How ‘Stoptober’ and ‘Sober October’ could save you tens of thousands of pounds

This October people will be encouraged to give up smoking for good and drinking for at least a month. The health benefits are clearly the most important thing, yet it could make a meaningful difference to your finances too. Research shows health is the biggest reason for quitting smoking, but the financial motive was also significant for a lot of people.

If you take the challenge, and stick with your new habits, you could save a small fortune. If you put that money to better use, you could build a decent emergency savings safety net, a chunky investment nest egg, or a more robust pension pot.

Healthy and wealthy

The average household spends £15.60 on alcoholic drinks in a week – slightly more than half of which is drunk at home. Smokers also fork out an average of £63.91 a week on cigarettes. It means someone who drinks and smokes could save £79.51 a week by giving them up – or £344.54 in a month.

If they were to stick to their new habits, they could end up £4,134.52 better off over the year, or £82,690.40 richer after 20 years.

They might be tempted to spend it, to celebrate the great strides they have made towards better health. However, if they were to squirrel it away in a savings account, it wouldn’t take them long to build an emergency savings safety net.

It’s recommended that you have three to six months’ worth of essential spending saved for emergencies while you’re of working age. Everyone’s essentials are different, but in a scenario where someone has essential spending of £2,000 a month, they’d be aiming for between £6,000 and £12,000 in this account.

If they put aside £344.54 a month in an account paying 4%, they could hit the higher end of this target within three years. Those who have started building emergency savings already may be able to direct this money into an investment account such as a Stocks and shares ISA instead, to build real wealth for the future. If they made a return of 5% a year with charges of 0.6% over the next 10 years, they could build a pot worth over £51,000.

If they directed it into a pension and received a matching employer contribution, over the next 20 years they could add almost £276,000 to their pension pot – assuming growth at 5% a year and charges of 0.6%.

Falling short

This kind of lifestyle change isn’t easy and plenty of people will start the month with good intentions, and end it in disappointment. For those trying to cut down or quit smoking and drinking it is worth being aware that there can be long-term financial impacts beyond the obvious cost saving. If their habits lead to health issues in the short or long term, they could end up paying more for everything from life insurance to critical illness, income protection and health cover.

However, for those who want to generate some or all of their retirement income from an annuity it could mean they potentially qualify for an enhanced annuity. Being a smoker will usually add anything up to 12% to the expected income, while eating unhealthily and drinking could have an impact if it has led to specific conditions.

If it has caused high blood pressure it might add 5%, if this is in addition to something like high cholesterol or obesity that requires medication it might add 10%, and if it has caused other more serious conditions, it could add as much as 20%.

Of course, annuity quotes depend on a wide range of circumstances so each individual will need to compare the rates available to them personally. These increases are only available because the insurer will calculate that they’re likely to have a shorter retirement than average. So anyone who is weighing up the costs and benefits of new, healthier habits should bear in mind that there’s far more to be gained than lost.