How much money will I save by quitting smoking?
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It's 'Stoptober' again. How much money can you actually save by giving up smoking for good?
October is 'Stoptober'. A great chance to get healthier lungs and save a bundle to boot.
This year, the start of Stoptober coincides with a new law coming into force in England and Wales, banning smoking in cars where anyone under the age of 18 is present. Those who break the law could face a £50 fine.
Kwikfit research suggests that 3.1 million smokers are unaware of the new ban, meaning that many could soon be caught out and be liable to cough up to pay the fine.
Aside from the cost of any potential fines though, do you know how much your habit is costing you each and every year?
The cost of the habit
I’m going to use the example of my father-in-law, who has been a smoker for decades and usually has a go at packing up the cigarettes each year.
He smokes Lambert & Butler, a range I am assured is fairly middle-of-the-road price-wise, which sets him back £8.23 for a packet of 20. On an average day he smokes 30 cigarettes. That means he is spending over £86 a week just on fags.
The NHS Smokefree website has a calculator which you can use to see how much smoking is costing you. It also has all sorts of advice and information, including free Quit Kits and smartphone apps to help you kick the habit.
So simply packing up smoking would save my father-in-law in the region of £4,507.75 every year just through not buying cigarettes. That's not a bad saving at all.
And he could then turn that extra cash into an even bigger sum.
Instant access savings
An obvious choice is to stick the money in an instant access savings account. That way he can earn a little interest, and still have the money within arm’s reach if he needs to spend it.
Currently, the top account my father-in-law could open (minimum deposit of just £1,000) comes from ICICI Bank, paying a rate of 1.65% before tax.
After a year (assuming the rate stays the same, which is far from guaranteed), if he puts away £375 a month, after tax he’d be left with around £4,534.
He could beat terrible savings rates with a current account, as both Nationwide and TSB pay a whopping 5% AER, though this rate is only available on balances up to £2,500 and £2,000 respectively so he would need to find another home for the rest of his saved cash.
Another option is a regular saver. These pay juicy rates of interest, but you have to save some money each month to qualify. The top regular saver right now comes from First Direct, which pays 6% for 12 months. You can’t save more than £300 a month though, so at the end of the year you’ll get £3,700 back. However, don’t forget the extra £75 saved a month. Even if you keep that money under the mattress, not earning any interest, you’ll still finish the year with around £4,600.
In fact, you may end up even better off, as the First Direct regular saver is only open to the bank’s current account holders. That’s not really a hardship though as the 1st Account not only wins every award going for customer service, but you also get a £125 welcome bonus when you open a 1st Account.
What about an ISA? These accounts offer a tax-free return, and some offer instant access too.
The top instant access ISA today that he could open with £1 comes from Nationwide, and pays 1.6%. Putting in £375 a month, at the end of the year he’d be sat on around £4,540.
Read Where to earn most interest on your cash for more on cash savings options.
Saving by spending
A savings account isn’t his only option though. Perhaps he has outstanding debt on a credit card, and paying this extra money towards his bill will help him clear that debt earlier, meaning he’ll be paying less in interest.
Or perhaps he could overpay on his mortgage. Many mortgages allow overpayments of up to 10% of the balance each year without penalty, and doing so means that you’ll slash the amount of interest you pay and pay the mortgage off earlier!
Or maybe he fancies a bit of a punt by investing that cash. He could stick it in a Stocks & Shares ISA that tracks the FTSE, for example, or lend it via a peer-to-peer firm like Lending Works, RateSetter or Zopa.
Another huge boost
However, the money he'll save from not spending on cigarettes could be significantly boosted after 12 months by a drop in his life insurance premiums too.
For example, a 30-year-old man with £200,000 of cover on a 20-year level term policy from insurer Beagle Street would save about £47 a year if they were a non-smoker, or in the region of £935 over the 20 years.
A 49-year-old man wanting £100,000 of level term cover over 20 years would save £27 per month, which is about £325 a year. Over 20 years that would be a huge £6,500.
If you've given up for 12 months, without using any nicotine replacement products, it's time to have another look at your life insurance premiums.
The point is that with thousands of pounds a year extra in his pocket, there are all sorts of exciting options available to him. Hell, he can blow it all on a holiday if he wants. But the only way to get that money is to give up smoking, and stick to it.
If you are giving up smoking today, we wish you the very best of luck.
This is a classic lovemoney article that has been updated