Experts suggest that everyone should have a financial cushion that is at least three times the person’s salary1. These are rainy day remedies that will come in handy when you lose your job or unforeseen expenses arise. Once you have accumulated funds, it is worth multiplying them by investing so that they increase in value. What is saving? What are the ways to invest money? Check out what the best forms are.
Saving – definition
The Central Statistical Office defines saving as the ability to keep all or part of the money earned in order to use it in the future1. In short, it is money management so that you don’t spend it all.
The economic situation in Poland is not conducive to saving. According to the Central Statistical Office, inflation in February 2023 amounted to as much as 18.4%, which is how much prices increased on average compared to the same month last year2. Salary increases have not kept up with inflation, which means that you can buy less and less with your salary.
The problems of Poles with saving money are confirmed by the results of the survey “Saving Poles in inflation” conducted by the National Debt Register. It turns out that at the end of 2022, as many as 70% of Poles had problems with accumulating funds. One in three Poles has not increased their savings in the last six months. Half of them had spare funds, and 40% of them had to reach for them to cope with the ever-increasing prices3.
The more you are able to save, the better. Try to do this even if you manage to save a small amount per month.
Investing – definition
Once you have savings, you can manage them. Do you know what investing is? It happens that Poles use this term as a synonym for saving, and this is a mistake. The definition of investing indicates that it is investing funds in order to increase them. Let’s assume that you have PLN 100,000 of money set aside. You decide to buy, for example, the euro currency to make a profit when its exchange rate increases. Investing does not mean that you will definitely make a profit. It is associated with risk – you can lose some or even all of your funds.
What is the difference between saving and investing?
You know what investing is all about. So how is it different from saving? When you put money aside, you don’t take any risks. You can have the funds in a bank account, deposit or savings account. In either case, you can be sure that you will not lose them, but their value decreases as a result of inflation. This is where investing savings comes in. You can invest spare funds to make a profit. You save effectively when you protect your funds from loss of value. On the other hand, the result of good investing is the multiplication of money.
How to invest savings?
You can choose different forms of saving and investing. How to use the funds to protect them from losing value and at the same time not risk losing capital?
First of all, don’t keep cash at home. This way you will not protect it from reducing purchasing power, and besides, the money will not be safe.
You may think that the risk of burglary does not apply to you, but in 2022 there was an upward trend in such events. In Mazovia alone, from the beginning of the year to the end of November, there were 874 burglaries to apartments. This means a result 40% higher than the year before4.
The funds should not go to an interest-free account – they also lose value on it. Consider:
Term deposits – you can deposit a certain amount for a fixed period. After this time, your account will be credited with capital plus interest. Currently, you can earn even more than 8%, but you have to subtract the capital gains tax, which is 19%, from the result. Currently, the deposit does not protect funds against loss of value due to high inflation.
Savings account – open such an account and you will earn more or less as much as on a term deposit. What is the difference between these products? You can usually withdraw funds from a savings account – they are not frozen, so you can reach for them if necessary.
Treasury bonds – they are secured by the State Treasury. You don’t take the risk – you buy and earn. In 2022, a record for the popularity of these securities was set. The State Treasury sold Treasury bonds worth PLN 57.1 billion, which is 32% more than in 20215.
IKE and IKZE – thanks to these products, you can save funds for the future and benefit from tax preferences. You can deduct payments to IKZE from your income, i.e. the tax base. On the other hand, you will not pay capital gains tax on your earnings from IKE. In both cases, you must meet certain conditions.
Of course, this is only an introduction to how to invest and multiply your savings. You can choose different forms. Which ones are worth betting on?
How to invest and multiply savings?
Are you wondering what is the best way to invest your money in? Remember that there are always risks involved. Therefore, do not invest if you are not familiar with a particular industry or financial products. Various forms may tempt you with the prospect of high earnings, but first, learn more about them.
Prepare to invest – you don’t need to have a lot of capital. A small amount is enough. If you are starting out, allocate a certain part of your savings, and preferably try to invest virtually, do not risk money. After some time, check what result you would be able to achieve.
What to invest small amounts in? You have various options – you can manage larger sums in the same way. Consider:
Investment funds – your funds are managed by a team of specialists. You don’t have to do it on your own. An example is the TFI funds from our offer, thanks to which you can achieve a high profit in the long term.
Currencies – they can bring very high profits, but also take into account a high risk. According to the Polish Financial Supervision Authority, in 2021, as many as 72% of investors suffered a loss on the Forex market6.
Insurance with savings – thanks to this product, you have a life insurance policy and put money aside in unit-linked funds. These are funds that you can use for any purpose in the future. Choose which funds you want to invest in depending on the level of risk you accept and the expected returns.
Shares – i.e. trading securities. If you buy them, you have shares in the company. Your bottom line depends on how the stock price will move.
Do you want to invest? Remember that you always bear the risk and you have no guarantee of achieving your goal. Before making a final decision, carefully read the prospectus of the fund in question and the key information document