Why do we need to save? When do we start?

With so many expenses and activities to pay for during a lifetime, savings can be really hard especially at a young age when income is pretty low.

Unfortunately, people around the world, especially at a young age, tend to think that savings is a boring thing to do and end up saving only at a late stage in their life just before retirement.

In actual fact, according to a study done by statista, 15% of Americans aged 60+ have NO retirement savings. Furthermore, only 50% of those aged between 15-29 have started saving.

Another interesting and shocking fact is that 69% of Americans have less than $1,000 in their savings account!! (see charts below for full details).

Why do we need to save?

Saving is important as we cannot predict the future. Saving money can help you become financially secure and provide a safety net in case of an emergency when we are faced with unforeseen expenses. (e.g. when we get injured or sick and cannot continue to work or need to change our job completely resulting in lower income streams).

Saving is also important to prepare yourself when your personal circumstances change. For example, getting married or having children might be the last thing on your mind right now but as you get older, your priorities change.

Finally, it’s also of benefit as you will be more confident when you retire. It is clear that state pension is unlikely to provide you with enough income to cover all your costs when you eventually stop work and it might not be enough to keep your standard of living.

What age should I start saving money?

The practical answer is any age.

Irrespective if you have just started your first part time job today, or you have been working full time for a couple of years, saving should as soon as possible.

Even if it's €50 a month, it's good practice to start putting away a percentage of your earnings now rather than later

How much do I have to save?

The short answer is how much as you can!

At least 10% of your income, if you can afford it, is a good place to start. To successfully save money, your best bet is to create a budget or track your spending.

In which product should I start saving?

Well, a traditional savings account is a way to start of course. The problem however with these accounts is that % return you get is very low and would be surely not enough to cover inflation.

Don’t forget that if your savings rate is 0.2% p.a, and the current inflation rate in the EU stands at 2%, you are actually losing 1.8% on your purchasing power per annum!

Therefore, although it is important to have one for your daily liquidity needs, it is best to look for alternatives when it comes to long term saving.

What are the alternatives?

As an alternative, one can opt for an Investment Saving Products which provide an element of safety and at the same time grow your investments over time due to attractive returns.

These products would enable you to reach your goals and at the same time provide the required flexibility.

Basically, you would still be able to save a small account (e.g. €100), like the case of a savings account, every month (or any period you choose), but these will be invested in a diversified investment in order to achieve a good return.The investment chosen would of course be in line to your financial objectives and risk apetite.

To conclude…

Pension age might look miles away however it’s always good to think about all eventualities.

Remember even putting a small amount aside every month can make a real difference over the long term


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