Spiralling costs for university education and healthcare, coupled with increasing longevity in retirement, has resulted in the amount required to be saved for large-scale future costs, such as retirement and children’s education fees, becoming ever larger. The cost of university and healthcare have historically increased at a much faster rate than that of normal inflation. This means that, for income not to be eroded, savings must also increase faster than the rate of inflation.
A savings plan that invests in financial securities, such as equities and bonds, is one of the most efficient ways to plan towards such largescale costs as they historically provide far superior returns to cash whilst providing liquidity that cannot be achieved by investing in property. The key to planning towards any future cost is to achieve and take advantage of compound growth.
This can be achieved by investing in financial securities rather than cash and to make the most of the time available by starting to save early. Time is a key feature in investment as, in addition to helping ride out any short term volatility that comes with investing in financial securities, it is also the key factor that allows compound growth, described by Einstein as the eighth wonder of the world, to take effect and greatly enhance the value of your savings.