Common financial mistakes by age: Are you making one of these?

Even some of the most astute investors in the UK could fall prey to common financial mistakes that quietly erode their wealth.

Whether it’s leaving too much cash sitting in low-interest accounts in your 20s or letting fiscal drag eat into your earnings in your 40s, these missteps rarely happen out of neglect. Rather, they may occur as your priorities shift and you don’t adapt your financial plan alongside them.

The good news is that spotting these mistakes early means you can take control. With a structured plan, you can ensure that every pound you earn, save, and invest is working at peak tax efficiency.

Keep reading to discover the most common financial mistakes savers and investors make throughout their lives, as well as how to fix them.

In your 20s and 30s, being overly cautious can erode your long-term wealth

Holding money in cash can feel safer because you can physically see the balance in your account.

This type of loss aversion stems from the fear of short-term market drops, which can be anxiety-inducing. However, holding long-term wealth in cash can create a slow, invisible loss driven by inflation.

Data from the House of Commons show that approximately 66% of all adult ISA contributions go directly into Cash ISAs rather than Stocks and Shares ISAs.

Moneyfacts Group also highlights that from February 2024 to 2025, the average percentage growth in Stocks and Shares ISAs was 11.86%. In the same period, Cash ISAs saw 3.8% growth.

This disparity could grow even wider over a longer period. Indeed, statistics from IG suggest the following could be true.

Putting £20,000 into a Cash ISA earning 4%:

Timescale	Returns on 4%
5 years	£24,333
10 years	£29,605
20 years	£43,822

Source: IG

Putting £20,000 into a Stocks and Shares ISA with an annual return of 7% after fees:

Timescale	Returns on 7%
5 years	£28,051
10 years	£39,343
20 years	£77,145

Source: IG

After adjusting for inflation, you could see close to double your growth over the long term.

Cash is important for short-term use, but at this stage in life, consider establishing an emergency cash buffer of three to six months’ living expenses, then channelling your surplus income into tax-efficient wrappers such as a Stocks and Shares ISA.

In your 40s and 50s, lifestyle creep could derail your peak earning years

Your 40s and 50s are typically your peak earning years, but they can also bring competing financial demands. Mortgages, children, and lifestyle changes can all place pressure on your financial plan.

Moreover, as you progress in your career, you may be enjoying more of life’s luxuries and slowly letting unnecessary expenses overtake your financial plan. This could leave your wealth scattered and unfocused.

The common financial mistake here is “present bias”.

Present bias means giving more weight to rewards or costs occurring right now, rather than those that could occur in the future. So, your immediate lifestyle could be taking precedence over your long-term stability.

There are several ways to combat this:

• Automate your pay rises: When you receive a salary increase or bonus, commit a portion of that increase directly to your pension or investment portfolio before it disappears into daily spending.
• Mitigate fiscal drag: Where you can, maximise higher-rate tax relief on your pension contributions to help reduce your Income Tax liability. The tax saved can then help fund other savings and investments.
• Regularly review your incomings and outgoings: To ensure you remain on track and are not letting lifestyle creep and present bias affect your future security, stay on top of how much money you’re earning and spending. Where you can see budgets flexing more than you’d like, you can take swift action.

Taking control during your peak earning years can help prevent short-term spending from compromising your retirement stability.

In your 60s and beyond, retiring without a clear plan could trigger unexpected bills

Switching overnight from a lifetime of accumulating wealth to a period of spending can create significant anxiety. Without a clear decumulation strategy, which is a plan to turn your retirement savings into a sustainable income, it’s easy to make emotional decisions.

This could mean drawing funds down too quickly or not spending at all, and both instances could compromise the money you worked decades to build.

Here are a few things to build into your financial plan:

• Pace your pension commencement lump sum: Taking all your 25% tax-free amount without an immediate purpose removes your money from a tax-sheltered environment and could expose you to unexpected taxes on future withdrawals.
• Manage your Income Tax bands: Taking large, ad hoc lump sums from your pension in the same tax year could inadvertently push you into higher Income Tax bands, meaning you’re paying more than expected.
• Plug State Pension contribution gaps: Failing to check your National Insurance record early could mean you miss the chance to fill any gaps in your contributions. Remember, you typically need 35 qualifying years of contributions in order to gain access to the full new State Pension.
• Account for Inheritance Tax (IHT) and care costs: Leaving your pensions unmanaged within your broader estate could expose your beneficiaries to unnecessary IHT liability or leave you unprepared for future long-term care needs.

Having a clear, step-by-step plan in place ensures you can enjoy your retirement with confidence and peace of mind.

A structured plan could help you protect your future self

Financial planning is about more than picking the “right” investments. Rather, our focus is on spotting tax efficiencies, coaching positive behaviours, and ensuring your strategy evolves with your life.

Identifying your blind spots and taking action to rectify them is one of the most impactful steps you can take to protect your future self.

To find out more about how we can help you navigate your financial journey, please get in touch.

• Marnel Stafford: email Marnel.Stafford@fosterdenovo.com or call 07305 970959
• Ryan Edwards: email Ryan.Edwards@fosterdenovo.com or call 07591 758136

Alternatively, you can call our office on 0207 469 2800.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.