How To Save To Invest

Tuesday 2 March 2021

Here are 3 key concepts, 2 key resources, and 1 key action, to help you get your savings habits in order, and get you started investing.

If you’re looking to bump up your investment amounts from a few cents to a few hundred or thousand dollars, then your money house needs to be in order.

Sometimes finding that extra bit of cash can be difficult, so here are a few tips and tricks we’ve learnt along the way.

  1. Separate money for saving and money for investing. You want to be able to keep shovelling money into your investments. You want to be doing this as early in life as possible to let compounding take effect. To do this, you need to be comfortable with putting money away specifically for investing every time you get paid. 

    All this means is consciously and actively putting some of your savings into another account that’s used just to invest.
  2. The money you invest needs to be thought of as inaccessible. You don’t want to touch it. Don’t sell. Forget about it. There have been many times where we’ve had to do the cheeky transfer from our savings account to buy Christmas presents, or fund a holiday, or to splurge on some new clothes. The last thing you want to be doing is selling shares for activities like this. 
  3. Never invest money you need. You can’t control the stock market. Don’t blindly put money into the market when you know you have bills to pay, or you’re saving for a house deposit. Separate this from your investing money, and keep it somewhere you can access when you need it. 
  1. The ‘Rule Of Threes’ principle.  Let’s say each fortnight you get $2000. This can be divided into three ways:

    Spending – Rent, phone bills, gas and electricity, food, going out for dinner, Netflix, insurance, you name it. Ensure you firstly have enough for all the day to day expenses. This might be $1300

    Saving – You now have $700 to save and invest. You might allocate $500 to a savings account for a rainy day, or for your next holiday, or your emergency fund. This is money you will want to access at some point.

    Investing – you have $200 left and this is money you now think of as your investing money. Send this to another account if you need to. This is money you are saving to invest.
  2. Find out how to get the most out of your money and reach your savings goals sooner, using some of the resources on the moneysmart website.

Set your budget so you know what to spend, save and invest.

Use this free budget planner, or download the excel template, to get started. 

Community Call Out

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