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Five steps towards
financial security

Important information - Investments can go down as well as up in value, so you may get back less than you invest. The information on this page isn't personal advice - please ask us for financial advice if you’re not sure of a course of action for your circumstances. A pension is meant for your retirement, so you can’t normally access your money until you’re 55 (57 from 2028). Tax rules can change and their benefits depend on your circumstances. Inflation reduces the future spending power of money.

Your 20s and 30s can be one of the toughest times of your lives financially. Life’s busy. Kids, work and bills to pay. Everyone needs help so here is a five step guide to help you get started.

Step 1

Pay off your short-term debts as quickly
as you can

Action plan

  • Check the interest rates you’re paying on any debt
  • Focus on repaying the debt with the highest interest rate first
  • If you can, consolidate your debts into one cheaper loan
  • Pay off your debts and loans as quickly as you can afford to

Here's an example

If you have a credit card debt of £10,000 with an APR of 19.9% which you plan to pay off over 5 years, you’ll pay off £264.38 per month. But by the time the loan is paid off you’ll have paid a staggering £5,863 in interest, or almost 60% more than the amount you originally borrowed.

Pay it off in 3 years and you’ll pay £3,361 in interest, around £2,500 less. A better option would be to take out a much cheaper loan. Some banks are currently offering personal loans with interest rates as low as 2.9%. At this rate you’d only pay £179 a month over 5 years and the total interest you’d pay £744 – a massive £5,000 less.

Step 2

Set aside a rainy day fund, and get a
good rate of interest

Action plan

  • Work out how much you need to save to give yourself a healthy cash buffer, between three and six months' worth of outgoings is a good starting point
  • Try and put aside a little every month, even small amounts can quickly add up
  • Make sure you’re getting a good rate of interest on any cash you’ve already saved

Here's an example

High street banks typically pay some of the lowest rates - as little as 0.1%. If you've got £10,000 saved, this is equivalent to a miserly £10 a year in interest. It makes sense to try and get a good rate of interest on your cash, a few minutes effort could reap surprisingly big rewards.

If you use a savings platform like Active Savings you can choose from much better rates. Currently you can get 1.2% AER/Gross* on easy access savings, equivalent to £120 a year on £10,000 saved.

More about Active Savings

Step 3

Protect yourself (and your family)

Action plan

  • Think about what type of protection you want should the worst happen, and how much you’d need:
    • How much do you want to leave your dependents?
    • Do you have any debts?
    • How much income would you need if you were unable to work?
  • Get some quotes from some of the popular comparison websites to see how much different types of protection cost. Also some employers automatically offer some protection to their employees, so check what cover you might already have in place

What protection is available?

No one wants to think about what happens if they die or get seriously ill, but at the same time no one would want to leave themselves or their family in the lurch either. Protection needn’t cost a lot, though. For example, a 30 year old male could get £100,000 of life insurance for less than £5 per month.

  • Life Insurance – life insurance pays out a lump sum to your beneficiaries if you pass away while covered by the policy.
  • Critical illness cover – often available as a bolt on to a life insurance policy. It pays out a lump sum in case of a serious illness such as a heart attack or stroke.
  • Income protection – can compliment or be an alternative to critical illness cover. It provides a replacement income if an illness or accident stops you from working.

Step 4

Boost your investments, every
month

Action plan

  • Work out how much you can afford to invest each month
  • Work out how much your regular investments could be worth – try our regular investing calculator
  • Decide where to invest – get some help if you need it

Here's an example

Adding just £100 a month to a £10,000 investment could build a portfolio worth over £67,000 in 20 years (this assumes growth of 5% a year, not taking into account inflation or charges). Unlike the security offered by cash, all investments fall as well as rise in value, so you could get back less than you invest.

In many cases you can simply top up the investments you already hold. Or if you don’t want to have all your eggs in one basket, you can choose something else. Funds are a great place to start. They offer instant diversification with professional management.

You’ll soon get used to the money going out of your account each month, and you can change the amount you save at any point.

Help choosing investments

Total investments after 20 years
£67,278

Your contribution
£34,000

Investment growth
£33,278

Start investing monthly

This is an illustration and not a projection of what your investments will be worth. The volatility of the stock market is not reflected in any of the charts. The annual growth rate actually achieved will depend on the performance of the investments chosen. Results do not take account of inflation or charges. Remember the value of investments can fall as well as rise so you could get back less than you invest.

Step 5

Reduce the tax you pay

Action plan

  • Think about how much you can afford to save each month
  • Consider which tax shelters are right for you, balancing the tax benefits with having access when you need it
  • Choose your investments

How to save tax?

Everyone has a duty to pay any tax they owe to HMRC, but there’s no point in paying any more tax than you need.

There are a number of ways you can reduce the tax you pay and get your money working harder for you.

Whichever you decide is right for you (and it may be a combination of the below), you can invest in an ISA, Lifetime ISA or personal pension and start from just £25 per month with Hargreaves Lansdown.

ISAs

One of the simplest and most popular types of tax shelters. Shelter up to £20,000 every tax year.

Lifetime ISAs

For every £1 you save in a LISA, the government will add a further 25p. Use it to buy your first home, or after age 60. Early withdrawals will usually be subject to a 25% charge.

Personal pensions

One of the most tax-efficient ways to save for your retirement. You can’t normally take money out of your pension until you’re at least 55 (rising to 57 in 2028).

Personal pensions

One of the most tax-efficient ways to save for your retirement. You can’t normally take money out of your pension until you’re at least 55 (rising to 57 in 2028).

Still not sure what to do? We can help

This page provides information about investing and saving, but it’s not personal advice.

Getting your finances in order to provide yourself with a secure future is important and needn’t be complicated. But if you do feel like you would benefit from some extra help we have a team of financial advisers based around the country who can help.

We can help you to:

  • Meet your goals and increase your confidence
  • Save and invest for retirement
  • Manage your income and expenditure when you retire
  • Build or amend your portfolio
  • Secure your and your family’s financial future

More about financial advice

* What do AER and Gross mean?

AER (Annual Equivalent Rate)
Shows what the interest rate/expected profit rate would be if it was paid and compounded once each year. It helps you compare the rates on different savings products.

Gross
The interest rate without any tax removed. Interest/profits are paid gross. You are responsible for paying any tax due on interest/profits that exceed your Personal Savings Allowance to HM Revenue & Customs.

Rates may be subject to change and depend on individual circumstances.

Expected profit rate

Islamic banks offer an expected profit rate, rather than interest on their savings products, in order to comply with Sharia banking principles. They are authorised by the Prudential Regulation Authority, and regulated by the Financial Conduct Authority and Prudential Regulation Authority. Any eligible deposits up to £85,000 are covered under the FSCS. More about Sharia banking.

APR – or Annual Percentage Rate – is the total cost of your borrowing for a year. It includes the standard fees and interest you’ll have to pay.


This website is issued by Hargreaves Lansdown Asset Management Limited (company number 1896481), which is authorised and regulated by the Financial Conduct Authority with firm reference 115248.

The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money.

Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 2122142).