Brewin Dolphin : Financial Planning: it's never too early to start

Whatever risks you may face in life, when it comes to your finances and pensions, one of the key lessons passed on down the generations is that it is never too soon to start saving and planning.

Putting a plan in place is important to help deal with the short-term risks faced at different stages in our lives, as well as longer-term issues such as securing a comfortable retirement lifestyle.

The wisdom that comes with hindsight is clear from the responses of people who have already retired when they are asked what their most important pieces of advice for the younger generation would be based on their own experiences.

The answers that crop up most commonly tend to be that they wish they had started saving earlier and that they had made a financial plan to help them assess their progress.

Sometimes the benefits of planning properly, or the risks of not doing so, only become clear when people are approaching or living through retirement.

One of the key lessons is that delaying starting a pension leads to risks, the full costs of which might only become apparent much later in life.

Among the biggest risks that people face when they retire are unattractive annuity rates that provide less income than they were hoping for, the threat that rising inflation poses to their spending power, and the possibility that they will exhaust their savings, particularly if they require social or nursing care in the future.

They are potentially serious issues and need addressing well in advance through a financial plan that is reassessed at regular intervals, says Ammo Kambo, a Financial Planner with Brewin Dolphin.

Even in retirement, it is not too soon to start planning and one key area where sensible preparations can make difference is in estate planning, to ensure the most effective use of the inheritance tax rules, from relatively simple things such as gifts to more complex trust arrangements.

Good advice can make a huge difference to the size of the final inheritance tax bill and ensure that more of your money gets passed on to the next generation.

At all stages in life, putting a plan in place is important to help you deal both with the longer-term issues that need addressing, as well as the shorter-term risks .

The way we need to approach these short-term risks changes at different ages. Whereas a period of ill-health or unemployment would be a setback to a younger person without children, a decade or two later on it could prove catastrophic, potentially forcing the family to completely rethink its lifestyle and finances.

Some, such as sudden unemployment, may be best dealt with by putting aside a contingency fund, while others, such as ill health or early death, are best addressed via insurance.

"People are typically completely unaware of the major risks they face," says Kambo. "They only realise them at certain trigger points such as when they buy their first home, have their first child or perhaps five years before retirement. But they don't necessarily have a plan. Sitting down with a planner can really help them to think ahead and see what they ought to be doing."

The value of investments can fall and you may get back less than you invested.

Any tax allowances or thresholds mentioned are based on personal circumstances and current legislation, which are subject to change.

No investment is suitable in all cases and if you have any doubts as to an investment's suitability then you should contact us.