It is important for everyone to have a savings plan. We save because life is unpredictable and saving can help make your financial future more secure by helping you out in times of emergency.
In this course, learn about the different types of savings plans and how to set them up.
As soon as you start working and earning a regular income, apart from opening a bank account, you should also open a separate savings account with your bank to meet unexpected expenses. As you learned in Lesson 4 , this account is also called an “emergency fund.” In this article, you’ll learn how much of your income you could save and how to create a savings plan for investing.
Almost all investors have asked themselves the same question: should I save or invest my money? And how much should I save, how much should I invest? The answer depends on your financial situation, but we’ll give you an overview of how you can do both.
Inflation risk
The sad truth is that, at first glance, it may be convenient to save money in a bank. However, your funds may be exposed to inflation risk, that is, you could actually lose money by putting it in a bank. Since you no longer really earn interest on your deposits, inflation is literally eating away at your hard-earned money. Being aware of this phenomenon is an important step towards a better and healthier financial life. Done right, investing in assets other than just a regular savings account can put your money to work and produce better long-term results. This is why many investors choose to set up a savings plan based on the principle of programmed investment.
Savings plan on the principle of programmed investment
On Bitpanda, users can set up a savings plan that works on the principle of average cost effect. You invest small amounts of money in a digital financial asset, such as bitcoin or gold, at regular intervals and over a long period of time.
By continuously acquiring digital financial assets over a long period of time, you can reduce the effects of market volatility on assets that are subject to large price swings.
One of the advantages of using savings plans is that you invest more confidently. You rejoice when the price goes down because you get more for your money, but also when the price goes up because your investment is worth more than before.
Create a savings goal
Before you start saving or set up a scheduled investment savings plan, you should first set an approximate savings goal. If you want to start saving for the security deposit on your new home, the best way to calculate the amount is to know how much you can save each month and how many months it will take you to reach your goal. For example, you could invest around 10 to 15% of your annual income: if you earn €50,000 per year after deductions, your financial goal could be to save at least €500 per month, which corresponds to around 12% of your monthly income.
Now that you’ve set a savings goal, you need to consider how long you want to save for. This part is crucial to determine when you have reached your goal.
