This is even more important when you’re living and working abroad. You may not have a company pension plan, university fees can be a lot more expensive or you may wish to buy an extra home locally. Aside from the lifestyle and experience, most expats work abroad because the salaries can be significantly higher and taxes potentially lower, so it’s a great opportunity to save while you’re away.
Over time your savings will build up and, even if you just save the same amount, interest on interest soon adds up. This is called compound interest and even Einstein admitted it was the eighth wonder of the world. But, getting the most out of compound interest takes time which is why most regular savings plans are longer and need some positive discipline from you.
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It really depends on what you want to save for and how much you want to save. If you would like to retire in 15 years then choose 15 years but make sure whatever amount you save is something you can afford during that time. This helps you have a clear picture of your target amount in retirement which you can then manage over time.
If you’re earning a lot more for say the five years you plan to work abroad then it makes sense to save a larger amount but over a shorter period of time.
This is the process of regularly saving the same amount, usually on a monthly basis, to smooth out the highs and lows of the market in which you’re invested. It’s also extremely useful as a means of saving if you don’t have a lump sum to invest.
The effect of pound cost averaging is that you're buying assets at different prices on a regular basis, rather than buying at just one price. And while riding out the movements of the market, you could also end up better off than if you invested with a lump sum.
If you invested a £10,000 lump sum and bought share units valued at £10 each, you'd have 1,000 units. This would remain fixed unless you bought more units.
Now, if you bought £500 worth of share units per month over 18 months (£10,000 overall), you would buy 50 units in the first month.
If the unit price went down to £9.50 in the second month, you'd be able to buy 52 units, as the share units are at a lower price, and so on and so on.
If the unit price recovers to the original £10 your lump sum would not have grown, but a regular savings plan would have more units and thus more growth on your capital.
One potential downside of this is that if your savings continuously grow, you'll be missing out on some of that growth as not all of your money has been invested over the whole period. But then if your investments continuously grow then it’s not that bad a downside!
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Shawn Cramer - Maerskoil, Qatar
Hamzah is an approachable and professional individual, I would (and do) recommend him to friends and colleagues looking for savings plans of life insurance.
His diligence and support team positively differentiate him from the dearth of providers in the local market.”