National Savings Day 2024: A guide for investors

Staci West 11/10/2024 in Basics

Saving money is essential, no matter where you are in life. Whether it’s for retirement, helping your child through school, or building a cushion for emergencies, everyone benefits from having some financial security. National Savings Day, celebrated this year on October 12, is a perfect opportunity to review your savings habits and learn how to improve them.

Why you should save

As the cost of living continues to rise, it’s crucial to have money set aside. Inflation reached 11.1% in October 2022, a 40-year high, though it has since eased*. Inflation affects everything, from groceries to utility bills, making it harder to stretch your paycheque. Even as inflation slows down, prices are still rising, just at a slower pace. To keep inflation in check, the Bank of England raised interest rates, which now sit at 5%. While this has been tough on borrowers, it’s good news for savers, as many banks now offer interest rates as high as 5.2% on savings accounts.

As we write, in early October 2024, the best easy access savings accounts are offering 5.2%, according to data compiled by Moneyfacts**. Of course, many people haven’t been able to take advantage of these opportunities as the rising costs of products and services has caused a financial strain.

If you haven’t started saving yet, now is a great time to take advantage of these higher interest rates.

How much should you save for retirement?

One popular method is the 50-30-20 rule. This suggests you spend 50% of your income on essentials, like rent or mortgage payments, 30% on non-essentials (such as dining out), and save 20%. Even if you start small, consistent savings can add up. For example, saving just £10 a month adds up to £120 a year, and interest will help that money grow even more.

But how much is enough? Financial experts recommend having at least three months’ worth of living expenses saved in an easily accessible account. This acts as a financial safety net for unexpected expenses, like a broken car or a surprise bill.

Investing for the long term

While saving in a bank account is a safe option, long-term goals like retirement often require a different approach. Investing in the stock market can potentially yield much higher returns than a savings account, though it comes with more risk.

For example, The Pensions and Lifetime Savings Association publishes annual estimates for ‘retirement living standards’ at three levels of income: ‘minimum,’ ‘moderate,’ and ‘comfortable.’ Its estimates for 2024 found that a single retiree would need a minimum annual income of £14,400, rising to £31,300 and £43,100 for the moderate and comfortable retirement lifestyle. These numbers are higher for couples in retirement***.

Today a 65-year old in England could expect to live on average to almost 84 if they’re a man, while if they’re a woman they could expect on average to live to 86^. Assuming they retire at 65, this means men and women can expect 19 and 21 years respectively in this phase of their lives. Using the moderate annual level, this means the average male would need £594,700 and the average female would need £657,300 in retirement.

To live comfortably, the average couple living 20 years in retirement would need an income of £59,000 a year*** – that is almost £1.2m in total.

Minimum annual incomeModerate annual incomeComfortable annual income
Single person£14,400£31,300£43,100
Couple£22,400£43,100£59,000

Getting started with investments

The good news is there’s no shortage of investment funds. The ideal solution will depend on your requirements and attitude to risk.

With bonds yielding attractive returns once more, I’d look to the likes of a strategic bond fund like Jupiter Strategic Bond fund or the TwentyFour Dynamic Bond fund. Both can invest across all types of bonds and – in addition to the attractive yield – offer the potential for capital growth.

Assuming your investment would need to last two decades, an element of growth will be essential. For this I’d look to global equities with a fund like JOHCM Global Opportunities. The philosophy of this fund is ‘heads we win, tails we don’t lose too much’, with the manager happy to hold large cash positions if necessary. Those preferring to invest closer to home might consider the Artemis Income fund, a high-conviction portfolio of UK stocks, targeting a rising income and capital gain.

If you’re looking for something a little different, then the Cohen & Steers Global Real Estate Securities fund could fit the bill. This investment house is the industry leader in real estate securities. We believe the resources and experience of the team can deliver a repeatable, sound process.

Those looking for a multi-asset solution might consider the VT Momentum Diversified Income fund, which aims to produce a high level of regular income, with the prospect of preserving the real value of capital over the long term. Co-manager Richard Parfect told us more about how the portfolio is constructed for income generation in a recent interview.

Saving is the foundation of any good financial plan, whether you’re setting aside money for emergencies, planning for retirement, or looking to grow your wealth through investments. National Savings Day 2024 is a reminder to assess your financial habits and start building a more secure future. Even if you’re just getting started, every little bit helps. By understanding your options and making small, consistent efforts, you can set yourself up for long-term financial success.

*Source: House of Commons Library – Rising Cost of Living in the UK, 22 September 2023
**Source: Moneyfacts, October 2024
***Source: Retirement Living Standards, October 2024
^Source: Aviva: How long will retirement be?, 19 December 2022

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions.Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice.Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.