Before You Start
- You have basic familiarity with online banking and can access your bank statements.
- You know your current monthly income and expenses in EUR.
- You have access to a European investment platform, such as DEGIRO or Trade Republic.
- You are ready to reflect honestly on your financial habits and emotions.
Time needed: 60–90 minutes
What you'll need: Calculator, pen and paper or spreadsheet, your bank and broker login details
Many Europeans keep their money in savings accounts, attracted by their safety and simplicity. But with low interest rates and inflation eroding value, you might be wondering: Am I ready to take the next step and invest? This guide will help you answer that question through a structured self-assessment, using EUR-based examples and actionable instructions for popular European platforms like DEGIRO and Trade Republic.
Step 1: Confirm Your Emergency Fund
What to do: Calculate your essential monthly expenses—rent, utilities, groceries, insurance, and minimum debt payments. Multiply this number by 3 to 6 to get your target emergency fund.
- Essential expenses per month: €1,200
- Target emergency fund (3–6 months): €3,600–€7,200
Check your current savings. If you have at least three months’ worth of essential expenses set aside in an accessible account (not invested), you’re ready to proceed. If not, focus on building this buffer first.
Why it matters: Investing involves risk. If you need to withdraw investments during a market downturn, you could lock in losses. An emergency fund protects you from having to sell at the wrong time.
What can go wrong: Investing before you have a safety net can force you to sell assets at a loss if an unexpected expense arises.
Pro Tip
Keep your emergency fund in a high-yield savings account or a regulated money market fund for liquidity and safety. Avoid tying up this money in investments.
Step 2: Review Your Debt Situation
What to do: List all debts: credit cards, consumer loans, overdrafts, and the interest rates for each. For example:
- Credit card: €1,000 at 18% APR
- Car loan: €5,000 at 4% APR
Pay off any high-interest debt (typically above 6–7% APR) before investing. For lower-interest debts, such as a student loan at 1.5% APR, you may consider investing in parallel.
Why it matters: The interest saved by repaying high-cost debt is effectively a guaranteed return—better and safer than most investments.
What can go wrong: If you invest while carrying expensive debt, your investment returns may be wiped out by interest payments.
Pro Tip
Use a debt repayment calculator to compare the cost of your debt with potential investment returns. Prioritise clearing debts with the highest rates first.
Step 3: Define Your Financial Goals and Timeline
What to do: Write down why you want to invest. Is it for a home deposit in five years? Retirement in 30 years? A sabbatical in two years? For each goal, note:
- The amount needed (in EUR)
- Your time horizon (years until you need the money)
Example:
- Goal: Home deposit
- Amount: €30,000
- Timeframe: 5 years
Why it matters: Your goals and timelines determine which investments are suitable. Stock markets are volatile in the short term but tend to grow over the long term.
What can go wrong: Investing money you need soon exposes you to the risk of market downturns just when you need to withdraw.
Pro Tip
Consider matching your investment risk to your timeline: For goals under 3 years, stick to savings accounts or short-term bonds. For 5+ years, diversified ETFs may be appropriate.
Step 4: Assess Your Emotional Readiness
What to do: Reflect on how you react to financial ups and downs. Ask yourself:
- How would I feel if my investment dropped 20% in a month?
- Am I comfortable not touching the money for years?
- Can I avoid impulsive decisions when markets are volatile?
If you’re unsure, start with a small amount—say, €100—and track your feelings as markets move.
Why it matters: Emotional reactions can lead to panic selling, which locks in losses. Successful investing requires patience and discipline.
What can go wrong: If you’re not emotionally prepared, you may sell at the worst possible moment or avoid investing altogether.
Pro Tip
Most brokers, including DEGIRO and Trade Republic, offer demo accounts or let you start with very small amounts. Use this feature to practice before committing larger sums.
Step 5: Try a Platform with a Small Amount
What to do: Open an account with a European broker. For example:
- DEGIRO (broad ETF selection, low fees)
- Trade Republic (user-friendly, €1 trades, savings plans)
Deposit a small test amount, such as €100. Use it to buy a single share of a diversified ETF, like the iShares Core MSCI World UCITS ETF (IE00B4L5Y983).
On Trade Republic:
- Open the app and tap Portfolio.
- Tap Savings Plan → Add Savings Plan.
- Search for "iShares Core MSCI World" and select IE00B4L5Y983.
- Enter your amount (e.g., €25/month) and confirm.
On DEGIRO:
- Log in and click Deposit/Withdraw Funds to fund your account.
- Search for "IE00B4L5Y983" in the search bar.
- Select the ETF, click Buy, enter your amount (e.g., €100), and confirm the order.
Expected outcome: You should now see your first ETF purchase confirmed in your portfolio, with a value of approximately €100 (or your chosen amount) minus any transaction fees.
Why it matters: Real experience, even with a small sum, builds confidence and reveals how you react to market movements.
What can go wrong: Watch for fees, minimum investment amounts, and ensure you’re buying the correct ETF (check the ISIN code, e.g., IE00B4L5Y983).
Pro Tip
Set up a recurring savings plan—even €25/month—to automate your investing and benefit from euro-cost averaging, which can reduce the impact of market volatility over time.
Decision Tree: Are You Ready to Invest Beyond Savings Accounts?
Use this simple flow:
- Emergency fund in place? If no, build it first. If yes, continue.
- High-interest debt paid off? If no, prioritise repayment. If yes, continue.
- Clear financial goals and timeline? If no, define them. If yes, continue.
- Emotionally prepared for ups and downs? If no, start small or use a demo account. If yes, you’re ready to invest beyond savings accounts.
Common Mistakes
- Investing emergency funds: Don’t risk money you may need soon.
- Ignoring fees: Always check platform and ETF costs. Even 0.5% per year adds up.
- Chasing high returns: Stick to diversified, low-cost ETFs rather than speculative picks.
- Investing without a goal: Lack of direction can lead to poor decisions or panic selling.
- Forgetting taxes: Understand how investment gains are taxed in your country.
Next Steps
- Review your financial situation every 6–12 months, especially after major life changes.
- Continue learning about different investment options available in Europe, such as ETFs, bonds, and real estate.
- Gradually increase your investment amounts as your confidence and financial stability grow.
- Consider speaking with a fee-only financial advisor for personalised guidance.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Always do your own research and consider consulting a qualified financial advisor before making investment decisions.