Suppose that you would like to buy a house in the country with a garden. Ideally you’ve already researched price levels in different areas. Let’s say for example, that your future home should cost 900,000 francs.
To be able to buy the home you need at least 20% Equity. In your case that is 180,000 francs. You’ve already saved 40,000 francs. That still leaves 140,000 equity needed to realise your housing dreams. The rest of the purchase price you can finance with a mortgage, provided you can afford the monthly payments.
How long before your dream becomes reality
Perhaps before you used to simply put into a savings account what was left at the end of each month. However, it would be beneficial to analyse at your potential to save. Thus you’ll be able to work out how long it will be before your dreams of your own home are fulfilled.
To find out how much you can save, it’s best to first set out your household budget. Calculate your income and expenditures. What remains from your income you can set aside. Moreover, knowing your household budget helps you see what you are spending your money on and where you can make savings.
Assume your calculations show that you can save 1000 francs a month. Then it would take a little over 11 years to amass the necessary equity. However, you can also get more out of your savings over this time if you invest them.
How to appropriately place your money
When investing there are many different options available. Which investment is best suited to you depends upon the return you’re expecting. But also how risk averse you are and what your investment horizon is.
To find the ideal investment, it’s best to be advised by a financial expert. You will find a short overview of the major investment options below.
How to safely invest your savings.
If safety is more important to you than returns, then you could opt for these investment options:
- Savings and same day access accounts offer you the maximum security and have no fixed period. Thus you can withdraw your money at any time. However, you receive relatively low interest rates.
- With fixed term deposit accounts, you are also erring on the safe side, but you earn higher interest than on an instant access savings account. In return with a fixed term deposit account you pay the same sum over a fixed period. Also the earliest you can withdraw your savings is after the end of the fixed period.
- Please note: with both options you should take note of the withdrawal limits of the bank.
How you save twice and simultaneously provide for your retirement
You can save money and reduce your taxes if you pay into a retirement account:
- 3a Pension accounts are tax advantaged and award you higher interest than on your savings account. Your savings are essentially tied up but can be used for the purchase of a home if it to be your own residence.
- If you make voluntary payments into a pension fund, then you’ll also realise a tax saving. This is only true if you have the potential to make such payments into the fund though. You can use money from your pension fund to pay for a home for yourself or to provide your retirement income.
Which investments promise higher rates of return
If earnings potential is more important to you than higher security, then avail yourself of classic investments such as:
- Bonds or debentures are relatively safe securities. Through these you lend the State or companies money to invest and receive interest for this. Bonds have a fixed term but can normally be traded every day on an exchange.
- With Equity and Investment/strategy funds the risk is lower when compared to individual equities. Here the fund manager invests in different areas: depending on the nature of the fund in equities, property, bonds or government securities. If a single investment weakens, the other holdings can offset the loss. But funds are also traded on exchanges and are subject to market risk.
- Single company equities likewise rank as securities. They promise a high return and are bought and sold on an Exchange. They are risky though, being subject to Equity Market fluctuations. Therefor you should have prior knowledge and experience to invest in this arena. It’s best to get advice here.
With the investment calculator you can discover how your financial investments might develop over the years. You can see at a glance, how quickly you’ll reach your savings targets with the expected returns.