and get neglected, or just the bare minimum is paid.

The positive news is saving money can feel just as good as spending it, setting off that feel-good factor and encouraging the savings habit. Having started early, you’ll build up money which could help you and your family at every stage of your lives including school, university, buying a home and funding the retirement you want.

So, if you’re in the opportune situation to kick off your saving journey early – then do. And if passing on a little hindsight of your own to others, to start saving early makes for sound advice.

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If you liked this article, you might also find our recent post on the financial benefits of hindsight interesting too.

The information in this blog or any response to comments should not be regarded as financial advice. A personal pension is an investment. Its value can go up or down and may be worth less than you paid in. Laws and tax rules may change in the future. The information here is based on our understanding in October 2015.