Saving money can be a challenge, especially when you’re just starting out in your career or when money is tight. But having financial freedom means being able to invest in your future, buy the things you need and want, and pay off debt more quickly. As you begin to learn how to start saving money, keep these top five benefits of saving in mind.
1) Gives you more control over your finances
No matter what you may tell yourself, there are benefits to setting money aside. One big benefit is that it gives you a degree of control over your finances that can be hard to come by when operating on a strict budget. When the unexpected happens and an expense pops up out of nowhere, having some money set aside will help you to still make ends meet even if it’s tight for a few weeks or months.
A savings account is also a great way to make sure you’re saving for your long-term goals. Whether you’re looking forward to retirement or saving up for your kid’s college education, an emergency fund is something everyone should be working toward.
2) Helps you to become more disciplined
Saving money can take time, especially for people who struggle with self-control. But the benefits of saving money far outweigh the difficulty. The more disciplined you are with your spending, the easier it is to have some emergency funds on hand and make smarter decisions about your budget. Knowing that you have a certain amount of savings in place can help you cut back or change your spending habits altogether so that you’re not tempted to make an impulsive purchase just because you have money available to spend.
Having money set aside in a savings account will help you make more financially responsible decisions and keep you from making impulsive purchases because you know that your hard-earned money is set aside for emergencies or other purposes. You can also start saving for large purchases that may cost thousands of dollars, such as a car or house down payment. Even if you only have a small amount saved up, it’s still better than nothing at all! Start building your emergency fund by setting aside an amount each week for your savings.
3) Helps you plan ahead
Saving money helps you plan ahead for the future. You don’t have to worry about paying an unexpected bill because you already had that covered. Setting aside a little extra cash in a separate account makes it easier to set aside larger chunks at a time without feeling like you’re living paycheck-to-paycheck. Your money will grow because left untouched, it’ll work hard for you! The power of compounding can make your savings go much further than if you were saving $10 every month. Even though this might not seem like a lot, when added up over time with interest on top, those few dollars could easily turn into hundreds or even thousands of dollars over time.
4) Better security in old age
When you save money you have the ability to be more financially independent in old age. With a sufficient amount of savings and assets, you won’t have to rely on outside help or live solely off your social security benefits. You’ll be able to maintain a higher standard of living as well as continue with your lifestyle choices even if something goes wrong, such as being unable to work or having an accident. This can lead to less stress and anxiety when it comes time for retirement, which is a major benefit for those on the older end of the age spectrum.
One way to look at it is through a different lens. If you don’t save money, you’re essentially throwing your money away. For example, if you spend $50 on a nice dinner one night and simply don’t save that money instead, it’s basically gone forever. Whereas, if you invest that $50 in an index fund that makes even just 4% annually over 30 years (which is a very conservative figure), after 30 years it will have grown to nearly $140 – a value of more than 10 times what you originally spent. There’s also something to be said about making more money with compound interest but that’s a whole other topic…
5) Prepares you for future life events
#1. Savings are a safety net if you suddenly lose your job or come down with an illness. This is especially true if you’re still a few years away from retirement, in which case a savings account will help ease the burden of income lost.
#2. They provide peace of mind by ensuring that you’ll have enough money to cover any future financial needs should they arise. Perhaps your children need braces and orthodontia or you want to be able to afford healthcare after retirement? A savings account can help with both potential costs that could run into the thousands without warning.
#3. Providing for children’s education provides for their future and puts them on equal footing as other children their age when it comes time for college and post-graduate study opportunities.
#4. Savings allow you to have some control over finances during hard times and make it easier to bounce back from emergencies like natural disasters, medical bills, and other unexpected expenses.
#5. A reserve of cash set aside for any contingency makes people feel more confident about spending money now because they know there’s something saved for tomorrow – just in case!