How to save money for retirement on low earnings

Most people are aware that savings are maximised by beginning early, which is especially true for retirement savings. The complication is when people feel like they cannot afford to save money, and plan to save aggressively in the future when they are earning more.

The trouble with this plan is that as we earn more our expenses also increase, so it can still be difficult to find money to put aside. Deferring saving also means missing out on a lot of compound interest, which could have a big impact on your total fund size. For many people, saving money is a change in mindset so that it becomes a part of life. How you save is up to you - some like to put away a certain percentage of their salary, while others will try to find cheaper alternatives for products and services and then save the difference.

It's always worth remembering that pensions are typically very good value for money, as you receive more than you actually contribute. If we look at auto-enrolment for example, the current minimum contribution from an employee is 0.8% (which isn't much, so you should increase this if possible), and the employer then puts in the equivalent of 1% of your salary, and the government puts in 0.2%, taking your total to match 2% of your salary. You receive £2 for every 80p you put in, which is good value in anyone's book. However, if you are not earning much then it's possible you are not part of auto-enrolment, and without any form of pension. In which case, the following tips could help you free up enough money to start a private retirement fund.

One of the first things anyone can do to maximise the amount of money they have left at the end of the month is to look at their existing expenses and try to cut back. This may sound difficult, but it can be surprising how much money is being spent on expensive items - mobile phones may be considered necessary items, but their costs can vary drastically. If you only use your phone for calls and texts, it's still possible to buy a phone for £10 or £20 outright, then pay as you go. If you like to have the newest and most advanced phones, check the prices between different outlets and operators. Also remember that if your contract has expired but you don't feel the need to change your phone, you can talk to your network about reducing your bill, or switch to a pay as you go SIM card to really maximise your savings. Once you have figured out your monthly savings, you can start a direct debit to take that amount out of your account and into a savings fund. You can take a similar look at your television packages - do you need to pay for Sky's most expensive package, or do you only watch channels that are also available on Freeview?

If you commute to work, you may be amazed at how much money can be saved by ticket splitting on train journeys. When you split, instead of buying a single ticket to your destination you buy individual ones for various stops on your journey, and the difference can be remarkable. A post at the Miss Thrifty blog explained that their cost for the train reduced from £215 to £101.50, and also explains how to do it yourself. A Thrifty Mrs also dedicated time to advice on reducing rail costs, including cashback options and booking early.

If you travel by car there are still ways to save, with the main suggestion being to drive less. Walk wherever possible, and if your journey allows it you could park a few miles away from the office and then cycle in (which will help your health as well as your wallet). If you are unable to reduce your mileage, websites like can really help by reducing what you spend when you refuel your car, and Martin Lewis at Money Saving Expert has some tips on reducing the amount you spend on your car.

Another way to try and save money is with your weekly shop. The reduced aisles often contain some bargains, which are either close to expiring or are in damaged packaging. You may also find that your local supermarket sells items like bread at a fraction of the cost in the evening, so it could be worthwhile breaking your shop up from one big visit to a few smaller ones throughout the week to stock up on bread, fruit and veg before they expire. The other benefit to this is you'll eat the food immediately, whereas buying fruit and veg at the start of the week can mean throwing it out after a few days as it starts to turn. When considering your supermarket shop, it's also worth looking at which store you go to, as some are noticeably cheaper than others.

Have you found ways to reduce your spending to boost your retirement fund? Let us know on Twitter or Facebook.

Call 0800 304 7288 for a friendly chat about your pension

The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article. For our latest information and news, please see our articles section:

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