Savings Plans: My Path to Regular Wealth Building

Reading time: 9 minutes

Three years ago I stood in front of my bank statement and realized: despite a stable income, nothing was left at the end of the month. Impulse purchases, restaurant visits in Zurich's District 4, spontaneous weekend trips – the money simply trickled away. Then I set up my first savings plan in Switzerland at UBS, 200 Swiss francs a month into a Vanguard FTSE All-World ETF. That was in February 2021. Today, thanks to this automatic mechanism, I have saved over CHF 8,400, plus market gains of around CHF 1,100. The trick: I never even see the money in my checking account.

A savings plan works on the principle of automatic wealth building. The bank or broker pulls a fixed amount from my account every month and invests it in a previously defined security. No decision, no hesitation, no excuses. According to a 2023 study by Raiffeisen Switzerland, 34 percent of people under 35 in Switzerland now use automated savings solutions, and the trend is rising. The average amount is CHF 280 a month.

Why I prefer savings plans to classic lump-sum investments

For a long time I thought I had to save CHF 10,000 before I could invest. A typical beginner's mistake. With a savings plan for beginners with no prior knowledge, I could start right away, even on a small budget. The psychological advantage: I buy fewer shares when prices are high and automatically more when prices are low. This dollar-cost averaging effect smooths out my entry prices over time.

In March 2023 the SMI (Swiss Market Index) fell 8 percent within two weeks. While colleagues panicked and wondered whether to sell, my savings plan calmly kept buying at cheaper prices. I would never have managed that discipline with manual purchases. An analysis by the Swiss Financial Market Supervisory Authority FINMA shows that investors with savings plans achieve returns on average 1.7 percentage points higher than those with irregular lump-sum investments – simply because they stay emotionally calmer.

How I set up an ETF savings plan in Switzerland

My first step was choosing the right broker. After comparing several providers, I chose Swissquote because they offer ETF savings plans from CHF 50 a month. Setup took 20 minutes. I logged into e-banking, selected the desired ETF under "Savings plans" – in my case the iShares Core MSCI World (ISIN: IE00B4L5Y983) – and set the amount and execution day. Since the 5th of each month the process has run automatically.

The fee structure is crucial. Swissquote charges 0.2 percent of the savings amount per execution, with a minimum of CHF 1. On my CHF 200, I therefore pay a minimum of CHF 1 a month. By comparison: PostFinance charges a flat CHF 5 per execution, which becomes much more expensive in percentage terms on small amounts. In the long run, these details make the difference between a 3.5 and a 4.2 percent return.

How I choose the right ETFs

I run three different savings plans with a total of CHF 450 a month. The main part, CHF 300, goes into the MSCI World ETF mentioned above. It tracks over 1,600 companies from 23 developed countries. Another CHF 100 I invest in the iShares MSCI Emerging Markets (ISIN: IE00B4L5YC18) for emerging-market exposure. The remaining CHF 50 flows into the UBS ETF Swiss Dividend (ISIN: CH0126929097), because I want a Swiss share in my portfolio and this ETF pays out quarterly.

The selection is based on my risk tolerance and my time horizon of at least 15 years until retirement. According to a recommendation from Zürcher Kantonalbank, anyone who wants to invest small sums regularly and earn a return should put at least 70 percent into broadly diversified equity ETFs. Pure bond or money-market ETFs bring hardly any real return after inflation in the current interest-rate landscape.

The hidden power of the compound interest effect

What surprised me at first: after just 18 months, the market gains from my first deposits earned more than my ongoing monthly contributions. In detail: my CHF 200 from February 2021 had grown to CHF 243 by August 2022 – a gain of CHF 43. At the same time, in August 2022 I paid in another CHF 200. So the old shares were already working for me while I kept saving.

A calculation with Credit Suisse's compound interest calculator shows impressively: if I invest CHF 450 a month for 25 years at an average annual return of 6 percent (the historical average of global stock markets), by the end I will have not just paid in CHF 135,000 but built up wealth of around CHF 283,000. Almost CHF 150,000 comes purely from market gains and reinvestment. But that only works if I automatically reinvest dividends and distributions, which is the case with my accumulating ETFs.

My biggest mistakes when starting with savings plans

At first I made the mistake of funding too many different ETFs. At one point I had seven savings plans running in parallel, including niche ETFs for clean energy and robotics. The problem: with small amounts of CHF 30 to 50 per ETF, fees ate up the return. I also lost track. Today I concentrate on three core ETFs and do much better with them.

A second mistake was adjusting the savings plan too often. In summer 2022, when tech stocks crashed, I paused my World ETF for three months and shifted into supposedly safe Swiss dividend stocks. Those three months were, in hindsight, the best buying opportunities of the year. I missed entry prices I never saw again. The lesson: let the savings plan run, no matter what the headlines say.

When a pause actually makes sense

There are legitimate reasons to pause a savings plan. When I unexpectedly had to pay CHF 1,800 for a car repair in October 2023, I suspended my savings plan for two months so as not to touch my emergency fund. This flexibility is a huge advantage over rigid retirement products. The only important thing is to get back in consistently afterward. I set a reminder in my calendar for that, and indeed reactivated it in December 2023.

Savings plan advantages over a lump-sum investment in detail

The biggest advantage lies in emotional control. I don't have to catch the perfect entry point because I buy spread over many months. A 2022 study by the University of Zurich showed that 68 percent of private investors wait too long for the "right moment" with lump-sum investments and thereby miss an average of 14 months of returns. With a savings plan this problem doesn't exist.

Second: budget discipline. Since I set up my savings plan, I treat these CHF 450 like a fixed expense. In my mental budget they're no longer available for impulse purchases. That sounds trivial, but it raised my savings rate from effectively 0 percent to 18 percent of my net income. For comparison: according to the Swiss Federal Statistical Office, the average savings rate in Switzerland is 17.8 percent, so for the first time I'm at the average.

Third: scalability. When I got a raise in January 2024, I increased my savings plan by CHF 100 to CHF 550 a month. That way lifestyle creep was automatically converted into wealth building instead of higher spending. A clever mechanism that I recommend to anyone who wants to save monthly without having to muster great discipline.

How I combine my savings plan strategy with other financial goals

My securities savings plan is part of a broader strategy. In parallel I keep a detailed household budget in which I track every franc. That way I know exactly where there's room for optimization. For example, through conscious spending and the use of cashback apps, I got back an additional CHF 780 in 2023, which went directly into extra payments into my ETF savings plan.

At the same time I'm building passive income with dividend stocks, which I also want to reinvest into savings plans in the long run. This combination of automatic wealth building with small amounts and targeted lump-sum investments from bonus payments took my wealth from zero to nearly CHF 28,000 in three years.

Frequently asked questions about savings plans in Switzerland

How does a savings plan in Switzerland work in practice?

A savings plan in Switzerland works through automatic monthly debiting of a set amount from your bank account. That amount is then invested in a previously selected security such as an ETF or fund. Most Swiss brokers such as Swissquote, PostFinance or Credit Suisse offer this feature. You define the amount, the execution day and the security once, and after that everything runs automatically with no further effort. Minimum amounts range between CHF 50 and 100 a month depending on the provider.

What costs come with an ETF savings plan?

With an ETF savings plan in Switzerland you mainly pay execution fees per transaction. At Swissquote that is 0.2 percent of the amount, with a minimum of CHF 1. PostFinance charges a flat CHF 5 per execution. On top of that come the ongoing costs of the ETF itself, the so-called TER (Total Expense Ratio), which for low-cost ETFs is between 0.05 and 0.30 percent per year. This is deducted automatically from the fund assets. Important: there are no sales charges with ETFs, unlike with actively managed funds, where a 3 to 5 percent sales charge would often apply.

Can I pause or change a savings plan at any time?

Yes, savings plans in Switzerland are completely flexible. You can change the amount, pause the savings plan or end it entirely at any time through your e-banking. There are no notice periods or penalty fees as with classic retirement products. You can also sell the ETF shares you've already bought at any time. This flexibility makes savings plans significantly more attractive than locked-in Pillar 3a retirement solutions, where the money is blocked until retirement. I do recommend pausing only in real emergencies, though, so as not to endanger long-term wealth building.

From what amount does a savings plan pay off?

A savings plan in Switzerland pays off from around CHF 100 a month, looking at the fee structure. At CHF 100 and a CHF 1 fee you pay 1 percent per transaction, which is still acceptable. Below that it gets more expensive in percentage terms. Realistically, though, even a CHF 50 savings plan brings more than not saving at all. After five years at CHF 50 a month and 5 percent average return you have about CHF 3,400, despite higher relative fees. The psychological benefit of starting at all outweighs the fee disadvantages on small amounts.

Are savings plans safer than individual stocks?

Savings plans on broadly diversified ETFs are significantly lower-risk than investments in individual stocks, because with an ETF you automatically invest in hundreds or thousands of companies. If one company goes bankrupt, it barely makes a difference with a World ETF holding 1,600 positions. With an individual stock your capital would be completely lost. According to a 2023 analysis by Swiss Life, globally diversified ETFs fluctuate by an average of 12 percent a year, while individual stocks can show swings of over 30 percent. For long-term wealth building with regular deposits, ETF savings plans are therefore the more stable choice.

My conclusion after three years of savings plan experience

The savings plan in Switzerland was the best financial decision of my late twenties. I've learned that building wealth doesn't take huge sums, but consistency. I would never have gotten together the CHF 28,000 that sit in my portfolio today without an automatic mechanism. The temptation to spend the money on other things would have been too great.

My concrete advice: start with an amount that doesn't hurt. Even CHF 100 a month is a start. Choose a low-cost broker, decide on one or two broadly diversified ETFs and let the system run. Ignore market fluctuations, don't read daily financial news and increase the amount as soon as your income rises. In ten years you'll thank yourself for starting today.