Saving or investing? Or both?
The average Belgian saves a lot. In 70% of cases, they even plan to save more. This is the result of a survey commissioned by BNP Paribas Fortis on Belgians and their money, carried out by the research company Profacts. This savings mania may be due to the fact that 60% of Belgians are concerned about the return on their investments. But is saving more really the right thing to do?
Safety cushion
If you currently spend your entire monthly income, we advise you to start by putting money aside to build up a safety cushion so as to be able to cope with an unexpected event. These tips will help you manage your budget. “As a general rule, we consider a decent reserve to be the equivalent of six months of net income in your savings account,” says Koen Van de Steene, investment expert at BNP Paribas Fortis. “And we advise you to quickly top this reserve up after drawing on it.”
The return on savings
Saving does not expose you to any risk. Your savings are legally protected by the Guarantee Fund, up to 100,000 euros per person and per bank. So even in the highly unlikely event of your bank going bust, you will get your money back.
The downside is that these savings earn very little. The legal minimum interest rate is currently 0.11%. In concrete terms, the 1,000 euros you would have put into a savings account in 2016 would now be worth only 1,006 euros. While in the meantime, the cost of living has risen, partly due to inflation. It may therefore be worth looking for alternative investments for part of your savings.
Investment returns
This alternative is investments. Ideally, you should keep a comfortable reserve of savings and invest money that you do not need immediately.
By investing in a diversified way over a number of years, you considerably increase your chances of achieving a positive return. But beware: investing always means running the risk of losing (a portion of) your capital. If you want to limit this risk, choose an investment with capital protection or opt for a conservative or defensive investment formula.
Three simple principles govern investments:
- Only invest money that you do not need immediately.
- Invest in a sufficiently diversified way, spread over time.
- Consider a sufficiently long-term horizon.
In this simulation, we show you how much you could have gained in 16 years by investing EUR 100 per month. Of course, past returns are no guarantee for the future, but they are a good indication.
Finally, investing is not a solitary activity. The bank offers you a wide range of funds and other solutions. An investment advisor can help you find what best suits your wishes and needs.
About Ask Your Bank
At BNP Paribas Fortis, we want to help you gain a greater understanding of money matters, which is why we asked more than 1,000 Belgians what their main money-related questions and concerns are. With the Ask Your Bank series, we aim to make your life easier by addressing those matters in a fully transparent way: another example of Positive Banking.