1. The sooner you can start the better
This is the most common piece of advice you’ll get on any form of saving, but it’s also the best. The key to building wealth is time, the longer you can leave your money to grow, the easier it will be to reach your retirement savings goals. It’s very difficult to grow your capital quickly through investing (unless you are prepared to risk losing it), but if you save consistently for the long term, you’ll be amazed at how your wealth builds up. So, start as soon as you can, even it’s a small amount, you’ll learn how to save, and you’ll reap the rewards when the time comes to retire.
2. Keep going, and try to save part of everything you earn
You should try to be disciplined and put part of any income you earn into long term savings. A key example of where people don’t do this is with their annual bonus. As tempting as it is to treat yourself and blow any ‘extra’ money – you’ll do well to try and save at least as much of it as you would on your monthly salary.
3. Choose the right product
There are a few different options for how you can save for your retirement. Choose the one that works for you. Take advantage of any tax savings that you can get. If paying into a pension fund or a retirement annuity saves you tax, the cost to you of your contribution is less.
You don’t need to commit to a monthly payment– even with the best intentions, there may be times when you can’t afford to contribute to a savings plan, avoid products that will penalize you if you miss a premium or can’t afford to keep contributing.
4. Don’t be too conservative in how you invest
As above, if you’re doing it right, saving for your retirement should be a long journey. And if you have a very long term investment horizon, you should invest in assets which are expected to give you the best long term return. Historically this has been equities and property, not cash and bonds. Investing in riskier assets like this does mean that your investments might lose value in the short term. These investments are more volatile (so they go up and down more), but if you’re investing in the long term, and not wanting to access the money, you don’t need to worry about what the value is today – keep your eye on the long-term goal. As you get closer to retiring (3-5 years maybe) – you need to start thinking more about reducing the risk you are taking. Soon we’ll be releasing a section on different types of investments.
5. Leave it alone
There will be times when you will be very tempted to cash in the money you have worked so hard to save, and even times when you should do so. But do your best to leave that pot of money alone and give it the chance to grow. Cashing in your retirement savings pot for a holiday, or a fancy wedding, or to buy a new car is very seldom a good idea. Having to start all over again, with less time before you retire, makes it so much harder to reach your goal of a comfortable life when you stop working.
More reading: What is a tax free savings account
Have a look at our SAVINGS financial education course.