Summer is the perfect time to think about savings

It’s almost September, the end of the summer, and life seems easy. An ice cream, a vacation and just a little bit more money spent than the usual.

Summer is the time for relaxing, and it’s only natural that you relax the grip on your wallet too.

Saving money in summer and why it's important to save money in summer.
It’s important to save money in the summer.

However, this easy attitude often continues into early and even late autumn for some people. It’s important to save money in summer. If you don’t take measures to control your finances now, don’t be surprised that your Christmas gifts will be cheaper than you would like.

ETFs for the win!

Putting savings into exchange-traded funds (ETFs) is probably the easiest way to ensure that you don’t spend too much in the fall. Also, you’ll even receive income from them!

Exchange-traded funds can be explained with a simple example. Suppose a financial company X owns stocks from company A and B. The company X has so many stocks, that they are able to release a fund with a mix of stocks A and B. The fund’s value depends on the value of stocks A and B. If an investor believes in stocks A and B, and the company X, he/she can choose to own a share of company’s X exchange-traded fund, and indirectly own shares of companies A and B.

In reality, the funds are much more complicated, but they are based on the same principle. Because a typical ETF is made up many stocks, even if one or a few experienced a fall, the ETF value won’t be affected too much.

Even if you only have spare €50 lying around, you can invest into an ETF. Why is it a way to save money for the winter? Since you won’t be able to easily reach the €50, you won’t be tempted to spend it on a whim. Also, since we are in a bullish market right now, you can expect that the price of your ETF will rise. If so, you can sell it for a higher price than you bought! Even more, if you hold the ETF long enough, you could be eligible to receive dividends.

For those who are interested in statistics of ETFs, this website provides a great comparison: Morningstar.

Hide it like a squirrel

Everybody knows that squirrels love nuts, right? However, few people know that squirrels have been observed to be forgetful. A squirrel will often carry nuts, hide them somewhere on the ground and forget the hiding location! Later on, the nuts start to sprout and a tree starts to grow.

If you are able to hide your nuts (money) somewhere, you can easily avoid spending without a good reason.

Find the highest place in your home. Place the savings you won’t need in that place. Set a reminder about the hiding place on your calendar for October or November. That’s it! You’ll forget the hiding place after a few days. Later in the autumn, you’ll be very happy to find a little gift from your past self.

The risky way?

Anyone’s who has saved money knows that only saving won’t make you rich or comfortable. For that, you need investing.

An investment at the end of a summer into stocks or peer to peer lending can give you more financial freedom when the cold weather sets in. Although risky, you could see the money you didn’t spend on the new clothes and gadgets making you more money.

Disclosure: this article is not intended for financial advice. Any risk an investor assumes is only his own. Consult a professional before investing.

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