Getting the Results You Want from your Regular Savings

The very best thing about a typical domestic pension savings plan or superannuation is that we can't touch the money.  This forces a long term view, removes stress because we don't worry about day-to-day performance, and helps protect us from our worst enemies - our own fears, emotions, and irrationality.

If you have a flexible international pension or regular savings plan, here are some top tips to help you obtain the best results.

Keep The End Goal In Mind

You probably started your international savings plans for a specific reason, such as retirement funding, education fee planning, or perhaps building a deposit for a property. To get the best results from regular savings, it’s best to stay focused and keep in mind your ultimate goal.

Naturally the performance of your savings plan will vary over time – there will be periods of poor or negative growth, balanced out over time by periods of above-average returns. What counts in the long run is your asset allocation (strategic mix of investments), periodic rebalancing (resetting the percentages of your asset allocation), and the significant advantages of dollar cost averaging.

Don’t Dip Into Your Savings In The Early Years

The first few years are critical to your overall wealth accumulation. When you see your funds start to grow nicely, resist the temptation to dip into your savings to reward yourself with a holiday, a kitchen or a new car. The cost of doing so may force you to extend your retirement age in future, or survive on a lower income.

Increase Your Savings In Line With Your Salary Increases, And Drop In Lump Sums When You Have Bonus Or Other Surplus Cash

If you’re working towards a long-term financial goal, the best time to save is when you have the money. When you have a salary pay rise, make sure to pay some of that increase to the ‘future you’ by putting it away into your savings plan. The same with your annual bonuses; the future you will look back gratefully to the present you.

Treat Market Declines As Buying Opportunities

When you save and invest, you are buying shares in companies all over the world, and so participating in growth of the global economy. Don’t worry about the day to day financial headlines. Don’t worry about the short term ups and downs of stockmarkets. We’re not going back to Roman times! A market decline just means that share prices are currently cheap, and it’s time to go shopping. Consider increasing your regular savings amount.

Compound Growth Is A Wonderful Thing, But Don’t Rely On Investment Growth To Do All The Heavy Lifting

Stay disciplined with your regular savings, and don’t expect quick miracles from your investments. Sticking diligently with your savings is more important than growth in the early years of your plan.

For example, if you are saving $1000 monthly, and your investment returns are 7% per annum, as you can see from the table below:
  • Year 11 is the first year where the growth of your investments exceeds the amount that you yourself are saving;
  • Year 19 is the first year where the accumulated growth of your investments is more than the amount you yourself have saved; ie. the point at which you have doubled your money.