In many cases, little attention is paid to the future, and people live from day to day without considering that their retirement will come. Most people think that saving for the future is a matter that the State should resolve, and they forget to set their own financial goals. Thus, they reach retirement with very few resources to maintain their standard of living.
For this reason, it is essential to increase our financial knowledge, identify the different savings and investment options, which will be the beginning to encourage the interest in acquiring preventive financial education. Financial education encourages the growth of wealth in families and trains people to be financially responsible.
Reasons to save for the future
There are different reasons to save for the future. The following are the most common:
- Acquisition of a home
- Emergency funds
- Retirement fund
We can secure our financial future by taking the following basic steps.
- Savings. We must save what is necessary for our future, making a plan that allows us to achieve our goals when we decide to suspend our productive activities.
- Set goals. Long-term goals are those that you want to achieve in five or ten years. The goal becomes something tangible, which helps you maintain the discipline of saving. For example, buying a house, studying for a degree at university, your children’s wedding, the amount required to retire, and any other financial goal you set for yourself.
- Start saving: After setting savings goals, it is necessary to consider that the first step will be to accumulate sufficient funds to cover living expenses for several months in case of an emergency. It is also important to consider how the fund will be managed since a savings account allows easy access to money but, in many cases, does not offer greater productivity for our economy. Therefore, investment tools can provide greater advantages to increase our assets.
- Making time work in our favour: Starting to save preventively is essential when we are young. Saving for twenty or thirty years for our retirement is not the same as starting when we are only a few years away from that moment. It is clear that the later we start, we should allocate a greater percentage of our income.
- Investing for the long term: It is advisable to use long-term investment strategies, as this will surely offer a greater financial return on our money.
- Direct deposit for savings. It is often difficult to maintain the discipline of saving. To help us achieve this recurring saving, we can rely on a service provided by banks, in which they withdraw from our payroll deposit the amount we wish to save. The next step is to deposit that amount directly into our investment account.
- Budget: We must prepare and stick to a budget. This provides the financial information that is essential to understanding our financial situation. This way, we can know the income we receive, the amount we have in financial obligations or debts, and how much we can save.
- Keep an accurate record of all expenses during the month: It is necessary to keep a daily record of our expenses so that at the end of the month, we can review the list and see where we can start saving and allocate that money to the investment account.
- Emergency funds: It is necessary to ensure that basic savings are deposited in a conventional savings account, that is, an account that allows immediate access to funds without penalty in case of emergencies.
- Seek advice: A financial professional can help you choose investments and implement your financial plan. Before selecting an advisor, you should interview several professionals, which will help you learn about the different services these advisors offer to their investors.
Saving for retirement as a percentage of gross income
It is important to determine the percentage of savings over our income that is required to meet the financial goals we have set. Determining the correct percentage can be complicated if we do not take into account our goals and current economic status.
The most recommended percentage of savings over our income is ten per cent, which is based on a calculation for a thirty-five-year-old individual who wants to retire at sixty-five, with annual inflation of three per cent and an increase in income of four per cent and investment earnings of ten per cent annual interest.
It is advisable to always keep in mind that we must save for our retirement. To do so, we must be informed about the mechanisms of the Retirement Fund Administrators Afores (Afores), regardless of whether we do not yet have one. It is advisable to know which Afore gives the best returns and charges the lowest commissions.
It is the duty of all young people to secure their financial future, as retirement is one of the most important goals in life. Retirement should represent financial and emotional stability and recreation.
