Have you ever just randomly had this thought – What should I save money for? Isn’t it just better to spend everything that I make and enjoy it today rather than thinking about the future?
When people think of “saving”, they usually think of the next car or the big upcoming vacation. For pretty much everyone, saving means compromising on certain things.
And let’s be honest, that’s also true and not a very pleasing thought. If you want money left in the bank, it means that you have to cut out some expenses.
Saving is the fundamental pillar for the effective administration of our personal finances. That’s why starting to save is one of the most important decisions that we can make in our lives.
Saving is not a passive act, but an active decision that requires discipline and perseverance.
Are you still not convinced about why you should start saving money as soon as possible? Don’t worry, we’ll list you some very legitimate reasons to do so.
Important Reasons Why You Should Start Saving Money
To Have A Comfortable Retirement
Retirement is often one of the main reasons why most people like to save. And it is perhaps also, the most complicated topic when it comes to saving because retirement is a subjective term and can mean different things for different people because of all the different variables involved.
Especially when we are young (or at least feel young), we do not want to think about the future. We would much rather enjoy life now than worry about our retirement.
When we retire and leave the labor market, it is more than likely that our income will be reduced. If you don’t want your current lifestyle to suffer in the future because of weak finances, it is essential to have savings and start saving now. Savings can make our retirement wonderful and worry-free!
To Be Prepared For Unexpected Adversities
No one knows for sure what the future holds. An illness, an accident, a theft, or a major car breakdown. These unexpected events can throw a household economy completely off rails.
However, this does not happen when we have money saved up to deal with them. Saving makes it possible to deal with unexpected expenses without them becoming a major burden on our finances.
Experts recommend putting aside at least two or three net salaries as a reserve for such circumstances. Depending on how much security you need, you can always keep a larger buffer, for example, six months worth of salaries.
Tip: It is best to put your emergency reserve or savings in a separate bank account, to which you transfer a monthly amount or if you don’t have a regular income, you can deposit money as and whenever you can. This money should not be touched for any regular expenses and should only be used in case of planned big expenses like emergencies or travel fund etc.
To Finance A Project
We all have some projects in mind for the longer term that we would like to fulfill one day: to study, to set up a company, or to expand our current business.
These projects are much easier to execute if you have some sort of security backing you in the form of savings. Savings are necessary to execute any project in the long term.
If, for example, you want to set up a company, with savings we will be more sure of our decisions and less afraid of failure, which most definitely contributes to a faster take-off.
Turning a profit from your savings is really fulfilling and can help you realize your bigger dreams.
To Cancel Debts
Savings equals solvency. If you have debts, it is important to set aside a part of your savings to pay them off.
By doing this, you will avoid paying a significant amount of money in interest and, also, you’ll breathe easy knowing that you do not owe money to anyone allowing you to focus on the more important things in life.
To Protect Yourself In Times Of Financial Crisis
We all like to be optimistic in life but let’s not fool ourselves, there will most certainly be a financial crisis at some point in your future life. The economy works in a cycle: sometimes it grows and sometimes it decreases. And our personal finances work in a similar pattern.
For this reason, it is important to have money saved to protect ourselves in times of economic crises. If we encounter a salary cut, get duped by someone who borrowed money or even worse, become unemployed, it is better that we are caught in these situations with the maximum possible savings. That is why it is important to start saving as soon as possible.
To Leave A Heritage In Inheritance
Becoming a parent is one of the most special moments of our lives. And from that very exact moment, we start planning for what we leave behind for our children when we depart.
It is our responsibility to leave a good comfortable life for them. Our children and close relatives will thank us for leaving them a consistent heritage in the form of an inheritance.
To build up this wealth, it is essential to save during our working lives. It is not a question of accumulating wealth in order to be the richest in the cemetery, but of thinking about the future of the most important people in our lives when we are no longer with them.
To Plan Major Life Events
A wedding, children’s education, a holiday. All such major events in our life cost money, so if we save we can plan them with much more peace of mind and without the need to get into debt.
Think about the wedding of your dreams. Wouldn’t it be much easier to carry out with money saved in the bank?
As you’ve seen, saving is better than living just for the moment. And in case you haven’t yet, we recommend that you get your act together and start allocating a part of your income to savings. You can start with as little as 10 percent. It all adds up in the longer run!
To Fund Big Purchases And Ventures
It is also easy to understand why it is necessary to save money in advance for major purchases such as a piece of new living room furniture, a car, or even a new house!
Unfortunately, it has become fashionable to finance a new venture on credit or to buy that next flashy iPhone immediately instead of saving for it.
However, a bank won’t loan you money for a new house till you can pay for the downpayment. And to afford such a significant amount will require you to save up systematically.
As we can conclude from all the reasons listed above, it is (quite reasonably) a wise decision to start saving and investing money as early as possible. Reserves grow more and more with the compound interest effect and the time factor is of utmost importance here. The sooner you start to save, the better it will be for you.
Finance experts recommend saving at least 10 percent, better still 20 percent of net income, and (if the emergency reserve is filled) to invest, for example in the stock exchange, mutual funds, etc.
We hope that this article will motivate you to start saving, however little (or more), as soon as possible.
Are there any other personal or professional reasons that you save money for? Let us know in the comments if we missed anything!