“I am 29 years old and about two years into my career as a trainee accountant and my parents keep going on about me starting to say to my retirement. I don’t earn a lot in there many years yet before I even have to think about retirement. So why should I even bother?
Half the population, whether expatriate Bahraini expect to be poorer than their parents due to a chronic lack of saving. Many are earning too little, spending too much failing to save and are building up debts. This is the generation known as the “Ostrich Generation “.
Millions are burying their heads in the sand over the need to save retirement. The ostrich generation will live longer than previous generations and state and company pensions will not be so generous, says a report from HSBC bank. 17% do not have a clue how it will pay for their retirement, while 21% plan to rely on their state pension or GOSI. But this will not pay for a comfortable old age, with the UK state pension of just over £100 a week if you’re entitled to the full amount.
Because of debts many people over 65 years old have been looking to release money held in their houses as equity. On average, those who have debts are in the red to the tune of over £25,000, the equivalent of what the average full-time worker earns in a year! Many pensioners are being forced to rely on their credit cards to survive or remortgage their houses which were bought decades ago for a fraction of the current value.
The earlier you start to save to your pension, the better. Even a very small proportion of your monthly salary put away now can have dramatic effects on your wealth in the future. In the course of my work I have encountered many people who have lived here for more than 15 years and yet have failed to save one dinar and it’s my job to help them salvage something for their future and in many cases it is too late to do enough.
If you began now saving BD 40 on a monthly basis and by the time you are 65 (35 years from now) you will have over BD 85,000 at a growth rate of 6% per annum. This can be used to generate an income for you of over BD 4000 without touching the principal. We still have inflation to cope with, but don’t forget as your career progresses you will be able to increase the amount you save without too much pain; the trick is to start early and keep it going every month, without fail, preferably into a long-term plan that a good financial advisor can help you select. This takes the money away from your regular bank account and so removing the temptation to spend frivolously.
Your money is compiled by Bahrain Financial Planning Consultant Brian Davis
