Saving Needn't Mean 'a V sign'

 There was a time when 'saving' for me really did equate to the above anagram, something so unspeakably dull and depressing that piggy banks existed purely to get smashed open.

I now realise that my former disdain for saving, whilst largely misplaced, was not entirely so, though for very different reasons than the rather short sighted examples given above.

Conventional wisdom (ever read one of the Alvin Hall books? Now he is conventional) had it that you saved 10 per cent of your income, regardless of what that was, presumably on the grounds that this was do-able for even the most weekend-oriented of people and, in due course would result in a nice little nest egg instead of  an unmarked plot on the edge of town.

Still, not very exciting. And it overlooks the fact that you can get taxed on savings. Furthermore, the continual erosion of the value of all the currencies is such that in real terms your savings can often be dwindling faster than you'er accruing them; that's before we even get on to pensions, which are often linked to the stock market, which we're advised always goes up, but in fact has an annoying habit of coming down at inopportune times. Since putting money on the likelihood of something improving over time is really gambling, you might be better off doing just that on a regular basis, it'd be more enjoyable anyway.

The best approach to this rather demoralising subject I've come across is this: get yourself not one, but rather three piggy banks (literally if you wish). One of them can be marked 'savings'. After all, it's no bad thing to have a little tucked away for a rainy day, something you can get your hands on quickly if need be.

Number two piggy bank is for 'tithing' in other words, giving to charity. If you're of a religious bent that could be through the organised religion you subscribe to; indeed alms-giving, zakat, is I understand one of the five pillars of Islam. If you're not, just give to a charity of your choice. I don't believe that there are many people out there who genuinely believe supporting a charity, provided it's done quietly without too much fanfare, and there may be some instant karmic benefits of forgoing a good chunk of your money.

Then the third one is for investing. Investing in something is where the fun really starts. Not for capital gains, that's gambling as already noted. But for income. Put some money in an investment trust for example, you should get some dividends on a regular basis (not a lot though). This is where you actually start to make money rather than share it or let it lie dormant.

Real estate is a big one for a lot of people and yet there are so many amateurs out there, I should know, I've been one until recently. But if you pay attention to your portfolio and live somewhere where you can have control over the properties (i.e. not in another country where you have to give fifteen per cent of the takings to an agent before anything even happens, then it's sixty quid every time a light bulb needs changing); even if you're not a DIY person (I'm not) you may know someone who knows someone who is...

Setting up a business is often seen as the only way to riches, at least by those that have successfully done it, but again that's not for everyone, the hard work, frustration, fact that nine out of ten businesses fail in the first five years apparently (so just set up ten businesses!). Buying a business that's already established at least takes away some of that effort and you can see from the recrods what's been going on there.

These last three are all for income, not capital gains but if you really share the contemporary obsession for the latter, why not go for silver; although its price can be quite volatile, it may continue to rise (for example it was 12 USD and ounce a year ago, and these days is fluttering around the 17-19 USD mark) whereas gold, as well as being much more expensive, is currently disproportionately high compared with silver, historically speaking (about 64:1 compared with the historical average of 47:1). In fact the PMC posted at length about this some months ago, so we ought to preach at the level at which we practice here!

Finally, how much do you put in? Many people are going to grate at giving ten per cent of their money to someone else (in the case of tithing) and even for saving and investing. The answer is to start small. You don't have to set aside fifty per cent of you take home pay and never go out again. You could start off with just one kroon, dollar, pound etc a day, or even less if you want, most people could probably manage that. What may happen over time is that it becomes habit forming, and that small amount per day gets bigger and bigger, in each of the three piggy banks, and, hey presto, one's presence on this planet suddenly has some kind of justification.

Disclaimer: the PMC knows nothing at all about personal finance and was merely thinking out loud with this piece.