Your money: How much to save for the future?

Supermarket bills, car repairs, mortgage payments, insurance premiums: the never-ending stream of demands on your purse can leave you with little to spare at the end of every month. How early should you start making long-term savings? Can you afford to let things drift for a while?

"If you've only got pounds 100 left at the end of the month, then you're probably not going to make extra savings," says Tim Cockerill, of the independent financial advisers Whitechurch Securities. "Wait until you've got a bit more," he says.

However, with pensions, the sooner you start saving the better, is the word from advisers. "Everyone should be funding their maximum allowances," says Stephen Dight, managing director of the independent Grosvenor Financial Services in Henley-on-Thames.

Up to the age of 35, you can pay only up to 17.5 per cent of net relevant earnings into a personal pension plan. This allowance increases according to age, with those between 60 and 74 entitled to save 40 per cent of net relevant earnings.

Few people have enough in their pension fund, or are on track to receive a pension worth two-thirds of their final salary at retirement. If you are in a personal pension scheme, the maximum allowances are simply not enough, Mr Dight says.

You could pay dearly if you delay saving for a pension. In order to accumulate a pension fund of pounds 213,000 at retirement, which would buy an income of around pounds 21,000 a year, you would have to contribute pounds 77 per month into a pension plan if you started at age 25. But if you started saving at 45, you would need to pay pounds 500 per month to get the same benefit, according to figures from Whitechurch.

If you want to start putting away money towards your retirement income, but may not be able to do it consistently, he suggests saving the money in a building society account and then transferring the accumulated lump sum into a pension plan. "You would get tax relief, but the cost would be that much less," he explains.

But planning ahead doesn't always pay. There are some cases where you may be better off waiting rather than saving, one IFA argues: saving for children's school fees or higher education, for example. Parents use various types of savings scheme to cover future fees, and some start putting money away soon after the children are born.

"In certain careers, people can undermine their standard of living in their thirties, [whereas later] they'd be able to pay very easily out of income," says Mr Dight. "I'm all in favour of prudence, but some people go completely over the top - in my view unnecessarily."

An urge to save at all costs can lead to some bizarre financial decisions. One financial adviser cites a client who had a pounds 100,000 mortgage and subsequently inherited pounds 20,000. Instead of paying off a fifth of the mortgage, the man wanted to invest the sum long-term in PEPs. The adviser pointed out that this would be the same as having an pounds 80,000 mortgage, then borrowing an extra pounds 20,000 to invest.

Consider which is the best type of investment given your individual circumstances and needs. The younger you are the more risk you can afford to take, because you still have a long time to go until retirement. If your investment falls in value, there is plenty of time for it to rise again.

Grosvenor Financial Services (01491 414145); Whitechurch Securities (0117 9442266); Holden Meehan (0171 404 6442)