A penny saved is a penny earned

Benjamin Franklin is credited as saying ‘A penny saved is a penny earned’ but is it really true? As interest rates have languished since the financial crisis of 2007, so you will probably be forgiven for challenging Franklin. If your money is sitting in the bank, at current rates, your investments will be lucky to keep pace with inflation.

A regular saving plan, will give you more control over your investments, and ultimately your return on investment. However, more significantly than ensuring your interest rate out perform inflation, it is really important to keep saving towards your financial goals and here are four reasons why.

The benefits of compounding

Compounding is the process of earning interest on interest as your money benefits from the “snowball effect”. The longer compounding is left to work its magic, the more powerful it gets. 

Dollar cost averaging

It sounds like a complicated technical financial term but all this means is that if you invest regular small amounts, rather than a large lump sum, you reduce exposure to falling markets because you are not investing all your money on the same day at the same price. Dollar cost averaging is an investment method that can iron out the peaks and dips of share prices and eliminate concerns over finding the right time to invest. Of course some of your monthly investments will be made at the height of the market but these will be balanced out by those which are purchased when prices are low. Investing little and often is a great way to start building a portfolio to achieve your long-term financial goals.

Tax advantages

There are products on the market which provide tax advantages to saving. As an expat you have the opportunity to benefit from a wealth of international investment solutions which allow your savings to be tax efficient.

Discipline

‘The road to hell’ they say is, ‘paved with good intentions’ and human nature being what it is there is always something to spend your money on other than ‘boring’ savings. A regular plan encourages disciplined saving and in the long run will breed success.

So I would say that Franklin was correct – a penny saved is indeed a penny earned but only if it is saved right. Why not talk to me, find the right vehicle for your savings and ensure that your investments are outpacing inflation and working as hard as they possibly can for you?

Dominic Fry       Cell: +974 5572 2326      Email: [email protected]