We all know that we should “Start Saving” as early as possible, yet many of us put it off!
For many expatriates, building an investment fund in a foreign country may appear difficult. Rest assured, it isn’t and the benefits are often far greater than what they are when you are investing back in your home country.
Often you will be eligible for TAX FREE growth.
As an established financial advisory firm, Hampton Bridge understands the unique challenges you face!
Our mission? To guide you towards achieving your financial dreams and to make you aware of the benefits of saving and investing no matter where you live or where you call home.
With the rise in globalisation, more individuals are looking to live abroad, and the expat community is growing every day as people continue to work remotely.
As an expat, ensuring financial freedom in a foreign land requires a solid financial safety net. At Hampton Bridge, our primary advice is to start saving as early as possible.
Whether you’re considering buying a house, planning your retirement, or just wanting to lead a comfortable life, let us lend a hand.
Why Start Saving Now: The Power of Compounding
Start Saving Early is a phrase echoed by financial experts from every corner of the globe.
The reason? Compound interest: “The 7th Wonder of the World” – Albert Einstein
As your investments earn returns, those returns earn their returns in subsequent years. Thus, even a modest contribution early on can balloon, especially if you are starting to save for long-term goals like retirement.
Your Journey to $1 Million Starts Here
The journey to saving $1 million may seem like a massive task, but with consistent efforts, discipline, and the magic of compound interest, reaching this milestone is far easier than you might think.
At its true simplicity, the longer you save and invest, and the higher the rate of return, the more substantial your investment will be.
Let’s look into four examples showcasing the power of savings and compound interest over time.
Imagine you invest your money in an account that pays you an annual return of 5%. If you are aiming to save $1 million over ten years, how much will you need to save each year?
10 Years Savings at 5% Growth
You will need to save approximately $81,752.56 annually for 10 years with a 5% annual return to reach $1 million.
10 Years Savings at 8% Growth
Now, what if your investments yield an 8% return annually? Keeping the same 10-year frame:
At an 8% return, you’d have to save around $68,489.49 annually for ten years to reach your goal.
20 Years at 5% Growth
Stretching our horizon to 20 years with a 5% annual return:
For a 20-year timeframe at 5%, you’d have to save approximately $33,258.26 annually to hit your $1 million goal.
20 Years at 8% Growth
With an 8% annual return over 20 years:
You would need to save about $21,699.02 annually for 20 years to become a millionaire.
Now imagine if you start saving at 25 years old. You could feasibly be a liquid millionaire by the time you are 50!
Key Takeaways on Compound Interest
Starting your savings journey early and understanding the incredible power of compound interest can make seemingly impossible financial goals achievable.
Whether you have a 10-year, 20-year or 30-year horizon, the rate of growth that you achieve will significantly influence how much you need to save annually or monthly.
Receiving the correct advice from the right company, with a trusted advisor to help steer the ship in the right direction by helping you invest in a good, flexible plan and then picking the best investments to go inside the plan, is crucial for your success.
As the stark reminder of the savings rates above suggests, it’s never too early to start saving.
Even if you can’t commit to an amount you would like to save now, saving something is better than saving nothing. You don’t have to have everything in place on day one.
Your investment plan is an ever-moving piece that will change with you as your life and career change. There will be good times when money is available and more difficult times to save, when children, relocation and career changes appear.
With discipline and over time, the magic of compound interest will help your savings grow, inching you ever closer to your financial goals.
Where Can I Gain an 8% Return Year on Year?
Finding the right investment product that invests in a broad range of assets, is what every smart investor should be trying to achieve. Everyone should be trying to build a fully diversified portfolio across all of the asset classes.
You should be doing the same.
Let’s break this down: Simply, it means spreading your money across as many places as possible, stocks, property, commodities, alternatives and so forth, in lots of different, solid, high-performing investments. The famous old idiom “Don’t put all your eggs in one basket” is one of the most important rules to follow.
You won’t always be able to pick high-performing investments all of the time, but over the medium-long term, most good advisors will be able to invest most of your capital into assets that perform to a high enough standard to help you reach your goal.
Please read our Blog Post article on: “Monthly Savings Plan: Are 8% Returns Possible?“
What are the Main Asset Classes?
At Hampton Bridge, we always tell our clients, “Only invest in things you understand”.
We believe in understanding the foundational elements that shape your investment landscape.
One of the fundamental concepts to grasp is the “categorisation of investments” into “Asset Classes.”
Let’s explore the main asset classes that you will encounter as you embark on your savings and investment journey.
1. Equities (Stocks & Shares)
When you invest in equities, you are essentially buying a share of ownership in a company. Stocks represent a claim on the company’s assets and earnings.
Equities are generally considered high-risk, high-reward investments if you buy them individually. We always suggest you utilise products like Mutual Funds or ETFs, which pool together hundreds of stocks & shares into one investment product.
Some funds or ETFs invest in all of the asset classes listed below. This style of investment enables you to minimise your risk exposure as much as feasibly possible.
With these types of investment products, you can track different stock market indices, such as The S&P 500.
Index tracking has become a popular investment strategy due to its low fees and steady returns.
2. Fixed Income (Bonds)
Bonds are IOUs issued by governments or companies to raise capital for large projects.
When you buy a bond, you’re lending money to the issuer for a predetermined period, usually 1-10 years. In return, the borrower agrees to pay an annual interest and then return the principal to the investor at the bond’s maturity.
Bonds are typically less risky than stocks and provide a steady income stream, making them suitable for more conservative investors.
Because a Bond is considered a low-risk asset and produces an income, this type of investment is perfect for someone in their retirement.
3. Real Estate
Real estate investing is one of the most common investment avenues, but it also can be capital-intensive and time-consuming.
To access this asset class typically involves investing in physical property, a property fund or REIT. You can invest in residential property, like houses or apartments, or commercial, like office buildings or shopping malls. REITs and Property funds may invest in both commercial and residential.
Real estate offers investors both a rental income and capital appreciation on the rise in the price of the property. While physical real estate can provide excellent diversification to a portfolio, it is far less liquid than stocks or bonds.
At some point in our lives, we all invest in real estate. It is considered a good, solid, sturdy investment, but you must choose wisely. Real estate investing can be a painful and exhausting experience if the property is not a good fit for your investment portfolio.
Please read our guide to “Investing in Overseas Real Estate: An Expat Investor’s Guide“.
Commodities are raw materials or primary agricultural products that can be bought and sold freely on the stock exchange.
Examples include coffee, gold, oil, and wheat.
Investing in commodities can be a way to hedge against inflation and help diversify your portfolio. The prices of commodities can be influenced by global economic and political events, supply and demand dynamics, and currency strength, so it is important to keep up to date with current affairs. The most current example of this is the energy and cost of living crisis due to the war in Ukraine in 2022/23.
Commodities are considered high-risk, so we suggest pooling them together in a single investment and purchasing them through a Mutual Fund or ETF to spread your risk.
5. Cash and Cash Equivalents
This class includes assets that can be quickly converted into cash without a significant change in value. Examples are money market funds, short-term government bonds, and bank certificates or deposits.
These are considered low-risk, low-return instruments suitable for investors prioritising liquidity and capital preservation.
6. Alternative Investments
This category of investment is comprised of non-traditional assets, including hedge funds, private equity, and collectables, like art & wine.
Alternatives offer diversification benefits but may also come with higher fees and reduced liquidity. They are more difficult to understand compared to traditional asset classes.
Be careful when investing in alternatives as they are often complicated and may not appear what they seem at the outset. Please read this article for a more detailed and informed opinion: “Unmasking the Risk: A Deep Dive into Alternative Investments and Their Pitfalls“.
Wrapping Up: Asset Classes
Understanding the distinct characteristics and behaviours of each asset class is fundamental for constructing a balanced and diversified investment portfolio.
As you start on your savings journey, remember that the right mix of asset classes can help you achieve your financial goals while managing risk in alignment with your investment horizon and investment and appetite for risk.
Ways to Start Saving: Tips and Techniques
- Start Saving Money with small daily habit changes, like brewing your coffee at home or choosing to use cheaper local markets. You’ll be surprised how these start-saving tips can lead to significant gains over time.
- Best Methods to Start Saving
- Open a dedicated start saving account. Look for banks offering competitive rates. Many investors consider, “Which bank offers the best start saving account?” Hampton Bridge can help guide you through the decision-making process.
- Automate your savings. Schedule monthly transfers. Over time, you’ll adjust to living without your previous spending levels.
- Launch Your Savings Journey by opening a financial savings account. It is important to set clear goals when you start saving. Whether you aim to start saving for a house or are simply looking to boost your emergency fund, defining your objectives is the first step.
Why Start Saving for Retirement Now
Many expats overlook retirement planning. Yet, starting saving for retirement early gives your money more time to grow and allows for the long-term effects of compound interest.
Dive Deeper into the World of Savings
- Start Saving Accounts: Make the right choice. Expats often question, “Which bank offers the best start saving account?” Your choice depends on fees, interest rates, and international access. Research is key.
- Apps and Tools to Initiate Thriftiness. In the digital age, are there apps to help start saving money? Absolutely. Many apps round up your change or automatically transfer small amounts to savings.
Frequently Asked Questions (FAQs)
What are the benefits of starting to save early?
Besides compound interest, early savers often develop better financial habits and have a clearer understanding of their goals.
How to start saving from a young age?
Encourage habits like setting aside part of their allowance or gifts. Investing even small amounts can teach the importance of savings.
Which bank offers the best start saving account?
It varies by region and personal needs. Always compare fees, rates, and services.
How much should I start saving for retirement?
Ideally, 10-20% of your income. However, this varies based on age, goals, and current savings.
Are there apps to help start saving money?
Yes, many apps help in budgeting, rounding up change, and tracking expenses.
Final Thoughts: Commencing Monetary Conservation
To “Start Saving” is more than just a phrase, it is a commitment to a new way of life.
A mantra to your future, to financial independence for you and your family so you can make the most of your expatriate journey. With the strategies outlined above, from beginning financial savings to exploring ways to start saving, you are now equipped to launch your savings journey.
Remember, Hampton Bridge is here to guide you. Whether you are trying to start saving for a dream vacation, a new car, or ensuring a comfortable retirement, let’s embark on financial planning together and secure your financial future.
The importance of saving cannot be stressed enough, especially for expatriates who face unique financial challenges. At Hampton Bridge, we can help guide you on this journey.
The time to start saving is now.
Secure your future, fulfil your dreams, and achieve financial freedom with the right savings strategy.