This week our APN podcast talks about savings and investment with private investor and writer, Merja Mähkä. You can send comments or questions to WhatsApp on +358 44 421 0909, via our Facebook or Twitter accounts, or email us at firstname.lastname@example.org.
Finnish residents expect that they will continue to receive reasonable social benefits and good pensions but that could change and investing is one way to safeguard the future, says private investor and writer Merja Mähkä.
An investment blogger, Mähkä claims to have multiplied the value of her investment portfolio by a factor of five in seven years to reach 300,000 euros.
Mähkä told Yle News' All Points North that many people consider investing out of concern for the future: they don’t know what will happen to their pensions, or what benefits will look like down the road.
She pointed out that technological developments mean that many jobs are disappearing — while today it’s still normal to hold the same job for 10 years, that may not be the case in the near future.
More fragmented work means less personal income and lower tax contributions to pay for social programs. At the same time, declining pension contributions from a shrinking workforce also mean that the prospects will not be as rosy for future retirees. This is the negative case for investing, Mähkä said.
"If you can save you should invest. If you can’t save then you should think again about where you can cut costs," Mähkä advised.
She noted that saving alone is not future-proof and that nest eggs should be put to work to generate future returns.
"If you can save, your savings won’t be worth much in 20 years because of inflation. If you’re in your 30s or 40s and have started to make money, you have 35 or 25 years to invest if you retire at 65," she added.
Earlier this year, Mähkä co-authored a book, “Become an investor in 7 days”. It is a primer to help newbies get started investing in stock market equity and mutual funds for the first time. The book’s central thesis is that investing is not just for the very rich.
Households choose investment over savings
There may be other incentives for investing besides creating a pension pot.
Economists have noted that income tax policy in Finland is such that capital income and dividends from shares carry a relatively lower tax rate than wages and salaries.
Finland’s wealthiest people tend to earn more from investments than they do from salaried work. This means they pay less tax on their income than people whose only or main source of income is their wages.
Overall, households in Finland seem to have got the message as they appear to be putting greater emphasis on investing than on saving.
Data from Statistics Finland show the household savings rate in Finland at -0.8 percent for the period 2016 - 2018, the latest date for which data are available. A negative savings rate means that households have spent more than they have earned.
However the latest statistical release suggests that while householders may not be saving, they are investing. The statistical agency said in September that households increased their net investments by mid-year by around four billion euros. This was driven mainly by banking more deposits as well as investments in shares in listed companies and mutual funds.
Investing in freedom
Investment evangelist Mähkä pointed out that people need not fear fluctuations in equity markets where stocks and shares are traded. She said that’s because so far at least, the overall trend has been for markets to rebound after suffering setbacks.
"If you are buying stocks or investing in a fund you’ll be ok as long as you are in it for the long term," she commented, adding that even people who are closer to retirement should consider investing for their future.
Mähkä tol APN that she invests, not because of fear of the future, but for positive reasons like the professional and financial freedom it provides.
"Not necessarily full financial independence so I never have to work again. But the freedom to work only four days a week, for example. I wouldn’t mind a day a week writing books that don’t sell or even volunteering," she declared.