Here is a summary article to understand why save to invest?
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We all dream of achieving financial freedom one day 😊🔥
But to get there. The quickest way is to save and then invest 🤩
⚠ Investing carries risks of losing money ‼
The non-frugalist
Let's imagine an average person who saves 5% of their salary without making the slightest financial effort.
For example, let's say she has the following expenses and has an income of 5,000 CHF net per month.
| Expenditure category | Amount spent | % of salary |
|---|---|---|
| Mandatory expenses | 2,500 CHF | 50% |
| Leisure spending | 2250 CHF | 45% |
| Invest | 250 CHF | 5% |
In this case, this person invests 250 CHF per month 💲
Let's imagine that the person will earn an average of 5% annualized net with investments. By calculating compound interest on Moneyland1. Here is the result in 20 years.
| Amount invested out of pocket | Amount earned with compound interest | Total amount won |
|---|---|---|
| 60,000 CHF | 41,484 CHF | 101,884 CHF |
👉 An investment of CHF 250 each month for 20 years yields more than CHF 100,000 with a rate of 5% per year.
▶ If we realize the rule of 4%. After 20 years. This person can spend 4,075 CHF per year. 339 CHF per month.
The frugalist
Next, let's say this person has become frugal. That is, they've started cutting back on secondary or unnecessary expenses! For example:
- Switch to a cheaper phone plan
- Cancel certain insurance policies that were paid for twice
- Remove some compulsive purchases
- Cancel some unnecessary subscriptions
Basically, this person started reading the MinimalisteFrugaliste blog ☺
These small optimizations allow you to increase your savings each month. This will automatically increase your ability to save and invest.
Let's imagine the new budget is:
| Expenditure category | Amount spent | % of salary |
|---|---|---|
| Mandatory expenses | 2,500 CHF | 50% |
| Leisure spending | 1500 CHF | 30% |
| Savings and Investment | 1,000 CHF | 20% |
In this case, this person invests 1000 CHF per month! That is to say, 4 times of money invested every month 😉
If I use the moneyland compound interest calculator. Here is the result taking into account annualized 5%.
| Amount invested out of pocket | Amount earned with compound interest | Total amount won |
|---|---|---|
| 240,000 CHF | 167,537 CHF | 407,537 CHF |
▶ If we realize the rule of 4%. After 20 years. This person can spend 16,301 CHF per year. 1,358 CHF per month.
In conclusion, By reducing unnecessary expenses and investing the money saved, it is possible to gain a certain degree of financial independence within a few years., provided that profitable investments are chosen.
inflation
We tend to forget that inflation influences our savings and our returns in the long term.
Indeed, depending on the country you live in, the average annual inflation rate is 1 to 3%.
Let's imagine an inflation of 2% per year on average. What will the losses be over 20 years? According to Moneyland's inflation calculator.
| Annual inflation | Loss of purchase value in 20 years |
|---|---|
| 2% | – 32.7% |
Therefore, in this simulation, 100,000 CHF of purchasing power today will correspond to 67,300 CHF of purchasing power in 20 years.
👉 In other words, if your savings (and investments) do not generate a return higher than inflation in the long term, you gradually become poorer, even if the amount shown on your bank account remains the same.
compound interest
It is worth noting that what is impressive in these examples is the compound interest.
| Amount invested per month | Amount earned with compound interest (5% annualized net) |
|---|---|
| 250 CHF | 41,484 CHF |
| 1000 CHF | 167,537 CHF |
In this example, a person who invests CHF 1,000 per month will earn CHF 126,056 after 20 years solely through compound interest 💲.
In summary, compound interest shows that investing regularly over the long term is often more effective than seeking exceptional returns over a short period. Time remains the investor's best ally.
How to invest your savings?
Saving is a first step. But leaving your money sitting in a bank account for several years is generally not the best solution, mainly because of inflation.
Once you have built up your emergency savings, you can start investing gradually according to your risk profile.
For example :
- diversified ETFs
- the third pillar invested in the stock market (for Swiss residents)
- real estate
- SCPIs
The goal is not to seek the highest possible return, but to find investments suited to your investment horizon and to hold them for the long term.
👉 The best investment is often the one you understand and are able to keep for several years.
Conclusion
Why save money to invest?
Because every franc saved today can become a real lever for building your wealth tomorrow.
By gradually reducing your unnecessary expenses, you create a perfect pattern:
- You naturally increase your savings capacity
- This money, instead of sitting in a bank account and losing value due to inflation, can be invested
- If your investment is profitable, the money works for you.
- Once you have invested enough and obtained good financial returns, you become financially free.
In the long term, it is not only the sums invested that make the difference, but above all the compound interest. The earlier you start saving and investing, the more your capital benefits from the snowball effect.
You don't need to be rich to invest. You simply need to:
- to regularly save a considerable sum
- to invest with discipline each month
- to let time do its work in order to increase your income
In the end, Financial freedom is not usually built through exceptional income, but primarily through financial habits repeated over many years.
In other words, save a significant sum each month and invest it in a profitable investment. It's really that simple.
👉 Starting today, even with a small amount, will often be more profitable than waiting several years before investing.
⚠️ As always, investing carries a risk of capital loss. It is important to choose investments that suit your objectives, investment horizon, and risk profile.
FAQ: Why save to invest?
Why save before investing?
Saving money allows you to build up capital that you can then invest. Without savings, it's difficult to take advantage of investment opportunities or cope with unexpected events. Saving is therefore the first step in gradually building your wealth.
Why invest rather than leave your money in a bank account?
Money left in a bank account gradually loses its purchasing power due to inflation. By investing, you aim to obtain a return higher than inflation in order to preserve, or even increase, the real value of your assets over the long term.
How much do you need to save before you start investing?
There is no universal minimum amount to invest, but it is advisable to have an emergency savings of 3 to 6 months of monthly expenses.
Why is it important to invest regularly?
Investing regularly allows you to benefit from compound interest and smooth out fluctuations in the financial markets. This strategy promotes discipline and avoids waiting for the "best time" to invest.
Are compound interests really that important?
Yes. Compound interest allows the gains generated by your investments to generate further gains. The longer you invest, the stronger this multiplier effect becomes. This is one of the main reasons why it's advisable to start early.
When is the best time to start investing?
The best time to invest is generally as early as possible. The longer your investment horizon, the more your capital benefits from compound interest. Even a small amount invested over several decades can produce significant results.
Is it possible to invest with a small salary?
Yes. You don't need to be rich to invest. Many people start with just a few dozen or a few hundred francs a month. Regularity is often more important than the amount invested.
Why reduce your spending before investing?
Reducing unnecessary expenses automatically increases your savings capacity. The money saved can then be invested to make your capital work for you, rather than financing unnecessary purchases.
Does inflation actually reduce the value of my savings?
Yes. When inflation is higher than the return on your savings, your purchasing power gradually decreases. Even if the amount shown in your bank account remains the same, you can buy fewer goods and services with that money.
What investments allow you to grow your savings?
Popular investment options include ETFs, stocks, real estate, investment funds, SCPIs (French real estate investment trusts), and the third pillar pension scheme in Switzerland. Each investment carries a different level of risk and should be chosen according to your objectives.
How much can a monthly investment yield in the long term?
The return depends on the amount invested, the duration, and the yield obtained. For example, investing regularly each month with an average annual return of 5,130,000 francs can allow you to accumulate several hundred thousand francs over several decades thanks to compound interest.
Why does financial freedom begin with saving?
Financial freedom is based on the ability to make your money work for you. By saving and then investing regularly, you gradually build wealth capable of generating additional income and reducing your dependence on your salary.
Does investing involve risks?
Yes. All investments carry a risk of capital loss. Past performance is not indicative of future results. It is recommended to diversify your investments, invest for the long term, and choose investments suited to your risk profile.
Should you wait until you have a lot of money to invest?
No. Waiting until you have a large sum of money often wastes precious time. Thanks to compound interest, starting early with a small amount is often more advantageous than starting late with a much larger sum. However, it's essential to have a financial cushion and save at least three months' worth of expenses.
Why is saving to invest a good strategy?
Because it combines two powerful levers: gradually increasing your savings capacity and making that money work for you through investments. With discipline, time, and suitable investments, this strategy allows you to build wealth and move closer to financial freedom.
Why save to invest?
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How does this blog live?
Overall, this blog lives from sharing a frugal and minimalist lifestyle 💪
For the sake of transparency towards readers. All the recommended products are intended to make life cheaper, simpler and to promote the essentials 😊
Basically, my only income with this blog comes:
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About me
I decided to create this blog to develop and help readers who are looking for a simpler and more economical life.
Compared to before, I was a person who consumed a lot until the day I realized that my consumption made me sadder and poorer 😑
Now I prefer the minimum of my needs to be happy and achieve my financial freedom.
Without realizingI started to focus on saving and investing to depend on a boss for as little time as possible and to speed up my personal projects.
As a result, I am getting richer in a way that I never imagined since I have an average salary in Switzerland.
What is the purpose of this blog?
The goal is to share and learn with others who seek freedom and simplicity 😉
Are you rather minimalist or frugal Jonny?
I am as minimalist as I am frugalist. However, there are situations where I lean more towards an art of life.
To conclude, I think the most important thing is to feel comfortable in your lifestyle 😊
Why save to invest?
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