When it comes to planning for retirement and saving at the start of your career, things are certainly different for younger generations.
Those who started out in work 40 years ago often had a secure job for life and a gold-plated defined benefit pension – and with parents who may have known the hardships of the Second World War, thriftiness was a common lesson.
Today, with the average millennial – born in the 1980s and ‘90s – already having changed employer five times and with the state pension age shifting more than Blackpool sands, their future is far less defined than those generous pension pots of their parents’ generation.
But while the challenges they face might be different, the tools to help them understand their personal finances have changed too.
Younger generations are born into a world of financial info at their fingertips, and greater flexibility and opportunity to shape their own future.
We spoke to father and son Stephen and Alex Shaw to discuss their differing attitude to money – and what they’re able to teach each other when it comes to their personal finances.
“I started planning my financial future when I was 18 and qualified as a nurse. Even though I was just a teenager, I joined the NHS superannuation scheme, which promised half your final salary in a pension if you worked in the health service for 40 years.
“I thought ‘that can’t be a bad thing’ and others at the time said it was one of the best pension schemes around, so I signed up there and then.
“When I retired in 2018, after 41 years (the last 17 of which were office-based), I was glad of that decision. I’ve since been able to enjoy an income of around £20,000 a year and will start drawing my state pension this month.
“My wife Carol, who I married 22 years ago, was also a nurse and with no outstanding mortgage to pay we can live comfortably on both our retirement incomes.
“As I get older, I have much less desire for material things. I prefer to spend on experiences, like going on holiday. My biggest extravagance is having a new car every few years.
“Apart from that and a mortgage, which I paid off just before I retired, I’ve never had a debt in my life.
“I consider myself fortunate, especially compared to Alex’s generation. He and his peers face hefty rent or mortgage payments that take a huge chunk out of their income, whereas I’ve been able to have money left over once my bills are paid.
“But the position I’m in now has also come through a lot of careful financial planning. I’ve always been thrifty and that goes back to my parents, especially my mother. She taught me the value of money and not to fritter it away.
“I won’t buy anything new if I already have something else at home that’s working well. What’s the point? And when I do splurge, I weigh it up considerably beforehand. I can take weeks to make a decision.
“Making my money work for me is my hobby, and something I spend quite a bit of time on.
“It brings me great satisfaction to move my savings around to get the best interest rate so I can beat inflation. If I see a good savings rate or ISA, I’ll immediately look at switching my savings.
“I love getting a good deal on things I would buy anyway. I use cashback sites, especially when I am buying financial products like insurance, and have made around £1,900 from the site TopCashback over the past decade or so.
“Recently I put a holiday on a 0% credit card. I paid the minimum off each month – around £40 – and put the cost of the holiday aside in a savings account with a decent rate of interest.
“It meant I could pay off the balance of the card when the 0% rate finished, and in the meantime, I’d accrued extra interest.
“The small amounts I save add up and with tricks like this, I’m thousands of pounds better off – although you do have to be quite ‘money-minded’ to keep on top of it.
“I have a spreadsheet with all my banking information, including all the dates when deals are ending. It takes time and effort, but I enjoy it.
“When I was working, I used to get up at 6am and spend an hour on the computer, checking what deals were on. Now I’ve got to where I want to be, with a comfortable retirement income, I can relax a bit and actually spend less time working it all out.
“I’m still quite risk averse though. I like to be in control of my money rather than have others do it for me, so apart from one stocks and shares ISA I’ve never been keen on investing in the stock market.
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“I was spending up to £8,000 a year in rent – or paying off someone else’s mortgage, as I’d moan to Dad – and every spare penny was going towards a deposit for my own home.
“Only once I got on the housing ladder, with help from family (including Dad), was I really able to think about my future and start working towards it. My attitude to saving changed quite significantly after that.
“Dad likes to save money but he’s also shown me you should enjoy life at the same time.
“Nevertheless, he’s careful with what he spends and doesn’t allow himself many luxuries. He's only just paid for a decorator for the first time because he saw that as a waste of money when he could do it himself.
“I’m happy to pay for that kind of thing. They’ll do a better job than me, take less time and create less mess.
“Dad knows a lot about money, but I’m still able to share some tips with him. I told him about Honey, a browser extension that automatically finds and applies coupon codes and showed him how to use it.
“I sign up to newsletters and mailing lists, and I also share deals with him. For example: when some coffee shops and restaurants have promotions where you can buy a £40 gift card for £30, I’ll let him know so he can treat himself for less.
“I do tell him about stocks and shares ISAs and other investments, but I know his attitude to risk is very low and he prefers to stick with saving and switching accounts.
“Dad has definitely instilled in me the idea of building enough wealth so that my wife, Kelly, and I can retire with a good standard of living.
“I pay about 11% of my £60K earnings into my pension and that amount is creeping up all the time.
“I'd like to have an annual income of around £40,000 in retirement. Would I retire early if I achieve that? Perhaps. Or maybe I’d switch to working in a simpler job or volunteering.
“Kelly and I are very focused on our quality of life. We’re not trying to make the most money we possibly can. We live in a modest house, drive a second-hand car and enjoy time with our dog.
“Our life is as much about our enjoyment as working hard.
“I think Dad was probably in a more favourable position money-wise when he was my age. I think my generation is more materialistic and, partly because of social media, feel more pressure to keep up with others.
“I’ve certainly felt low when I’ve struggled to afford the nice holidays or shiny cars that friends have, but nowadays I’m not so bothered.
“The only thing Dad has ever done that I consider quite lavish is buying new cars. It’s surprising when he likes to save money on everything else.
“But I definitely don’t judge him for that. If he’s got the money, then I am glad he’s spending it on something that makes him happy.”
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