How much & where to save according to your age: Are you on track? Decade by decade guide

Martin Lewis advises on savings accounts and premium bonds

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Inflation is primed to hit double digits before the end of the year and the Bank of England has increased the base rate for the fourth time this year. As interest rates on savings accounts begin to rise post-pandemic it’s the ideal time for Britons to consider their financial position compared to where they should be.

CEO of Association of Financial Mutuals, Martin Shaw, shared his insight on where a person’s savings should be depending on their age. 

70+

Mr Shaw advised that people aged 70 and over focus on making their pension stretch as much as needed by keeping the unused portion invested. 

He said: “Having a flexible income pension allows you to take money from your pension flexibly, whilst keeping the rest invested. This means that you can scale the payments up and down depending on what you need at any given time.”

Additionally, the investment can be passed onto one’s heirs if they die. 

Although it should be noted that every investment has capital at risk and people are advised not to invest more than they can afford to lose. 

40 to 60

At this age, people have usually accomplished all the expensive milestones of life such as completing their studies, owning assets like cars and houses and perhaps even sending their own children off to college or university. 

Mr Shaw advised now that these people look towards their pension and “really start taking it seriously”. 

He added that people who have a lump sum they would like to invest could: “Look for Investment Bonds which usually allow you to withdraw a small amount each year, tax free. Many can be opened in single and joint names, so while a good idea for retirement, it can also be used for saving up for something special, whether that be a child’s wedding, first home, or a holiday of a lifetime.”

35 to 45

This age tends to be relatively expensive when it comes to personal and familial expenses, Mr Shaw advised looking at medium-term investment plans, some of which could come with much needed life insurance. 

He shared: “Look for products like Tax Exempt Savings Plans which allow you to invest a small, set amount of money, tax free, over 10 years. The investment sits in a growth fund designed for long term savings, and, the cash is available in a lump sum once the plan matures, and may also come with life insurance. 

He noted it’s “perfect for when children get older and you want a cash boost, whether it be a new home, house upgrades, school supplies or a nice holiday”.

25 to 35

Mr Shaw highly recommended that people in this age group open a Lifetime ISA, which is a Government backed savings account which offers a 25 percent annual bonus. 

The account has a limit of £4,000 per year, meaning that depositing the maximum amount will earn one £1,000 bonus. 

However, people should note the funds in this account can only be accessed when buying one’s first home or when they turn 60 as a retirement fund. 

Mr Shaw added: “If you’re looking to save, but not quite sure if you want to buy a house, then the stocks and shares ISA is a better option.”

18 to 25

Mr Shaw advised that people in this age group, generally still studying or starting out in their career, to create a financial plan and educate themselves on their financial possibilities.  

Usually people have the least amount of responsibilities at this stage in life, but also generally have little money after bills as well. 

Mr Shaw shared: “Your financial plan might include allowing for student loan repayments, the costs of buying a car, or saving for next year’s holiday.  It is certainly worth trying to put some money aside for the longer term, and taking out an ISA may provide a good, flexible option.

“Remember, cash ISAs are good for short-term, secure ISAs, and Stocks and shares ISA are most suited as a medium term investment, making them good for saving for a new car, or the beginnings of a house deposit which may take a few years.”

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