As a nation, we need to be better with our money. From saving to investing, the UK is battling against difficult economic circumstances and is struggling to build healthy financial habits.
Two thirds of adults in the UK wish that they had started investing sooner, but it doesn’t have to be this way. Through little-and-often investing, we believe that many people in the UK could be putting money away for their future and growing their wealth over time.
Our report, ‘Building a Nation of Investors’, explores what the UK can learn from the EU (Germany in particular) to improve financial literacy and encourage better investing.
One of the report’s findings is that, despite the differences in their habits, UK and German adults have very similar financial goals. Namely, these are holidays, retirement and the more broad growth of their wealth.
So, what are the key takeaways that the UK can learn from Germany? And, how can a platform like InvestEngine help people achieve their long-term financial goals?
1. Starting investing early is key
As we’ve already mentioned, 66% of adults over 18 in the UK wish they’d started saving or investing for their futures sooner. It is true, after all, that time is your biggest asset when investing.
The sooner you get started, the more room your investments have to grow. You can also take on more risk given the amount of time you have to ride out any difficult periods – this potentially opens you up to higher returns. This is before you get to powerful elements like compounding interest.
Getting started with InvestEngine is as straightforward as it gets. You can set up a portfolio in minutes and select the ETFs yourself free of charge with a DIY portfolio (all you pay is the underlying ETF cost). Or, easier still, you can have your portfolio built and maintained by our team of experienced investment managers, for just 0.25% a year.
2. We need to talk about money more
Nearly half of German adults said that they had learned enough about their finances at school, compared with under a third of those in the UK. This closely reflects the number of respondents who said they’d prefer to invest their money than save it – 48% in Germany and 33% in the UK.
We believe that financial education has a key role to play in improving investing habits in the UK and getting more people into long-term wealth management. In our report, we call for the government to do more to teach (particularly) young people about the different options for their savings.
3. Use the tools available
Investing has never been easier. Modern investment platforms have made the process of building and growing an investment portfolio incredibly straightforward. Equally, if you don’t have the time or inclination to manage a portfolio yourself, professional management has never been so affordable.
When asked about support in taking the first steps, 42% of people said they’d want help setting up their portfolio. The same percentage said it was important to them to be able to see exactly what they’re invested in.
The InvestEngine platform makes every step of the process easy. You’ll have the choice of hundreds of ETFs, helpfully divided into Collections based around different themes, and you’ll be able to monitor your investments on the go with full transparency over every single holding in your portfolio.
4. Invest little-and-often
You don’t need an enormous lump sum to start investing. In many cases, building sound financial habits means learning to invest small, manageable amounts more often. This could be in the form of taking 5% of your paycheck and topping up your ISA once a month.
It’s also something you can do instead of putting cash into savings accounts. Providing you don’t need to access the money any time soon, it can pay to invest it in markets regularly to keep your portfolio ticking. Almost half of German respondents said they’d prefer to invest than to save, whereas only a third of UK adults said the same.
With an InvestEngine Savings Plan, you can fully automate your regular investing. It’s a technique that has taken off in Germany – over 90% of the 4.9 million investors using one are domiciled there. We want to see more people in the UK using Savings Plans for manageable, consistent long-term investing.
5. Think long-term
Finally, and perhaps most importantly, it’s key to think of investing as a long-term strategy. An ISA or a self-invested personal pension (SIPP) is not a get rich quick scheme, rather it’s a tool for long-term wealth preservation and growth.
The InvestEngine platform is fundamentally built for medium and long-term investing. ETFs are well-suited to long-term, diversified, (relatively) low-risk growth, and our automated features mean you can take the legwork out of investing.
Time in the market beats timing the market, so your strategy should be framed in terms of years, not weeks. Make sure you’re investing with a platform that’s built with this mentality in mind.
Capital at risk. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply.
This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.
Tax treatment depends on personal circumstances and is subject to change, and past performance is not a reliable indicator of future returns.