The importance of saving money should not be taken lightly considering the role it plays in achieving financial stability. Saving is basically when you spend less than you make, the money left over in your savings. Whatever may be your financial situation, saving money is always a smart move. Savings can help meet unexpected costs and help plan for the future. It is a short, medium, and long-term look at your plans and how you are going to finance those plans.
Importance of Saving Money:
- Can help achieve your goals
- Provides security knowing you have a cushion financially
- Provide options to spend when you may not have been had you not saved
There is a long list of reasons to save but a lot of people don’t save regularly or not at all. Most of us would like to save but think we are unable to put money aside. It could be because you are already spending all the money you earn on necessities. While you may feel you don’t have any money left to save, there are ways you can find money to save.
Budgeting is a good place to start. Have a spending plan, and the best way to do that is to start budgeting. Budgeting provides control over your spending and that control, in turn, enables you to save. It is important to realize that we ourselves are the biggest hurdle in our path to saving. Look at your spending and find ways to squeeze out savings.
Automatic saving plans are a good place to start. Most if not all institutions provide options to transfer a portion of your paycheck directly into your savings accounts automatically every month. You will feel the crunch when you first start automatic savings but you will soon find ways to adjust your spending to your new after savings income. Don’t think of this in terms of denying yourself of your hard-earned money, think of it as paying yourself first before your paycheck disappears paying bills.
High-Interest Debts and Saving
While it’s great if you have decided to save it will amount to nothing if you are paying high interest on loans such as credit cards. You may be paying more on interest than you are saving. The money you are paying towards interest payments is a saving opportunity lost. Car and mortgage payments are medium and long-term loans that are usually not high-interest loans, don’t try paying off these loans before you have tackled credit card debt.
How Much Should I Save?
If you have realised the importance of saving money, you are probably wondering how much should I save. As a rule of thumb, it is generally considered saving 10% of income a good place to start, if you can save more even better. Always make regular contributions to your savings, if you put aside 10% every month you will likely reach your savings goals a lot quicker.
Should I Save in Savings Accounts?
Keep in mind that simply keeping your money in a savings account may not be the best option. Make sure you are getting the most out of your savings. Your money should be earning more than what simple savings accounts offer, in the current economic climate with low-interest rates savings accounts are not the ideal place to keep your savings. Look at other saving options, talk to your bank.
There is no set rule or secret to follow when it comes to saving money. It all depends on your circumstances and your savings goals but it is always better to start as soon as possible. Keep in mind that saving even a small amount is better than saving nothing at all. It is not going to be easy, taking money every month that could otherwise be used towards something you really want is hard. A lot of discipline is required when it comes to saving. Now that we have discussed the importance of saving money, make saving a habit.