3 reasons why regular saving still makes sense

IT may be a new year, but that doesn’t mean last year’s challenges are behind us. Interest rates are at a 17-year high and with inflation still a way off the Government’s 12% target¹, they may stay higher for even longer than expected.  

When the outlook - on the face of it at least - feels bleak, investing might feel counter-intuitive. Especially as some fixed term saving accounts are offering 5% returns² (which is now ahead of inflation). But with inflation expected to be around for a while yet, investing could give your money the potential to grow over time 

It’s one of the reasons I’m staying invested. I’ve got a youngish family, so I’ve got my sights set on the long term and I’m looking out for my children’s best interests as well as my own. What I find makes investing feel more affordable is saving regularly. By investing a little and often I know - just by looking back at my savings over time - that it can make a real difference. 

Here are three more reasons why saving regularly makes sense…  

Helps you avoid trying to time the market

Every bone in your body might be calling out for you to sell your investments when the markets fall, but if you do this, you’ll only lock in any losses you’ll have made. By saving regularly, you’ll avoid the temptation to try and time the market, which is something even the experts find hard to do. And this is because you need to second-guess the markets twice to successfully pull it off - once when the markets bottom out and once when they’re at their peak. 

Allows you to take advantage of pound cost averaging

By regularly investing you benefit from something known as pound cost averaging. This may sound complicated, but it’s really not. Invest the same amount regularly each month and when prices are low your money will buy more than when prices are high. The idea is that over time the price you pay evens out as the markets rise and fall. 

Takes the emotion out of investing

It’s said that fear and greed are the main drivers of the markets. And that investors feel the weight of losses greater than they do gains. A regular savings plan can take the emotion out of investing as once you’re set up you can step away and leave your investments to it; though it’s important to remember that the value of investments can go down as well as up, so you may get back less than you invest. 

Then it’s a case of staying invested and holding your nerve - keeping your sights set on the long term and sticking with an investing strategy that aims to help you to meet your goals. It’s worth investing even when it feels hard to, especially if you’ve got time on your side. 

Sources: 

¹ Inflation and the 2% target | Bank of England 

² moneysavingexpert.com January 2024