Saving and investing, a step-by-step guide to help navigate the essentials!


For many, the idea of saving and investing can be tricky to understand, but it doesn’t have to be as complicated as we think.

Let’s start by thinking about saving..


We’ve all heard the old wisdom of “look after the pennies” and honestly if someone told me when I was 20 how little I needed to save each day to get to get almost 90k together, I probably wouldn’t have believed it. Now, I can see it’s surprisingly simple. Here’s how I’d do it, starting from scratch.

It sounds obvious but the sooner you start and the more you save the better. I think €3.50 a day is a good amount to demonstrate the power of investing. €3.50 a day is approximately €106 a month. This is roughly the price of a coffee and while not everyone can save this much, it is achievable for many.

Best of all, the strategy works for any amount I can save, even if I saved less, I can still build up my wealth. But saving regularly isn’t enough, so what then?


The next step is to invest. Banks are finally starting to pass on some of the recent interest rate rises customers even if it remains below what you might expect and while it is guaranteed which may suit better than un-guaranteed higher returns. But personally, I’d consider putting my €3.50 a day into the market to buy stocks/shares. Shares mean I own a part of the company, may share some of its earnings, or my shares may grow in value with the company. It’s important to remember returns aren’t guaranteed.

There have been prolonged periods when stocks/shares underperformed inflation. Indeed, poorly chosen investments sometimes never recover. So, it’s fair to say investing in stocks/shares demands a tolerance for volatility and an appetite for risk.

Over time long-term investments have a good track record of rewarding shareholders. The big FTSE 100 or FTSE 250 firms have returned around 8 per cent to 10 per cent annually over the last few decades. The average stock market return is about 10% per year, as measured by the S&P 500 index, which tracks the performance of 500 large companies in the US. However, this is not a guarantee, as the market can vary significantly from year to year and from portfolio to portfolio. In the financial crash it fell by just over 46 per cent between October 2007 and March 2009 for example. Therefore, investors should assume returns much lower than 10 per cent, such as 4-5 per cent, when planning for the long-term.

However, this is still far more than you would currently expect to get in a savings account, although savings account returns are guaranteed, which share returns aren’t. Picking the fund is crucial. While companies tend to perform well, there’s always a ‘Blockbuster’ or similar that ends in disaster. A good strategy to limit risk is to diversify with a variety of funds.

How does it work?

Well, let’s assume I’m getting a 5 per cent return on the €3.50 a day. The first year, I’d save €1,277.50 and hopefully get back €1,310.04 from my 5 per cent. This is nothing too crazy. But the beauty of investing is how the compound interest builds up over time. It works exponentially. In this example the total contributions come to €22,550 over 30 years but I’d have built up a €89,000 net worth (before tax).

Please note that tax treatment depends on the individual circumstances and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Remember, get professional advice before investing, and that past performance isn’t a guarantee of future returns, Finally, inflation would make the above amounts less in real terms.

Still, I don’t think there’s a better way to build wealth than investing in companies. The magic word however is diversify.

This article aims to give information, not advice. Always do your own research and/or seek out advice from a Financial Broker before acting on anything contained in this article.

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