Saving money is a priority for everyone, but our society often ignores this and spends aggressively.
This could be due to a poor understanding of finances, a failure to budget properly, or an impulse to buy.
Statista reports that the personal savings rate in the United States in February 2021 was 13.6%. This is down from 19.8% in January.
It’s surprising that you did so well, but you know you can do better. Who doesn’t wish to feel more confident about their finances and save more money?
Continue reading if you want to learn more about why saving money is so important or if you are looking for some financial motivation.
Table of Contents
Why you should save money
Why you should start saving money now
Final Thoughts
Why you should save money
It is essential to save money in order to prepare for any financial emergency. Prioritizing your saving helps to reduce financial anxiety and stress, help you get rid of any debt and build better money habits.
Saving money is easy if you know how.
There are many reasons to save, but there are three main reasons that everyone should put money aside. These are to build a long-term fund, to create an emergency fund and for essential purchases. You should save before you spend to boost your results. Most people only save after paying off debts and bills.
Prioritizing savings over spending money has many other advantages.
Why you should start saving money now
- Emergency Fund
Building up an emergency fund is one of the best reasons to start saving. Anyone who works in the personal finance industry will usually recommend this.
Why?
Unexpected expenses and life’s events can happen. The more prepared you are, the easier it will be to deal with this “emergency”, or “life” event.
Say, for example, that your car breaks down. You need it to go to work. However the repairs will cost you over $1,000. You won’t be stressed out about the cost of repairs if you have an emergency fund.
Save 3 to 6 month’s expenses, but I prefer to save a full year, in case your primary source of income is lost.
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- Essential Purchases
Saving money is not the same as spending, so you might not consider essential purchases when saving. There are many other reasons to save money to purchase certain items.
You might buy a vehicle, or items for your house like a refrigerator, washer and dryer or TV. These larger purchases can be costly and choosing monthly payments usually comes with interest.
You may need to use your credit card if you do not have enough money to pay for the purchase. Credit cards can have high interest rates.
- Building Wealth
Saving money should be a priority in your financial plan if you are serious about accumulating wealth. Saving money not only helps develop good financial habits, but it also increases your cash reserves over time.
If you want to build long-term wealth, you should start investing as soon as you feel comfortable with your emergency funds.
Start by saving your money in an account that pays interest. This will allow you to earn some extra money. Interest rates on bank accounts are lower than what you could earn if you invested your money in the stock exchange.
- Reduce Financial Stress
According to the Stress in America study by APA, 72% of Americans said they felt stressed at least once in the previous month. This is not even including all the other areas that cause stress!
Saving more money is a great way to reduce financial stress. Saving more money may not eliminate all financial stress, but it can help you to feel less anxious about unexpected expenses.
It’s great to have a good sleep, pay your bills on time and not worry about unexpected expenses or losing your income. It is for this reason alone that I continue to save.
- Creates good money habits
You are creating a habit of good money management when you start prioritizing your money! You can improve your financial situation and life by adopting these habits.
When I realized the importance of saving and put in an effort to do so, I also developed other good money habits. I started to be more aware of my money, avoid accumulating credit card debt and became interested in investing.
It was my experience that you will start to see your financial habits improve after creating a plan for saving more money.
- You can help your marriage
You may have heard that finances are the main cause of marriage problems and arguments. There are many statistics that have been published over the years. For example, nearly one in three (30%) couples claim finances cause them the most stress.
Money arguments are extremely common, and they’re also not very fun. Saving money and prioritizing can reduce money arguments.
Tensions can arise when couples spend money but don’t have enough to cover bills or other life events. Building a financial plan together and working on your finances can boost your marriage.
- Choose from a Variety of Options
It is good to have options, especially when it comes time to create an income. Saving money is a great way to create opportunities.
You may want to start your own business, but you will need your living expenses to be covered. You may want to switch careers or take some time out.
Saving money can allow you to do things that you love.
A job and a comfortable income could be taken from you over night. Even robots could take your job, but if you have money saved, it gives you time to breathe and not panic before deciding on your next career.
- Get Out of Debt
You’ll be less concerned about debt when you put into practice money-saving techniques. Prioritizing savings and increasing your saving rate allows you to purchase things with what you have.
You can still pay with a credit card but you now have the money to pay it off immediately. It’s a great feeling to pay with cash, without worrying about paying interest or getting stuck in a cycle of minimum payments.
It is true that people can still get into debt, even when they are saving, but it comes down to a spending problem. If you are prone to excessive shopping, a challenge of no spending can help.
- Prepares you for Life Events
Saving money for the future is also important. Consider major life events that you may face in the future. Having money set aside for these occasions will be beneficial.
Saving money can help with expenses for a new baby, future expenses for your children as they grow up, or even for your wedding. These life-changing events can be expensive.
While your family may help with some of the expenses, you should have cash on hand to cover any unexpected costs.
- Spend Less on Something You Want
You may also want to save up for something that you desire. Although personal finance is about managing your finances, you should not be afraid to treat yourself.
It’s important to find a balance in your spending. You should have a plan to save money so that you can treat yourself from time-to-time. Set aside money to do something fun.
Consider:
Dream vacation for your family
Buy a boat, a jet ski or an old car that you would like to restore
You’ve been eyeing up that new electronic device you’ve wanted.
You can enjoy a fun purchase without having to feel guilty or go into debt.
- Homeownership
Why is it important to save money? If you are planning to buy a house or already own one, you probably know how expensive homeownership can be.
You’ll need money to pay for the downpayment and closing fees if you plan to purchase a house. You’ll also want to save some money for repairs, maintenance or new appliances.
Even if you already own a house, various expenses, renovations and other repairs are expensive. Set up a separate account for household expenses. You can indeed have more than one bank account.
- Money Doesn’t control you
Money can be a powerful force when you have to work constantly for it in order to survive. You are controlled by money, particularly if you live paycheck to paycheck.
When you prioritize saving money, you take control of your finances. Money becomes your tool and you don’t feel the need to chase after money in order to achieve what you want.
Imagine how much more comfortable you would feel knowing that you have at least 6 months’ worth of expenses in savings and you have a plan for your money. Ahh!
- Reduces Financial Risk
Have you thought about the current risk to your financial health? This is not a pleasant thing to do, but it will help you understand your current financial situation.
Let’s say, for example, that you have $5,000 in an account of savings and lose your primary source of income. Let’s say that your monthly expenses are $2,000
In 2.5 months, you will have depleted your savings due to the lack of a stable income. You’ll need to find a way to pay for your bills. You are at serious risk of financial ruin if you only have $5,000 saved.
Saving money and creating an emergency fund will help you avoid debt and falling behind on your bills. You can also avoid declaring bankruptcy, depending on how bad the situation gets.
- Increase Financial Independence
One of your goals in life could be to achieve financial independence and retire early. Many people do not wish to continue working well into their 60s. This is a common goal and dream.
There are many variations of FIRE. I’ve linked to a few of them here.
Barista Fire
Coast FIRE
Fat FIRE
Lean FIRE
Saving money is the first step to financial independence. You will have more chances to achieve FIRE and to be able to quit that job.
- Leave a Money Legacy
You might begin to think about your family’s future when you start growing your family. Bestow offers affordable term life insurance, but you should also prepare financially in other ways.
You can ensure that your family will not be burdened financially by your death by managing your finances, paying off debt and saving money.
You can also leave your family a substantial financial legacy.
- Education
Saving money can help you ease the financial burden of further education, whether it’s to improve your own education or prepare for your children as they age.
Daycare is expensive! The cost of daycare is high! Private schools can be expensive.
Even though there are many alternatives to college, they will all cost money. Saving early and planning for education costs can make life easier for your family in the long run.
Plan your child’s education or your own, if you want to go back to school. Find ways to save for education. For example, a 529 plan. You will be grateful to yourself in the future for having planned so far in advance.
- Enjoy More Fun
Saving money can be a great way to enjoy yourself more.
When I was young, I often missed out on things because I couldn’t afford it. As I started saving money, it was easier to spend money on experiences and do things.
You can feel more free to do what you want without worrying about your finances.
Spending moderation is still important, but if you save consistently you can be sure that you will replenish your savings and not lose too much.
Final Thoughts
It can be difficult to save money depending on your income and expenses, but there are ways to increase your savings rate. Create a budget and analyze your spending to reach your financial goals.
Find out what motivates you to start saving and continue. Are you interested in all of the above options? Do you have a favorite option?
Saving money is essential to your happiness and stability.
