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Mindful savings for starters
26 Jul 2019
If carpe diem and living life to the full is your mantra and you perceive saving as foreign to your nature, then you form part of a large cohort of people who think like you.  

Local research studies suggest that a considerable chunk of society continue to postpone long-term savings plans indefinitely, even though the majority are fully aware that they will not be able to maintain their current lifestyle solely on their state pension. Saving for tangible items such as holidays or cars may easily be visualised and actioned upon, whereas saving for the longer-term or for the unforeseen becomes more complex for most of us.  The multitude of diverging ideas and opinions continue to boggle and confuse, further prompting would-be-savers to put their savings planning on hold.   

Let’s bust three diffused myths about savings and investments.

Myth N.1 – “Now is not the right time.”
Unless you hit the jackpot, there’s never a time when you will have so much extra money to invest. When you’re young you will typically have low disposable income and a series of goals that you wish to achieve to mark your independence, such as branded clothing, travel, a car and perhaps a deposit for an apartment. With such a tall order, it is easy to discard any long-term saving ideas, thinking that you will come back to such considerations after you achieve your short-term goals. This is precisely the issue why people end up retiring with no supplementary income to their state pension. By the time you upgrade your lifestyle, buy a decent car and furnish your apartment you’ll normally be in your early to mid-thirties. Add kids, more frequent travel and car upgrades to the equation and before you know it you hit retirement age, and after a lifetime of trudging to work every day, you’d rather enjoy each day rather than invest your money. If you’re finding this hard to believe, have a chat with someone in their late fifties. 

Plan ahead by starting a consistent savings plan, as early as possible. With a few Euro a month, you can start off a pensions plan and you may even benefit from Government tax rebate incentives. 

Myth N.2 – “I will never understand how Investments work.”
Whether you’re naturally inclined to financial matters or not, you still need to manage your finances throughout life. It is a matter of necessity rather than choice. Any responsible adult will need to pay bills, put food on the table, give kids a good education and save for a rainy day. Our aptitude for finances varies from person to person but we read, we talk, we listen, we discuss, we learn and we adapt our lifestyles to match our objectives. If investments are too laborious for you, browse reputable websites to gain insight. Attend educational sessions, read thought-leadership articles on local and foreign media and seek ways of broadening your knowledge. Yes, the jargon is daunting, the array of investments is never ending and the complexity ranges from plain vanilla bonds to complex instruments that are aimed for selected professional investors. 

If it gets too much, choose a financial advisor who will guide you in your investment or savings journey.  

Myth N.3 – “Investments are risky and the returns are low anyway.”
This is the typical line of reasoning for those who focus primarily on short-term returns. The return on investment instruments is commensurate to the risk they carry. The reason why a savings account pays a very low interest rate is because it carries a low risk and you can withdraw your money at any time. The (possible) return is influenced by the duration of the investment, how easy it is to sell (supply and demand), initial investment amount (some investments such as real estate require a considerable lump sum) and the risk it carries, linked to future uncertainty.  We all have different acceptance levels for risk and therefore some people might be willing to risk more than others. Irrespectively, a solid investment strategy is built on a diversified mix of investments with various investment instruments, possibly in different geographic locations and in different currencies. 

Don’t look only at the short term – design a diversified investments portfolio with your financial advisor. Regular meetings with your financial advisor will ensure that your investments portfolio is adjusted to keep in line with your risk appetite and changes in your circumstances. 
If you would like to discuss your financial planning requirements, set up an appointment with one of BOV’s Financial Advisors, are invited to contact the Branch or Investment Centre of their choice or the BOV Customer Service Centre on 21312020 or [email protected]

This article was first published on the Sunday Times of Malta on 14th July 2019 and written by Daniel Magrin. 
Daniel Magrin works for Bank of Valletta at Market Intelligence unit and is actively involved in business strategy, research and data analytics. 

This article is not and should not be construed as an offer or recommendation to sell or solicitation of an offer to purchase or subscribe for any investment or pension plan. The writer and the Company have obtained the information contained in this document from sources they believe to be reliable but they have not independently verified the information contained herein and therefore its accuracy cannot be guaranteed. The writer and the Company make no guarantees, representations or warranties and accept no responsibility or liability as to the accuracy or completeness of the information contained in this document. They have no obligation to update, modify or amend this article or to otherwise notify a reader thereof in the event that any matter stated therein, or any opinion, projection, forecast or estimate set for the herein changes or subsequently becomes inaccurate. Furthermore, past performance is not necessarily indicative of future results. The value of investments may go down as well as up and may be affected by changes in currency exchange rates. 

Terms and conditions are available from www.bov.com. Issued by Bank of Valletta p.l.c., 58, Triq San Zakkarija, Il-Belt Valletta VLT 1130. Bank of Valletta p.l.c. is a public limited company regulated by the Malta Financial Services Authority and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap.371 of the Laws of Malta) and the Investment Services Act (Cap.370 of the Laws of Malta).
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Bank of Valletta p.l.c. is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap.370. of the Laws of Malta).