Little lifestyle changes can lead to big lifetime savings that can boost pension pots by thousands of pounds.
Recent surveys have suggested that many workers cannot afford to save as much as they like because they have no spare cash.
But financial experts point out that little tweaks to how money is spent can bring surprising results.
One study looks at the price of a daily cup of coffee someone picks up on the way to work.
The largest Starbucks Americano coffee costs £2.50.
Taking the average working month as 20 days, that adds up to £50 a month.
Over a year, that’s £600 on coffee in the morning.
If our worker took a flask of coffee to the office instead of buying one, saving that £50 a month at a return of 5% over 25 years would see a pot of retirement cash of £30,000. That’s without the option of a tax top-up that would make putting that £50 into a pension into saving £63 a month.
Looking at that daily coffee purchase in 25 years’ time, that caffeine habit has cost £30,000 to maintain.
Simple spending hacks can save a fortune over the years because in a pension or ISA they benefit from the magic of compound interest combined with tax relief.
Most people can save a few pounds here and there by looking at how they spend and implementing a few changes.
Becoming a Scrooge
For someone buying a £2 sandwich for lunch, substituting a homemade lunch is probably more nutritional and certainly cheaper – but offers the same £30,000 savings result as ditching the morning coffee.
Convenience comes at a price and saving money means micromanaging spending and seriously looking after the pennies while the pounds look after themselves.
Making those daily coffees and sandwiches a treat rather than routine easily adds up to £60,000 over the years – and there are plenty more places to look for small savings.
Look for discounts and money-off coupons, dismiss that distrust of loyalty cards that offer vouchers, but instead of spending the money that stays in the bank, save it into a pension or ISA.
Those Scrooge habits soon become second nature and pay off as a more comfortable and affordable retirement.