Why should you even toil and save money if you earn well and can easily meet your expenses? It is the question that requires clarification because many people do not develop the habit of saving money, which leaves them with nothing when their income suddenly dissipates or when they retire. In this article, we will outline five reasons why you should save money.
1- Save for Emergency Situations
If you don’t save money, you will struggle when you encounter an emergency situation. So, to have sufficient funds for emergencies, you need to set up an emergency fund. An emergency situation can result in sudden large expenses, such as job-loss, health emergency, accident, or any other unexpected situation. You should save at least six months’ worth of expenses in your emergency fund, which should be enough for you to encounter emergency situations.
2- Build your Retirement Savings
You should save some part of your earnings each month and contribute it to your retirement fund. The funds you put in your retirement fund will grow with time, allowing you to have money at the time of your retirement. If you don’t save money for your retirement and just spend your money haphazardly, you’ll struggle after your retirement. Even if you have an employer-sponsored retirement fund, you can top up that fund with other private pension funds to save up money for your retirement.
3- Save for Big Purchases
Big purchases, such as buying a car, paying for your child’s college or tuition fees, and paying a down-payment of your mortgage, require you to regularly save money beforehand. An ideal way to do this is to set up a sinking fund. Setting up a sinking fund prevents you from using your emergency funds for your purchases. You can put the money in a savings account so that the money you put in it earns interest and grows while you regularly deposit money into it.
4- Save on Interest Expenses
When you save enough money to meet your planned and unplanned expenses, you don’t have to take out loans that involve exorbitant interest charges and often require collateral as well. Also, you will earn interest on the money you save, which can help your money grow with time. So, savings will not only save you plenty of money in interest charges, but it will also make you self-sufficient.
5- Save for irregular and Recurring Expenses
When you develop the habit of saving money regularly, you always have money saved up for meeting your irregular as well as recurring expenses. You won’t fail to pay your irregular or repetitive expenses as you can use your saved money to fund those expenses.
Conclusion
It is evident from our discussion that saving money is of paramount importance in meeting your short and long-term financial goals. You need to regularly save money for funding emergency situations, building retirement savings, and making big purchases. Without saving money, you’ll need costly loans to meet your expenses, which can further ruin your financial position.
Comments