This weekend the clocks go back an hour, giving the illusion that we’ve gained an extra hour’s sleep, when all that’s really happened is an hour of daylight has moved from the evening to the morning.
We can’t escape the effects of time. Sometimes we think we can control it - we talk of killing time, saving time, losing time or having all the time in the world. Yet we can’t slow it down or stop it altogether.
However, with investing, time is a great tool we can harness to our advantage. Over time, regular investments, however small, can build into a sizeable lump sum thanks to the power of compounding.
Compounding can simply be described as earning interest on interest. This is great news for savers, but bad news for borrowers. So, if you’re only paying back the minimum amount you need to on your credit card each month, the interest compounds and the debt becomes bigger.
However, when it comes to saving or investing, the benefits of compounding are passed on to you. You just need to give it time to take effect. So, whether you’re planning your first investment, or know deep down you really need to be saving more to achieve the lifestyle you want in retirement, there’s no time like the present to get started.
Of course, there’s always a reason not to save but if you take a step back and look at your spending it’s amazing how easy it is to fritter your money away on non-essentials.
They say “take care of the pennies and the pounds will take care of themselves” and it’s true. So maybe now is the time to review your spending, if technology is your thing there are some great apps out there that will show exactly how your money is spent. Are you really getting your money’s worth from that gym membership? Do you really need that coffee and muffin before work?
You just need £50 per month to start saving in a tax-efficient ISA, so you don’t need a large lump sum to begin with. The key is to get into the discipline of saving. Direct debits are a great way of ensuring the money leaves your bank account before you have a chance to spend it and when pay rises come, try to increase the amount you save so it always feels affordable.
If you’re young retirement may be the last thing on your mind, but saving for your retirement in your 20s and 30s, when time is on your side, can make a huge difference compared to someone starting later on in life.
How do you really feel about investing?
In our latest video series Invest for Life we’ve asked real people to share their own stories about how they started investing and what they have learned along the way. Some started early, others later in life. Some found it quite daunting, others had to make sacrifices to get into the discipline of saving. Each have their own tale to tell as they navigate their way through the ups and downs of life.
In this episode the investors share how they got started.
The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment on ISAs depends on individual circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
What you could do next
Explore regular saving
Making regular monthly contributions to your investments as part of a savings plan could help them grow into a sizeable sum over the long term.
Get help choosing investments
Whether you need a lot of help or a little, we have the right tool to help you find an investment.