While it’s increasingly important to save money during times of economic tumult, these conditions tend to squeeze your disposable income and make it much harder to achieve such an objective.
To this end, the average UK savings currently amount to 8.21% of a household’s monthly income, while this sum is continuing to dwindle as earnings are undermined by rampant inflation.
This could be offset in part by the rising interest rate, but it’s still increasingly hard to build a nest egg in the current climate. But why is this important, and can you grow one in 2022?
What is a Nest Egg?
The term “nest egg” is a colloquial one, which describes a large amount of money (in the form of either cash or assets) that have been accumulated over time.
Often nest eggs are cultivated to fulfil a specific purpose, such as funding retirement, paying for your childrens’ higher education or saving the deposit for a new house.
However, a financial nest egg can also be built for general purposes and the proverbial “rainy day”, creating a de facto emergency fund that provides real-time fiscal security and far greater peace of mind.
The Key Reasons to Start a Nest Egg – And How to Get Started
As we’ve already touched on, retirement is one of the main reasons why people start to save a nest egg, particularly as we continue to live longer and need more capital to fund our ambitions once we’ve stopped working.
This rule applies to planned or forced retirement too, with nearly half of all retirees having to stop working sooner than they intended.
Saving for future family care and the future education of your children are other specific and popular reasons why people strive to accumulate nest eggs, as both of these endeavours require a significant amount of capital that will need to be saved over time.
Of course, your core motivation and reason for saving will impact your precise plan and the amount you set aside each month, so it’s important to understand this before getting started.
In terms of growing a nest egg, understanding your short and long-term goals is key to making informed decisions, and creating a strategy that enables you to achieve such objectives.
This strategy will include numerous investment vehicles, from tailored savings accounts with fixed rates of interest to a wider portfolio of investment assets (which will vary depending on your starting capital and appetite for risk).
The key here is to focus on optimising passive income streams, particularly those that are highly leveraged (such as forex and stocks). You should also incorporate assets like bonds into your nest egg, as these deliver more reliable returns and appreciate incrementally over a 10-year period.