Regular Savings - Making you save
By Stephen Lansdown | 04 Mar, 2008
There have been many articles written on the merits of regular savings particularly highlighting the benefit of pound cost averaging. In other words because you are saving every month you buy some units at a high price, some at a low price but the average price tends to be reasonable over the life of the savings plan. I however think that the main benefit of a regular savings policy is that it just makes you save.
How many of us think it would be a good idea to put money aside each month but never get round to doing it? A regular savings plan does this automatically for you and therefore does not allow you to forget or choose to do something else with the money.
The other day a life assurance savings policy which I took out some 20 years ago matured. As with many life assurance policies the investment returns were not as great as perhaps I might have got elsewhere but the fact that I had religiously paid in £50 a month for 20 years i.e. £12,000 in total still saw a lump sum of £23,000 coming back now, a return of around 6% per annum during that period. It was a nice surprise.
In volatile times such as we have now regular savings become far more attractive because there is a reluctance for investors to commit too much too soon to markets they are unsure about and prefer to phase their investment into the markets. The real benefit however only comes through if you continue to save and regular savings make you do that!
