Saving for the future is one of the hardest financial disciplines to adhere to. But it is ultimately one of the most rewarding, especially if it gives you financial freedom in later life.
Hands up, mea culpa, and all that. Over the years, I have struggled with the savings habit. Things, multiple things, have often got in the way, temporarily derailing my long-term savings plans.
At various stages in my life, young children had to be fed and clothed – as well as the loss of one income compensated for (that was tough). New cars had to be bought (yes, keeping up with the Jones’s syndrome) and financially demanding teenagers had to be appeased (and numerous school trips paid for).
And then there was the frequent indulgence in some of the finer delights in life – expensive holidays, the latest state-of-the-art television and latterly original paintings. I have a financially fatal attraction to the art of Paul Kenton, especially his lovely paintings of London. My walls are in danger of falling down under the weight of his fine art.
So have I cracked the fine line between living for the moment and saving enough for the future when employment is no more? Not really, but I have got a little better at it as I have got older.
Not just because of becoming wiser and children fleeing the family nest – two actually still live at home, one with his girlfriend while they frantically assemble a deposit sufficiently big enough to please a mortgage lender. But because the financial services industry has actually got better at making it easier to save – yes, you did read correctly, I am for once praising an industry I rarely have much time for.
This is through the introduction of online-based investment platforms that allow you to hold all your investments – shares, investment funds, investment trusts – under one roof and within different tax wrappers – Individual Savings Accounts (Isas) and Self-Invested Personal Pensions (Sipps).
I use such a platform and it is central to building my long-term savings. I have investments on the platform, held within both Isas and a Sipp. I love its versatility. I can turn on the contribution cap when my finances are in good shape. Similarly, I can switch it off when an unexpected household bill comes my way.
Over the years I have struggled with the savings habit
Also, provided my internet service is working at home (50:50), I can check up at any time of day or night (usually late at night when I cannot sleep) on how my investments are shaping up. Sometimes, I am pleasantly surprised. On other occasions, I am dismayed, triggering financial nightmares and an increase in my monthly contribution.
Apart from the investment platform, the other core component of my long-term savings armoury is my company pension plan. It is the prime tool I will depend upon in later life to meet my financial needs. As long as I am employed, I will continue to contribute to it. It is a no-brainer financially. Not only do I benefit from tax relief on my pension contributions, but my employer tops up my payments.
With auto-enrolment now ensuring most employed workers (sadly, not the self-employed) are members of a pension scheme – with a top-up contribution made by the company – pensions should lie at the heart of any long-term savings strategy.
But there is more to savings than investment platforms and pensions. Diversification is key. In recent years, I have dabbled with peer-to-peer lending where I lent money through an online platform to small businesses in need of finance, earning interest on my lending. Although it is a peripheral part of my savings portfolio, it has delivered better returns than the small amount of money I hold in a Cash Isa with a high street bank.
For those who are more comfortable holding cash – and buoyed by the recent (marginal) increase in savings rates – it is good to see services such as online-based Savings Champion (Savingschampion.co.uk) now helping savers maximise their interest payments. I am not a user, only because cash – in my eyes at least – is no longer king.
I am a big believer in squirrelling small amounts of money away on a regular basis. The investment app Moneybox takes this to the extreme, allowing you to invest minuscule amounts, be it the odd £1 here and there, or even better rounding up any card spending to the nearest pound and investing the difference.
It is ideal for young savers. I keep going on about the tool to my three app-savvy boys, all in their 20s. As yet, I have had little success but I am working on it.
Jeff Prestridge is the personal finance editor of The Mail on Sunday. He won the Contribution to Personal Finance Education category at the Santander Media Awards 2016. Email him at firstname.lastname@example.org.