How do I begin to save? MAPFRE's experts have the answers
Financial education remains an ongoing concern for many despite its vital role in our daily lives. Taking the initial step toward saving is key. World Savings Day on October 31 aims to raise awareness about the importance of cultivating a saving culture.
“The concept is simple yet powerful: setting aside a portion of your income for future needs. This practice not only helps cover unforeseen expenses but also enables you to plan for future purchases and, in the long run, ensures a financial cushion for retirement,” the Bank of Spain insists on its website.
Embarking on the savings journey can be challenging initially, but persistence and dedication yield rewarding outcomes. “Anyone can start saving at any time. It involves building up capital over time, requiring an obvious effort, as it means forgoing immediate spending to secure a better future,” according to Sergio Esteban, an expert at MAPFRE Vida.
In the current economic landscape, marked by persistent inflation, monetary tightening, and weak economic growth, saving has become especially important. “You have to save now and always, because in our lives we set different types of goals,” says Javier de Berenguer, investment manager and fund selector at MAPFRE Gestión Patrimonial.
De Berenguer outlines different types of savings:
- Emergency savings. These are liquid assets stored in short-term vehicles or a bank account, serving to cover unexpected expenses.
- Savings for planned future expenses. These funds prevent the need for expensive private financing, such as paying for college.
- Savings for retirement. “This type of saving is the crucial in Spain today,” the expert explains, emphasizing that public pensions must be supplemented with private savings to sustain one’s quality of life.
And the approach to saving for each goal may vary.
Tips to start saving
MAPFRE’s experts offer three basic tips to start saving:
- Don’t hesitate to start saving. “Everyone has a reason to start saving at any time.”
- Start as soon as possible. Time is your ally, enabling your money to grow year after year. “On average, a monthly contribution made over five years has a cumulative return of 8%. Extend this over 30 years, and you’re looking at an estimated 60% return,” says Esteban.
- Consistency is key. Don’t let market fluctuations sway you. Resist the temptation to dip into your savings for other purposes.
Eduardo López, a wealth management expert at MAPFRE Gestión Patrimonial, suggests that having all your savings readily available isn't necessary. There are various investment options, from pension plans to savings insurance and investment funds, tailored to your specific goals.
Additionally, whenever your disposable income increases, whether through a salary boost or other sources, remember to allocate a portion of it towards your savings.
What savings products are best suited to each investor?
When it comes to growing your savings, there’s a world of options beyond the basics, from savings insurance to pension plans and investment funds. Esteban emphasizes the importance of clarity: understand why you’re choosing a particular product. Your goal sets the timeline for building your capital and determines the level of risk you’re comfortable with. According to De Berenguer and López, the best choice is always the one that aligns with your specific saving needs.
Your personal saving style matters too. For cautious individuals, especially those averse to market fluctuations or with a particular investment horizon, low-volatility products with stable price movements are recommended, says De Berenguer.
The fund manager and selector believes that mutual funds can be a good option for both conservative and moderately risk-taking savers. “They are managed by professionals, offer daily liquidity and allow for great diversification,” insists De Berenguer.
Esteban adds a nugget of wisdom: even the most prudent savers should have a slightly riskier product in their portfolio. “If I had to choose one, I’d go with options managed by MAPFRE experts, that adapt dynamically to your life cycle and risk profile, available in user-friendly formats,” Esteban points out.
MAPFRE provides an array of choices, including various investment funds, pension plans, and a dozen savings insurance policies. Why such diversity? Each product serves a unique purpose, catering to different saver needs. López stresses that there’s no need to limit yourself to just one type of product; you can have several, each tailored to different financial goals.
The importance of seeking out an advisor
Getting expert advice can be a game-changer on your savings journey, according to López. A professional advisor can help clarify your goals, making your savings strategy more effective. MAPFRE has a dedicated unit, MAPFRE Gestión Patrimonial, that offers financial investment solutions to its customers to help make their savings profitable. It has offices in Madrid, Barcelona, Valencia, Zaragoza, Bilbao, Seville, Málaga and Palma de Mallorca.
López emphasizes the importance of being well-informed before making any decisions. “Don’t hesitate to ask questions and thoroughly examine the details of a savings product. Taking the time to understand the features and ensuring they align with your goals is key,” he advises.