There are so many answers to this question of “Why is saving money important” One most notable answer is to have something to rely on in times of emergencies.
Most country economy are uncertain, they might seem fair in the present but may become worse in the days ahead. In other words, nobody can predict the future.
Therefore, in other to overcome the fear of unexpected situations that needs financial solutions saving money becomes important. (You can read here the simple ways to save money each month)
Below are some reasons why saving money is important
1. Unlimited access to financial security
Setting aside some portion of your monthly income could help you have enough money to make future expenses. For the present, you might be spending according to your budget as the income keeps arriving.
When there is a serious demand for making emergency expenses then you are rest assured of having a backup. Having savings will give you hope of resolving issues that involve financial settlement.
2. Savings could help you to avoid debt
Once you have some savings, there is no need to go borrowing when an urgent need to make expenses arise. This is another reason why you are saving, to avoid incurring debts.
However, when you borrow it may also lead to paying interest. Therefore in other to avoid interest on a loan it’s best to save.
3. To give you hope for retirement
Aside from building investments, for future financial freedom, some people may prefer to keep saving until retirement. That is the age when they will no longer participate in active work. In this case, they would have to save enough to see them through.
This method of saving money still works once you have saved enough, then at retirement, you can start up one passive income.
4. It encourages you to take on new challenges
When you have savings, there is the hope of solving problems and dreams of setting goals that is achievable.
You could start thinking about making more money. For instance, you would want to set up a new business or try out a new investment.
Irrespective of the risk involved you would want to take the challenges.
5. To have something to rely on in times of job loss
Nothing is permanent in life and one of the unexpected circumstances is losing a job. Therefore when you are on the job, it is very important to save.
What you save will help to sustain you between the time of job loss and getting a new means of income.
6. To help others in need
Your savings may not limit to the sole purpose of solving your needs and emergencies. They may be an emergency need to help a relative or friend then you could do that from your savings.
For instance, a loved one might be sick or in urgent need of financial assistance. Then you can help the fellow from your savings.
7. To build future wealth (Investment)
In most cases, it may not be advisable to start building investments from loan grants. Although you may still need to borrow it is more advisable to start investing from your savings.
You can come up with a plan to build a certain investment, then you also plan on how to save for it. This method of investing from your savings will help you focus more on achieving your plan. Rather than paying for the loan,].
8. To live happily
The thought of having some money in your bank account could give you some peace of mind especially when you have no one to contend for you.
You can pay emergency bills and miscellaneous from your save ups. The most important thing is to make sure you do not lack money in your bank savings.
What this means is each time you spend from your savings you also try to replace and save more.
9. Savings can serve as a legacy
Most parents usually save up a huge amount of money and store them in the bank for their children. When it is time to allocate their inheritance they can include it in their will.
In another instance, when the breadwinner of the family dies leaving some saved amount of money, it can be a legacy to the children
10. Savings also determines an individual’s net worth
When calculating an individual’s net worth we include total savings comprising both cash at hand and cash at the bank. Although when calculating an individuals net worth we also include assets but savings is more valued to assets.
This is because assets can depriciate with time thereby losing its worth but savings remains and still yealds interest adding more value.
What is savings?
It is setting aside some portion or a whole of your income for a certain purpose or future expenses. When you have savings your mind is at peace.
Putting away money today and withdrawing it the next day does not guarantee saving money. It is the same thing as if you have not saved at all. Saving is putting away some portion and withholding it for a long time which may be utilized at your retirement age.
Savings is indeed very important but all the same, some factors may hinder you from saving. Those factors include
Responsibilities: When you have too many obligations to take care of and you are left with no other option but to respond to them all. In the process of doing this, you may overlook the necessity to save.
Low income: When an individual’s total income both investments salaries and other passive income is poor compared to expenditure.
Reckless spending: When you do not always check and monitor your expenditures, spending without making a budget. You are likely not to have any savings.
When you do not have plans to save some portion of your earnings each month.
Saving money is important, but when you are facing the above challenges it may be difficult to save.
This should not discourage you from saving but you can read up on 10 simple ways to save money each month