You probably know that saving is an essential part of any stable wealth management plan, You need savings to help build up your finances for when you can’t work, provide a safety need in the case of an emergency, and help you to engage in wealth building activities like investment. A question that comes to mind when planning your savings strategy will probably be – how much should I be saving?
The answer is not as simple as you might think. Many industry experts will tell you that you need to save at least 10% (or even 20%) of your current income every month to ensure that you have enough savings for the future. While any savings is a good thing (and more is better), this is not always the most helpful answer.
To make the most of your savings plan, you should really answer the ‘how much’ question with another question – ‘what are your financial goals?’ because the truth is that your specific savings plan depends on your long-term reasons for saving. Many of these reasons might be the same as other peoples’ reasons and saving is definitely essential to living a wealthy lifestyle (think retirement, emergency plan, education funding, children’s needs etc) but they might apply in different ways, timelines, or order of importance, depending on your financial situation.
Pointers for working out how much you need to save
1. Work out your timelines
Factors such as your age, working years ahead, and goals for your wealth will help you to establish savings timelines. Are you looking to establish short-term savings for events coming up or lifetime savings for the ultimate long-term goals of retirement and inheritance?
2. Consider the type of saving
Simply saving your money in a bank account will do you no good in the long term and will not take best advantage of compound interest. You need different types of savings vehicles for your different needs. Savings for an emergency fund? They will need to be enough to cover at least three months’ worth of expenses as well as easily accessible. Savings for retirement? Investment might be best. It all depends on your financial needs and goals.
3. Get guidance
That’s why it pays to engage the series of a reputable and experienced financial adviser who can help you put in place a wealth management plan that suits your individual savings and investment needs.
Saving is an important part of a stable and prosperous wealth plan. Need help in implementing a wealth management plan for you and your family? Speak to us – at TRG, we can help you save and achieve so much more.