Savings advice, why save?

Why does anyone save? The answer is obvious. You may need the money in the future either for something you want to buy, or to cover the unexpected, or for when you are too old or ill to work.

Savings can be divided into short and long term needs.

Short term savings needs

Saving for a car or a holiday: the most suitable investment is usually a deposit account such as a bank or building society account.

Long term savings needs

Saving for retirement, school fees or providing capital for children as they grow up.
You'll need to consider how easy it will be to get at your money and how much you can afford to put back.

Consider your attitude to risk, generally the higher the risk the greater the potential for gain. Be aware of your tax situation and the charges on savings plans.

Budget planning,

Budgeting involves understanding how much money you earn and spend over a period of time. When you create a budget, you are creating a plan for spending and saving money.

Before investing,

You first should know the answers to basic questions including:

• How much money do you want to invest?

• What type of investment return do you expect to achieve?

• How much risk are you willing to take?

• What are the tax consequences of your investment decisions?

• How does inflation impact your investments?

The power of compound interest

Compound interest is a fundamental component in the laws of money.

Compounding interest simply refers to the fact that the interest you receive will be calculated not only on the principal amount that you invested, but also upon prior interest amounts added to your investment.

In order to show the power that compounded interest can make if an investment was made for €10,000 in 1994 into a fixed interest fund over a 15 year period by the end of 2008 this would total a return of €71,371.