Bees

Three big benefits of saving for the future

30.07.2021

By Beehive Money

BH_article_images36
With so many finances to take care of – bills, travel costs, gym membership – savings easily slip through the net. But while the future might seem a way off, it’s important to still make short, medium and long-term goals to achieve those big milestones, like buying a house or securing a retirement fund. Here are three reasons to start saving now.

1. Short-term: financial independence

Saving money little and often is the first step in becoming financially independent, which means being able to provide everything that you need to live for yourself and not relying on parents or guardians for financial support, especially if you only earn enough to cover those day-to-day costs. Whether it’s setting up a standing order into your savings account on the first day of the month, cutting down on eating out, or signing up for voucher schemes, we’ve covered some helpful tips for saving quickly and ideas for saving as a student over on our blog, which can help you meet short-term savings goals. 

Once you’ve started a few savings pots for different things – Christmas, holidays, gap year – you might start saving for other reasons, like an emergency fund. This can help cover unexpected expenses, like needing to fix your car or replacing a broken appliance. If you manage to save between three to six months of your salary, you’ll also have a safety net if you’re made redundant, have to move suddenly, or face an expensive problem, like a broken boiler. An easy access savings account is ideal, as you can dip into this as and when needed.
 

2. Medium-term: buying property

Getting on the property ladder is a great way to plan for the future. It gives you long-term security, and houses usually increase in value over time, which could make them a good investment. If you’re aged between 18-39, you could open a Lifetime ISA, which benefits from a 25% Government bonus. This means that if you put away the maximum £4,000 per year, you’ll receive an extra £1,000 on top. But, it’s important to remember that a LISA is only for a first home (or a retirement fund, which we’ll cover later). So, if you withdraw your money for pretty much any other reason, there’s a 25% Government charge, and you could get back less than you paid in.

You could also look into a bank account that pays compound interest (interest on top of interest) or other types of ISAs, which offer tax-free savings. For example, a Cash ISA helps with straightforward saving, while a Stocks and Shares ISA is high-risk, but could give better returns.

3. Long-term: retirement

The biggest milestone and savings goal is retirement, and if you start saving early, there’s every chance you’ll be able to retire early (at 60, rather than at the national average of 66). While you and your employer likely pay into a work pension scheme, and the Government currently offers a state pension, it may not be enough for the future. The LISA, mentioned above, can also help your retirement savings with the 25% Government bonus on top of any deposits you make until the age of 50, which means that if you open the account at 18, you could save up to £160,000 (£32,000 of which would effectively be ‘free’ Government money). Even better, this doesn’t take into account the interest you’ll earn on top. We’ve put together a few more tips on ways to grow your retirement fund if you’d like to make even more gains for the future.

Now that you’ve got an idea about why to save for the future, you’ll no doubt want to know how to go about doing it. We’ve covered that in our article on saving quickly, and have lots more useful blogs to browse over on the
help centre

There are more rules and restrictions about how you can use a LISA
, including eligibility for opening an account, the Government bonus scheme and deposit limits. You can find out more about LISAs here, or get to grips with how it all works with the LISA factsheet.

If you’re 18-39 you can open a
Lifetime ISA with Beehive Money online with £10. The maximum you can save each tax year is £4,000. The Government will pay a 25% bonus of up to £1,000 each tax year. You can withdraw money from a Lifetime ISA to buy your first home, or at age 60. Other withdrawals will usually mean a 25% Government charge, so you could get back less than you put in. Full terms and conditions apply.


Hello, we'd like to keep tracking cookies so we can give our customers a better experience. To find out more please click here.