Investing can seem like a low priority for many, especially for younger people for whom retirement or a ‘rainy day’ seems a long way off. For others, it can also feel pointless – particularly if they are working for low wages and are struggling to have enough money each month just for the basics they need to survive. The idea of having enough spare cash to invest and grow into a lump sum to use at some point in the future can feel like a distant dream when you’re on a low income.
Building an investment habit
But we’ve also always said here that saving your money and investing it for the future is a good habit that needs to be nurtured. And the trick to successfully building up a good habit is simply to start it – and then to repeat whatever it is you’re doing, whether it’s exercise, going to bed early or putting some money aside each month – until it becomes second nature.
With this in mind we thought it would be interesting to look at a relatively recent phenomenon that is in many ways making it much easier for investors to make a start at developing the investing habit in their lives. Micro investing is a new way of saving that has been made possible by the advances we’ve seen in recent years in smartphone technology, in electronic payments and in encryption, that have all now made it much easier to use your daily spending activities to build up a small but significant lump sum over a period of time.
Start small, and grow
So, how does it work? Well, most micro investing schemes will take advantage of mobile technology to provide a simple and secure way for customers to save. Often, the customer will pay for something – their morning cup of coffee for example – either wirelessly with their phone or using a card.
Micro investing works by rounding up the payment (say to €3, for a coffee that costs €2.80) and then taking the difference and investing it. That 20 cents may not sound much, but when it is one of many daily transactions which are then put straight into a portfolio of investments it can begin to add up. The key here, of course, is that the amount that the transaction has been rounded up by is small enough that most people won’t notice it – and that because the subsequent investment is also done automatically it makes the whole process quick and relatively pain-free. The investments themselves can often also be tailored to fit with your needs and your own personal preferences – some apps, like Stash allow you to choose a portfolio that suits you, as well as providing investment advice and support.
Investing made simple
One of the things that we like most about the whole micro investing phenomenon is just how straight forward it is to get started. That, for us, is the real beauty of the idea – the way that technology can make it easier for everyone to save a little bit of money. New, innovative ways of saving through apps like Moneybox or Rize are making the world of investment more accessible for millions of people – meaning that it isn’t just the financial experts or those with lots of savings to spare who can afford to explore the possibilities that are out there.
And developing that good investment habit is absolutely crucial. According to the Financial Times, quoting a report by the world’s largest asset manager, BlackRock, ‘more than 80 per cent of the UK population don’t save regularly because they don’t have a disposable income’. That is a worrying statistic, particularly as the gap between what people need to retire comfortably and what they actually have available is widening.
Of course, micro saving probably won’t give you a big enough lump sum to retire on – that is a lot of cups of coffee. But what it will do, we believe, is help you to develop an investing habit that could lead to bigger opportunities to save in the future.
Micro investing offers a great opportunity to save for those unexpected surprises, or to put money aside for special occasions. But most of all, it helps us to understand that when it comes to saving and investing, you can never start too early, or too small.