When to save and invest?

As Bradley Wiggins heroically showed last month with his historic Tour De France victory: timing is everything. David Cameron also recently predicted that macro-economic volatilities would continue for some time. So the Scottish Friendly blog drew inspiration from the Yellow Jersey winner and put our investment hats on to tackle similar questions to those Wiggins must have asked himself as he climbed mountains, out-manoeuvred the peloton, and gradually built a winning margin with well-timed drives. When do I invest? How much can I push to get to the end goal, and how long do I need to do it for?

This week, the picture of the UK economy looked gloomier than it has done for some time. The ONS reported that the UK recession has deepened with the output of the economy falling by 0.7% between April and June [1]. The contraction was much bigger than experts expected and follows a 0.3% drop in the first three months of the year [2]. Ernst & Young ITEM Club’s report also showed consumer credit conditions have worsened for people [3], and when you consider these headlines, it can feel as if financial mountains need to be climbed.  When it comes to saving and investing though, it is still possible, and a small change in behaviour, often involving a bit of small change from your pocket, can make all the difference.

If you take saving or investing towards a deposit for a house for example, getting into a habit of putting small sums aside and starting early could be an effective strategy.  In terms of timing, as with the Tour De France, you can’t get to your goal in one day, it takes a long term approach.  Here’s what I think you can gather from this approach for saving and investing effectively:

Work out how much you can save or invest – Saving or investing for a deposit can seem like a big task, but it may not be as difficult as it might seem at first.  Successful savers and investors get into a habit and it can be as simple as not buying a cup of coffee or indulging in a magazine each week.  There are savings and investment plans out there that can fit to your lifestyle and offer you the flexibility to contribute more or less each month by direct debit.  If you think really hard about it, a small amount each week could be a very realistic goal, but that habitual amount over 10 years could help towards getting on the property ladder, so a little discipline could go a long way.

Establish clear goals – Think about your priorities and make a list of long-term goals.  Work out if it is 3, 5 or 10 years in the future and think what you would like to be doing, whether it be setting aside money towards a holiday to Cancun, university fees, a new car or a housing deposit, map it out and stick to the task.

Shop around – There is a wealth of information on the web about different savings and investment products. Money supermarket, Which? and Compare the Market are good places to start looking.  Before you commit, make sure you have looked at a range of products and found the right one for your lifestyle.

Keep in mind flexibility and tax efficiency – Think about how you want to save or invest and weigh up the options available. You may want to lock money away, and there are tax efficiencies available for doing so, or you might prefer to have the reassurance of knowing that you have access to the money if you need it. Many people are not aware of friendly society tax-exempt Savings Plans (TESPs). These long term investment plans, under current tax law, grow free of income and capital gains tax (other than tax on dividends from UK shares). Typically, you need to invest for at least 10 years to ensure that your plan is tax-free. However, please bear in mind that tax treatment depends on your individual circumstances and tax law may change in future. There are plans that allow you to take the money out earlier if you need to but if you do, you may have to pay tax on the profits you make.

Keep an eye on your progress – It is important that you keep up to speed with how your money is performing. This is perhaps the easiest thing to do, but the thing people often forget. So when those statements come through your door, don’t just stuff them in a drawer. Take a while to properly read over them and see how your investment is growing and if you need to consider other options to meet your financial goals. Consider how much you will have at the end of the plan and if it meets with your expectations. You may also get a good feeling from saving or investing and feel a sense of achievement.

Read the small print and ask questions – Warren Buffet, arguably the greatest investor globally, always stuck to the mantra: “Never invest in a business you cannot understand.”  Keeping this pragmatic advice in mind, you should make sure you check the small print for information on fees and that the savings or investment plan literature is clear and easy to understand.  If you are interested in a plan, and you are still not 100% sure, you should consider picking up the phone or emailing in questions.  Good financial services providers will be able to answer your question quickly and with clarity but cannot provide financial advice. If you are in any doubt as to whether a plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk. Advisers may charge for providing such advice and should confirm any cost beforehand.

In conclusion, as Chris Hoy, Bradley Wiggins and Mark Cavendish strive for their goals on the global stage, we can learn a lot from their preparation and approaches to building a lead when it comes to saving and investing. Keep it regular and keep an eye on the goal and saving and investing becomes much easier.

For more information, take a look at the The Friendly Guide to Saving and Investing section of the Scottish Friendly website.


[1] The ONS – http://www.ons.gov.uk/ons/rel/naa2/second-estimate-of-gdp/q1-2012/stb—second-estimate-of-gdp-q1-2012.html#tab-Headline-figures-

[2] The ONS – http://www.ons.gov.uk/ons/rel/gva/gross-domestic-product–preliminary-estimate/q2-2012/index.html

[3] Ernst & Young – http://www.ey.com/UK/en/Issues/Business-environment/Financial-markets-and-economy/ITEM—Forecast-headlines-and-projections

The information provided in this article was accurate at the time of publishing and should be read in the context of the date it was published. Views in this article are those of the author alone and do not necessarily represent the view of Scottish Friendly. No advice has been provided by Scottish Friendly. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk. Advisers may charge for providing such advice and should confirm any cost beforehand.