Boost your savings: 5 tips and tricks
When it comes to savings, investment diversification is the key to boosting your investments. In other words, don’t put all your eggs in one basket.
If a majority of French people were content ten years ago to place their savings in passbooks, this is no longer the case today. Indeed, the low returns on savings accounts and growing inflation, aggravated by the health crisis and the war in Europe, are pushing more and more savers to turn to new products so as not to lose money, or even win it.
And when you decide to change strategy, it is important to be well informed before starting. You have to make resolutions and stick to them, but also clearly determine your goals. Here are our 5 tips to boost your savings, day after day, month after month.
What is the dynamization of savings?
We talk about boosting our savings “in general”, when we want to manage them dynamically. On the stock market, for example, the term represents an offensive person, who wishes to maximize his returns, while being aware of the risk of capital loss. This type of saver profile does not hesitate to invest between 70% and 100% of their savings on the stock market, and particularly in shares.
On the contrary, we talk about boosting your life insurance, when you have a rather secure profile, or when you are approaching retirement age, for example. Thus, this type of saver will not risk his capital, but will give a little pep to his savings by placing interest on units of account chosen to make his assets grow.
Ultimately, there is no precise definition of boosting savings. In our opinion, it is a question of finding the best compromise to save well, taking into account both your objectives and your appetite for risk. It is therefore essential to put savers back at the heart of the process by giving them the keys they need.
Learn how to boost your savings in 5 fundamental points
Tip and trick number 1: force yourself to save monthly
This is the basis for anyone wishing to save, regardless of their income. It doesn’t matter whether you earn the minimum wage or are an executive earning 5,000 euros per month, it is always possible to save.
Set a realistic monthly savings goal based on your budget. To this end, it is best to go through your account statements to see if certain expenses are superfluous and how to reduce them.
These are things that are generally quite simple to set up, because you are not necessarily aware of the extent of your expenses until you look closely. If, for example, you go to a restaurant every lunchtime, reduce to one restaurant per week and prepare your meal. This is a minimum of 30 euros saved per week, while maintaining a moment of pleasure.
Similarly, you subscribe to all the online streaming services to “have a choice”, while you watch the same series for an entire month. So why not take a single service, and change when you’ve done the trick. Again, these are 20 euros minimum earned in the month.
In short, you can decline this principle to infinity and find a few euros to put aside every month. It doesn’t matter whether you spend 30 euros, 100 euros or 500 euros per month on your savings, you will save, and that’s the main thing.
Of course, when an event occurs, for example a job loss or a raise, adjust accordingly, but continue to save so that it becomes a reflex, just like paying your rent.
Tip and trick number 2: do not ignore precautionary savings
Some savers are very attracted by the prospect of returns, while others only bet on security and are afraid of tomorrow. However, neither approach is desirable for boosting savings.
No one is safe, whatever their situation, from finding themselves in need overnight. The car that fails when you live in the countryside and absolutely need it for work. Emergency hospitalization with a hefty bill on discharge. A forgotten invoice that comes back to you with a formal notice.
Here are so many unforeseen events that you need to be able to manage on a daily basis, and for this purpose, it is better to have a safety mattress, allowing you to dip into your precautionary savings when you have no choice.
Here, regulated savings accounts, such as the LEP Livret d’Epargne Populaire, the unbeatable Livret A or the LDDS Livret de Développement Durable et Solidaire are ideal. The money placed there is immediately available, and they have the advantage of benefiting from a guaranteed rate of return, while escaping restrictive taxation (no taxes or social security contributions).
However, it is not useful to fill them all up to the ceiling, because you will never need more than 30,000 euros in the event of a hard blow. Investing in passbooks the equivalent of 3 to 6 months of income is sufficient, and will allow you to devote yourself to boosting your savings afterwards.
Tip and trick number 3: determine different investment horizons
Now that you’ve built up enough precautionary savings, it’s time to think about your investment goals. Depending on your age, the composition of your household or your future projects, you will not have the same investment horizons.
And let’s add that you can, and should, have several different investment horizons. This long-term vision of your savings allows you to define your properties and anticipate each stage of your life.
Here are some examples of investment horizons:
- Short-term horizon (from 3 months to 3 years): become the owner of your main residence, make a first rental investment, finance a wedding, etc.
- Medium-term horizon (from 3 to 10 years): prepare for the studies of your children, become the owner of your second home, finance a sabbatical year, etc.
- Long-term horizon (10 years and more): preparing for retirement, anticipating succession, etc.
Epending on these various horizons, you will orient yourself towards different products, such as:
- In the short term: savings accounts or boosted accounts, term accounts, bond funds,
- In the medium term: PEL Housing Savings Plans, life insurance with funds in euros, SICAVs, UCITS,
- In the long term: real estate (tax exemption law such as Pinel, SCPI, management of a rental stock), the PEA Savings Plan in Action, the CTO Ordinary Securities Account (shares, trackers, etc.).
In general, the longer the investment horizon, the less the capital is guaranteed. The risk of capital loss exists, but is diluted due to the duration of the investment.
Tip and trick number 4: consider your risk profile
Of course, each saver has their own sensitivity, depending on their experience, their current standard of living, their character. Risk aversion can be non-existent, moderate or visceral. It is important to take this into account, because saving should not be synonymous with stress, but should help to calm you down about the future that is looming.
There are 3 main savers profiles, each corresponding to a specific level of risk:
- The prudent saver: low risk exposure is his priority, even if it means having a low return, he prefers security,
- The balanced saver: the right balance between performance and risk, he seeks a decent return without losing everything overnight,
- The dynamic saver: exposure to risk is high, the search for yield is his objective, even if it means losing money, he prefers to be offensive.
Ideally, choosing investments that match these three different risk profiles is a great way to boost your savings. It is possible to do online simulations to know the profile to which we belong and thus better choose the investments that correspond to us according to our expectations, our fears, but also our knowledge of the financial markets.
Tip and trick number 5: choose several asset classes
In the same way that we were able to determine one or more investment horizons, and a risk profile for each saver, we can associate different asset classes, from the least risky to the most risky.
Here are the different asset classes that may be right for you:
- The class of monetary assets: these are regulated passbooks, taxed passbooks, accounts and term deposits,
- The class of bond assets: these are bonds, i.e. a debt security that you hold to settle the debt of a State or a company,
- The class of shareholder assets: these are shares, that is to say a title of ownership that you hold with a company and which gives you the right to a part of the profits,
- The class of real estate assets: these are physical real estate held directly, intangible real estate called stone-paper such as SCPIs, or real estate in stocks and bonds,
- The class of speculative assets: these are niche markets such as investment in luxury watches, in crypto currencies, in fine wines or in commodities such as gold, wheat, oil .
Before boosting your savings, it is a good idea to take an interest in the subject to deepen your knowledge, and to do a balance sheet or an asset audit with a specialist advisor who will be able to guide you, even monitor your investments and take care of the management of your wallet every day.