With the benefit of hindsight, many of us might change financial decisions that we made in the past if given the chance.
For three in ten people, this change is likely to be to start saving money earlier in life, according to new data from Tesco Bank, shared exclusively with This is Money.
Almost a third of people, some 29 per cent, said they regret not starting to save sooner, Tesco Bank said.
For those in their 30s and 40s, this feeling is even more acute. As many as 36 per cent of these older savers reported that they wished they had begun saving earlier.
One in ten also said they are concerned that they have not built an emergency fund. It is generally recommended savers build a pot of between three and six months’ worth of their salary in order to cover unforeseen expenses.
Chris Henderson, save and pay director at Tesco Bank said: ‘Hindsight is a wonderful thing, and when it comes to your hard-earned money, feeling like you’ve missed out on a chance to maximise your savings can be a tough pill to swallow.’
Giovanna Smith is a social worker and matchmaker and runs her own business, Perfect Fusions
This is exactly what how 54-year-old Giovanna Smith feels.
The relationships expert, who owns matchmaking service Perfect Fusions, says she her lack of saving earlier in life has had significant consequences further down the line.
She told this is Money: ‘It hit me when I got divorced and I was suddenly on my own with four children and was at university.’
‘I was thinking, “Oh my god, what am I going to do”.’
Giovanna says she didn’t save money during her marriage, instead focusing on caring for her kids, while her husband saved money.
She said: ‘The biggest mistake I made was not to save myself, instead of relying on somebody else that they were going to do it… at the time, I thought it was going to be forever.’
‘I struggled big time,’ she said, ‘when we divorced, I had nothing, nothing at all. I had to rebuild myself, go to uni, struggle with childcare and all of those things, and had to get government help just to finish my degree.’
I was young and naïve. Ironically, I’m now a matchmaker and I tell my clients what I’ve been through so that they don’t make the same mistakes in their own relationships.’
Giovanna says she is now in a position where she doesn’t have a sufficient pension to fall back on in alter life, and has little to no savings.
Giovanna owns her own home, but her ex-husband owns 40 per cent of the equity in the property, which she says prevents her from being able to afford a move.
Instead, her focus is to continue to build her own business in the hope that it can help to fund her future.
‘I am actually relying on this business to be successful,’ she said, ‘I’m funding it through social work that I’m still doing, and putting that money, or what’s left of it, into the business.’
‘I’m very resilient, so I’m… I can’t give up. That’s not an option.’
When it comes to saving, time is of immense importance.
The longer you are able to save for, the more your savings pot will be able to grow, benefitting from the compounding effect.
For example, a £10,000 lump sum earning two per cent inter interest per year would increase to £11,000 over five years, and just over £12,000 over the course of ten years.
Over 30 years, this same £10,000 would have reached £18,212.09. Over 40 years the same figure would have risen to £22,240.59.
Long term saving is just one money habit that Giovanna hopes to instill in her children, ensuring that they don’t make the same mistakes that she did in the past, and so that they can benefit in the future.
She said: ‘I should have started this way back, and now I’m telling my kids: “look, you’ve got your first jobs, you should start saving for your future”.’
‘I’ve always had really good communication with my kids, and they’ve seen my journey, they know my journey and they’ve been through it with me. They understand the struggle.’
Many of those in their 20s, like Giovanna’s children, are concerned that they lack in financial education, the data shows. Some 17 per cent said they already regret not learning more about how they can build a savings pot, while the same said they regret not having set themselves financial goals.
‘I’ve taught them about finances,’ she says, ‘I’ve taught them about saving, and doing it as soon as they can, before they have families.’
Giovanna says she has suggested her three sons buy a house together., and they plan to do so once they all start their careers.
‘One of them has a really good job as an AI engineer at one of the big four accounting firms… he’s in a really good place and could move out on his own, but they are brothers and I think I’ve helped them to grow up caring for each other,’ she said.
How can you build your savings pot?Â
It can feel like an insurmountable obstacle to build a strong savings fund, especially if you are starting from nothing.
However, starting small can help you to get past this first hurdle, and even small contributions will grow over time.
Chris Henderson, said: ‘One of the simplest ways to make the most of your money is to get saving. Setting aside a little bit each month, or boosting your savings when you have some extra cash, will see you build up a healthy savings pot quicker than you think.
Every little helps: Starting small can still lead to a significant savings pot
‘It also gets you in the habit of putting money away regularly and can give you peace of mind that you have some money stashed away.’
To boost your savings habits, Henderson suggests setting yourself a savings challenge, such as putting aside £1 per day.
He said: ‘There are lots of different savings challenges out there, whether it’s saving a certain amount every day or increasing the amount you save each day or each week.
‘Each is designed to get you in the habit of putting money away regularly and seeing it grow over time, so have a look and see which one could work for you and start saving today.’
Sometimes, when there is money in your account, you are more likely to spend it.
Henderson says setting up an automatic transfer of funds into your savings each month can help prevent you from spending it elsewhere.
Once you have a built a savings habit, opening an Isa will help to ensure that you keep hold of all your savings and any interest your earn.
Henderson said: ‘Put simply, in most cases everything you earn from your ISA, you keep. You can deposit just £1 to get going and remember that you don’t have to use the full ISA allowance of £20,000 each tax year to reap the benefits.’
Outside of an Isa, you will only start to pay tax on your interest once it surpasses £1,000 per year. While this may not seem like a problem In the short term, as your savings pot grows over a number of years, this could eventually eat into your pot.
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