Quit smoking and save £143,233

Today is No Smoking Day. If you're a smoker, and someone offered you £143,233 to quit today, would you do it? Because that's how much you save by giving up...

Today marks No Smoking Day. So if you’re contemplating using this as your chance to give up smoking for good, perhaps you need a little encouragement. And what better form of motivation than discovering how much money you could save?

So let’s take a look at five top ways you could save some cash...

1) Cash benefits

Let me introduce you to my imaginary friend Chris. Chris smokes 20 cigarettes a day, but has decided it's time he gave up smoking and saved some money. So how much will he save exactly?

Well, according to the Tobacco Manufacturers’ Association, the current recommended retail price for a pack of 20 cigarettes is £6.13. This means that Chris spends a total of £2,237 a year on cigarettes! So if Chris quits, this will work out to be around £186 of extra cash per month for Chris' wallet, which he can spend on whatever he wants.

2) Boost your savings

To make things easier, let's round down the £186.45 per month to £185.

If Chris decides not to spend the money straightaway, he could save up this cash instead and put the extra £185 per month into a savings account.

If Chris wants to be able to access his savings without paying a penalty, he should choose an easy access savings account. And right now, the top paying easy access account comes from the AA – the AA Internet Extra Account which pays an interest rate of 3%.

By paying his spare £185 into this account each month, after a year, Chris will have accumulated £2,248.76 in savings (based on Chris being a basic rate taxpayer). That's a pretty decent sum of money - imagine what Chris could do with that!

Just bear in mind that the AA Internet Extra Account includes a bonus rate of 2.5% for the first year – so after that, the interest rate will fall. If Chris wants to keep saving, he’d need to look for a better savings account once that first year was up.

What’s more, the interest rate on the account is variable, so there’s no guarantee it won’t change.

• Adopt our goal: Build up your savings

3) Pay off credit card debt

Another option Chris could consider is paying off his credit card debt.

Chris has a debt of £2,000 on his credit card, which has an interest rate of 16.9%. At the moment, Chris can only afford to pay off the minimum monthly repayment of 2%* of the balance each month. If he continues to do this, it would take him a whopping 31 years and 11 months to clear his balance in full. What’s more, he would end up paying a mammoth £3,481 in interest.

However, if Chris used his spare £185 to put towards his credit card each month, he would completely clear his debt within the first year, and only pay £171 in interest. So Chris would save £3,310! He could then put this spare money into a savings account!

Alternatively, if Chris transferred his debt to a 0% balance transfer credit card, he wouldn’t pay any interest at all. For example, the Virgin Money Credit Card offers an interest-free period for 16 months. Although Chris would have to pay a balance transfer fee of 2.98% (in his case, £59.60), if he put the £185 towards his debt each month, Chris would still clear his balance before the 16-month period was up, and he wouldn’t have to pay interest.

So compared to the £3,481 he’d pay if he was only paying the minimum on his existing credit card, Chris would save himself a total of £3,421.40 (taking the £59.60 fee into account).

• Adopt our goal: Pay off credit card debts

4) Boost your pension

Chris could also consider paying more money into his pension. Chris is 30 years old and earns £35,000 a year. He currently pays £100 a month into his pension and has an existing pension pot of £5,000.

If he carried on paying this amount until he retired at the age of 65, he would have a pension pot of £92,043.86 – equating to an annual income of £4,027.60.**

However, if Chris decided to put his extra £185 per month towards his pension (on top of the £100 per month he already pays), his pension pot would increase to £233,633.15. That's £141,589.29 more!

This equates to an annual income of more than £10,000 - which is £6,205.58 more every year, just because Chris quit smoking and started paying in the extra £185 per month! And, of course, Chris is likely to live longer and enjoy a healthier retirement by quitting smoking now. So it's a win-win situation.

You can read more about this in Up your pension pot by £94,000.

• Adopt our goal: Get ready to retire

5) Life insurance

As well as the savings Chris will make immediately over the months he gives up smoking, he will also make big savings when it comes to paying for his life insurance. In fact, according to Life Search, if you are classed as a non-smoker, the premiums for life insurance can become around 50% cheaper.

The chart below shows the savings that could be made by quitting smoking for two different age groups:

Quotes assume £150,000 of level term assurance over 25 years, guaranteed monthly premiums.

So in the case of Chris, he could save a whopping £1,644 in life insurance premiums over the term of his policy by simply quitting smoking. If he were 10 years older, this saving would be even greater at £4,899!

Bear in mind that to be classified as a non-smoker by an insurance company you must have quit smoking for at least 12 months. A cheaper premium cannot be guaranteed because it also depends on your overall health and age, but there is a good chance you will pay less.

• Adopt our goal: Get the right type of life insurance

Get quitting

So overall, it’s pretty clear that giving up smoking really can save you a lot of money – and in more ways than one!

Of course, Chris doesn't simply have to focus on one particular saving. Instead, he could choose to split his £185 per month into chunks so that he can pay off more of his credit card debt, save more, and put more into his pension.

However, over the long-term, the most cost-effective solution for Chris will be to pay the extra money into his pension and then pay lower premiums for his life insurance. In fact, by quitting smoking and doing just this, he will save himself a whopping £143,233 over the course of his lifetime! All of that, for simply quitting smoking!

Good luck!

* Or a minimum cash payment of £5, whichever is the greater.

**These figures assume a growth rate of 7% per annum less an annual management charge of 1%. Assumes inflation rises at 2.5% a year.

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