World Savings Day, first established in 1924 by the World Society of Savings Banks during the 1st International Savings Bank Congress to encourage people to save money and put it into banks for safekeeping, is celebrated annually on October 31st.
This observance serves as a reminder that responsible financial planning is absolutely essential for a prosperous future, and while saving is important, investing can be just as crucial for a secure financial strategy, especially during times of market instabilit
The Urgency of Financial Planning
In a world where economic uncertainties loom large, the urgency of financial planning cannot be overstated. Many individuals find themselves caught in a perpetual cycle of living paycheck to paycheck, andaccording to Eurostat, the EU’s statistical office, 22% of the population across member states, is at risk of poverty or social exclusion.
Strategic financial planning can help prevent unneeded instability. It encompasses various aspects such as: creating a budget, tracking expenses, and saving for the future. By setting aside a portion of your income regularly, you create a financial safety net that can help you weather unexpected expenses and changes in circumstances. However, saving alone no longer seems to be sufficient, especially nowadays.
Saving vs. Investing
What are the differences between saving and investing? And what are the advantages and disadvantages of the two strategies?
Saving: Saving involves putting money aside in a secure, easily accessible account such as a savings account. The primary objective is to preserve the capital and maintain its value. Savings are typically low-risk on a short-term basis, but they often offer limited returns. Especially in times of low interest rates and a high inflation rate, the money saved can even lose purchasing power over time.
Investing: On the other hand, investing entails putting your money to work. It involves allocating funds to various assets, such as stocks, bonds, real estate or tangible goods. The goal of investing is to make your money grow over time, surpassing the inflation rate and generating a return on your investment. While investing carries more significant risks compared to saving, it can offer the potential for higher returns and long-term wealth accumulation.
One of the main ways to avoid the risks associated with traditional investment is portfolio diversification.
The Importance of Diversification and Tangible Assets
Diversifying your investment portfolio is a shrewd strategy, and research from Vanguard, a leading investment management company, reveals that diversification can reduce “exposure to unnecessary risk.”
Collectibles, ranging from art and antiques to rare coins and vintage cars, offer unique opportunities for diversification. They have the potential to appreciate in value over time, often independently of traditional financial markets. The Knight Frank Luxury Investment Index (KFLII), which tracks the performance of various luxury asset classes over a 10-year and 12-month period, rose by 7% in the last year, while art as a category saw a 30% price increase, and watches and jewellery increased by 10% (as of October 2023). Here are some of the other benefits of investing in tangible assets:
Resilience During Economic Downturns: Collectibles often maintain or appreciate value during economic downturns, providing a reliable hedge against market instability.
Historical and Cultural Appreciation: Items like art, antiques, or rare collectibles possess an intrinsic value, and investing in them often represents an investment in our own shared cultural heritage.
Potential for High Returns: Certain collectibles, like rare artwork or vintage cars, have the potential to yield high returns over time, often surpassing the growth rates of traditional investments. (Discover here what returns our exits achieved).
World Savings Day: Take financial planning into your own hands
As World Savings Day underscores the urgency of financial planning in our uncertain economic climate. Saving is the initial step, but a strategic approach that includes diversification and tangible assets also offers exciting potential. Financial planning is crucial for a prosperous future and should be tailored to individual goals, risk tolerance, and interests.
World Savings Day reminds us to take proactive steps toward financial security, shaping a prosperous future. Whether you choose conventional investments, alternative assets, or a combination of both. World Savings Day can serve as the perfect catalyst for securing your financial future, and with Timeless you can expand your portfolio and participate in the development of unique assets.
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