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The importance of financial planning from an early age

1st February 2024 Print

Think of financial planning as a cushion for the future – it gives you something to fall back on and opens up a wide array of opportunities. The sooner you start saving money, the more you’ll get back for your efforts. It doesn’t have to be complicated either. You need to give it a little thought to begin with and then you won’t even have to think about it 

Here’s what you need to know about setting yourself up for a more financially stable future.

Main reasons to save money

There are endless reasons why you should take saving your money seriously. And the good news is that it doesn’t have to be high maintenance – it’s just a case of putting the cogs in motion.  

Savings give you long-term security by enhancing your overall financial health. With this in mind, it can help you become financially independent, which is important, even if you’re in a secure relationship with someone. It also gives you more freedom to take risks by giving you something to fall back on. For example, you might want to set up a new business venture – and savings are one of the main sources of capital that can make this happen.

Perhaps most importantly, savings can help to reduce stress in your everyday life. Research shows that money is something that can deeply affect the livelihood of individuals across the UK. To ensure you’re not affected, it’s worth taking your finances seriously. Peace of mind is invaluable at the end of the day.

Tips for long-term saving 

Saving regularly is all about creating habits. Before making a purchase, make sure you ask yourself whether it’s a worthy investment or an impulse buy that you won’t need. Little and often is a good approach, as saving lump sums can feel overwhelming. To help with this, think of redirecting the money you’d spend on a shop-bought coffee into a savings account. You’ll be thankful for the amount this generates in a year far more than that coffee.

You can automate this process so that you regularly transfer money into a savings account – and you won’t even notice the impact after a while. Take the time to use a budget planner to work out how much you can afford to save and decide how you’d like to distribute it. A cash ISA is simple to set up online and allows you to earn tax-free interest – and other options include regular savings accounts of Lifetime ISAs. 

Some people use the 50-30-20 rule, where 50% of your money goes towards needs, 30% goes towards wants and 20% goes towards savings. Even better if you can take advantage of compound interest, where the longer you save, the more interest you earn.