The Portuguese are among those who save the least in the eurozone. In the second quarter of 2023, Portugal’s savings rate was 5.7%, while the euro area average was more than double (14.8%). Low income and high level of financial illiteracy pushed the Portuguese into this scenario. Moreover, managing savings is not easy, as all guaranteed capital and low-risk products offer lower rates of inflation (5.4% in 2023, according to the latest Bank of Portugal forecast). In practice, savings are losing their real value, and the Portuguese are losing their purchasing power. Most Portuguese still keep their money in term deposits. Interest rates on new term deposits are rising, as the latest data from the Bank of Portugal confirms: the average wage has risen to 1.81%, the highest value in the past nine years. However, Portugal’s interest rate remains well below the average for eurozone countries, which was 3.03% in August. State debt securities were once a more interesting solution, as the new series of savings certificates have a lower yield; Capitalization insurance is rare and rarely outperforms the best deposits. The solution may be to invest money over the long term in products that involve some risk, but with a higher potential return.
There are two types of savings that are necessary to manage personal finance well:
- Short-term saving, while creating an emergency fund for unexpected events that may arise;
- And long-term saving, with the creation of a fund that will work in the future as a supplement to the retirement pension.
Investing in savings: 10 tips
Check out DECO PROTeste advice to learn how to manage money successfully.
1. Before investing, eliminate debt
Until you get out of debt at high rates, there is no point in saving. Your savings will always move at a slower pace. We are not referring to long-term loans (buying a house), but rather to small loans, which affect household budgets.
2. Pay attention to the source of the information
Be careful with advice from friends, or even your account manager. Even if they are not malicious, they are not the most reliable, impartial or knowledgeable source on the market. Many pyramid schemes are promoted by friends. Also pay attention to the growing number of digital influencers who also offer advice in the field of finance. Must be independent financial analysts Certified by CMVM Unfortunately, there are more and more people who are not qualified to provide financial advice online.
3. Start saving for retirement as soon as possible
The ideal situation is to sign up for a PPR as soon as you start working, in your 20s, even if the amounts are small. Not only because you have more years of savings and benefit from the capitalization effect, but because you can invest in products with a higher percentage of equity (more risk) and potentially more profitable.
If you already have a PPR, compare it with DECO PROTeste’s Right Choices and see if you’re losing money. If so, download it.
Earn more on PPR
4. Treat savings as regular fees
Don’t just save what’s left at the end of the month, because you risk not saving in a disciplined and regular way. For example, you can schedule automatic transfers to avoid “forgetting.” It is preferable to see the amount you have allocated as a personal investment, which you will benefit from in the future.
5. Create an emergency fund
Before considering any investment, especially a risky investment, it is important to create what we call an “emergency fund.” In practical terms, it is a financial cushion (at least six salaries). It allows, at any time, to deal with unforeseen events and avoid having to use a credit card that carries high interest rates, in
The rule, two numbers.
6. Use inflation as an income reference
Inflation is the rise in prices in the economy. If the value of your savings is less than the inflation rate, it means your money is losing value. In the long run, if this scenario repeats itself annually, it can be very damaging to the portfolio. That’s why we often hear the saying, “Money gets worth less and less.” Having too much cash on hand is a bad strategy.
7. Do not invest in strange products
Be careful about investing in products you don’t know or understand. For example, structured products have rules that can be complex. As a rule, they are created in such a way as to offer an interesting potential income, but this is rarely achieved, because they depend on the fulfillment of a set of different conditions. Avoid these products.
8. Diversification across multiple banks and products
Don’t put all your savings in the same bank, or the same product. It is preferable to deposit in each institution only the remaining amount in the Deposit Guarantee Fund (100 thousand euros per depositor) and the Investor Compensation System (25 thousand euros). It’s a way to reduce risk.
9. Take risks, but only with money you don’t need
Only apply to high-risk products the amount you are sure you will not need in the short or medium term. Products that do not have guaranteed capital, such as mutual funds or stocks, except for periods longer than five years. Otherwise, he risks going through a less good period, with stock markets falling, and he must have time to recover and not recover at a less favorable time.
10. Choose products according to your profile
No two people are alike, even financially. Each has different needs and assets, as well as a different risk profile. There are those who deal well with risks, and there are those who hate them. Know your risk profile, your level of acceptance, and the knowledge and time available for information on more complex products and markets. Adapt the financial products you subscribe to to your profile.
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