Does saving still pay? Yes. With discipline, patience – and brains. Here are a few tips.
by Stephan Lehmann-Maldonado
06 Feb 2017
His fantasticatrillions are legendary. But getting as rich as Scrooge McDuck is no longer as easy. Sound investments that once generated risk-free interest now offer interest-free risk. How can you build up your savings?
Beware of bargains
First, stick to the old saying: “When in a hurry, proceed with caution.” It means avoiding speculative investment schemes that come with the promise of “fast, safe returns.” Because there’s no such thing as return without risk. It’s also important to be better aware of your own needs – from winter clothing, to insurance, to your mobile phone contract. What do I really need? What will still make me happy tomorrow? If you know the answers, you won’t fall victim to every passing trend. Instead of grudgingly giving up things you like, the trick is to happily part with what you don’t need.
Stick to standing orders
Unfortunately, our determination to save is often short-lived. If you’re clever, you can outsmart yourself by establishing limits and setting up standing orders. For example, it’s a good idea to divert some money from your salary account to separate accounts for taxes, mortgage repayments, and savings. If possible, it’s also sensible to leave two to three months’ worth of salary in your personal account – as a reserve for unforeseen expenses.
Securities beat bank accounts
Where to put your nest egg? A look at the past offers guidance: diversified portfolios have almost always performed positively over a 10-year period. That’s why a fund account can make long-term sense. It’s as flexible as a regular account but invests in funds that tap into the enhanced earnings potential of the stock markets – with their associated risks. It’s practical to make regular deposits by standing order – 250 francs a month, for example. If stocks are trading high, you’ll get fewer securities for your cash. If prices are falling, you’ll automatically get more. That’s how this trick leads to lower average purchase prices.
Planning trumps trust
Many of us believe we’ll be provided for, with over a third of us relying solely on our state and occupational pensions. Too bad! Because the rules may well be rewritten due to the need for reform. What’s more, Pillar 3a voluntary pension savings are a great way to save. Employees with a pension fund can pay in a maximum of 6,826 francs for 2019. It’s worth doing just for the income tax deductions. If you pay in right at the start of the year, you benefit from a preferential interest rate for a full 12 months.
Tame your taxes
There are other “return” opportunities through your pension fund. Voluntary purchases are tax deductible. Most people receive their pension fund statement showing whether they can buy into their fund in March. But do check how financially sound the pension fund is before entrusting more money to it (cover ratio). If purchases are spread across a number of years, this regularly breaks the progression to a higher tax bracket. You can also take tax deductions on renovations to preserve the value of real estate. Spreading these costs over two years is equally beneficial.