Save! Save! Save! No, it’s not a sale so don’t get excited. What it is, is the best advice you’ll ever receive.
Did you have a piggy bank when you were a kid? I did, and I was taught the simple lesson that I should save up for what I want and then I’ll be able to buy it. I don’t use a piggy bank anymore – I use more complicated things with fancy names but the principle remains and so does the advice.
As a student you may have more pressing issues, like beer and fashion, but things cost less if you save up for them. Cash is still king and interest is the cost of borrowing money to pay for something that you cannot afford to purchase outright. Banks make a fortune because people want things that they don’t have the money to buy and that’s why stock markets crashed in 2008.
You’ll probably work for about forty years, assuming you start at the age of 25 and retire at 65. Then you’ll have to support yourself for the next 40 years because people are living longer and have access to medical and lifestyle support and care.
Fuel and food prices are soaring around the world and you’re feeling it in your pocket because you travel and eat. You need to survive and have as much fun as you can but you’re only working for half of your adulthood and living off your savings for the rest. In the interim you want things that don’t fit into the monthly budget, and retailers and banks are offering you attractive deals that will enable you to have what you want, but at a cost.
Patience is truly a virtue when it comes to saving. If you wait 6 months before buying your car, you can save for a deposit which will bring your monthly premiums down and ease up cash flow. The same will apply to purchasing a property or even renting one because at least a month’s deposit will be required so, in this case, it would be an enabler.
If you’re saving for a material object you will a require a ‘piggy bank’ for your money until such time as you require it and a bank account may be the most suited solution. Decide on your savings term and go onto internet banking (or speak to someone at your branch) and look for the highest interest rate with the most appropriate level of access. In other words, when will you require the money and how much notice must you give to get it?
Anywhere between one and 5 years would be a short-term investment rather than a savings plan and it would generally also be a bank that would provide you with such a service. For longer term investments of more than 5 years you can consider taking some risk depending on what the money is earmarked for. Where and how you invest the money will be determined relative to your own, personal goals and what you have earmarked the money for, and a qualified financial advisor would be able to assist you with this.
Depending on how deep you venture into the savings and investment world, it can be quite a jungle, full of lingo and confusion. As a young person wanting to put money aside for the long or short term, what you require is a savings mindset that results in your regularly and habitually putting money aside for a purchase, a rainy day or even for retirement considering the enormity of it.
You should make this as automatic as possible by setting up automatic transfers into savings accounts or debit orders to investment companies. Plan to save and include an amount in your monthly budget so that it is proactive and also so that there are no surprises at the end of the month.
Credit cards with zero facility are cost effective and build a healthy credit record. If you can’t get one, use a debit card, and cash only if you can withdraw for free. 7-day notice and other notice accounts are good piggy banks, and unit trusts and exchange traded funds are cost effective, flexible investments – great for getting into the market – but they come with market risk and advice should always be sought.
Set financial goals and ensure that they are time based. Have fun saving towards them and remember that there is always a reward at the end!