Why should people save money?
The idea of saving money is an important one. Why, indeed, should people save money? Because it is in your best interests to do so. Mature people realize that saving money is a good thing for many reasons, and one of these is that saving money will get you the lifestyle you desire, in the long run, when it counts. Having savings will also make you feel secure and more confident about your ability to cope with changes in life. It is a sign of prudent thinking and mature behaviour designed to make your life easier.
I need to start saving money
You definitely do need to start saving money if you want to achieve and accumulate wealth into the future. Initiating regular savings positions you right at the beginning of your journey to become financially stable and build a sound financial future for yourself and your family.
Having savings will enable you to multiply your income. There is no point of spending all your money on yourself and your present needs. What you need to do to secure a good financial outcome for yourself for years to come is to start putting small amounts of money away each week and begin to grow your money tree.
Imagine if you ate a hamburger and fries every day and didn’t do any exercise while your friend didn’t but used their lunch hour to eat a healthy salad and went for a walk to exercise. At the end of the year both of you are looking at vastly different outcomes. You will be fatter and more unhealthy than your friend who will not only be healthier but will have more energy to put into positive things in their life.
The same logical outcome applies to savings; if you put away a small amount each week, at the end of the year you will find a nice amount of money waiting for you to use as you please. But the amount of money that you can save isn’t the point – the point is that you acquire the habit of saving and thinking ahead.
Start saving young
You will reap the most benefit the longer you save as you will have acquired not only an amount of savings you can put to a good use to make more money but also the right attitude towards finances and responsibility.
Think of it this way – what you don’t have you don’t miss. So the best way to save money is to have a portion of your income that you want to save taken out automatically out of your pay every pay period. You’ll never see the money, therefore you will not plan to spend it and you won’t. It will sit in your saving account and accumulate interest over time. When you’re ready to make an investment, your money is there, waiting to be put to good use.
What are the advantages of saving money?
The advantages of saving money are numerous. You can ensure your retirement by putting the savings to good use by investing your money as well as having a retirement fund. Also having money put away for emergencies will give you a peace of mind. You will avoid stress by having financial security; even a small amount of savings will put your mind at ease. Without savings you might have to borrow to pay for unexpected expenses and this will incur interest, which will then have to be repaid as well as the original amount borrowed.
Savings will enable you to drive a better bargain when buying things. You can get discounts for bulk-buying or even just for paying with cash. It all adds up and if you do not have any negotiating power you will pay the premium price most of the time.
Savings will also enable you to invest in shares and bonds which are a good investment if properly researched. Don’t ever invest any more money that you can afford to lose. In other words: don’t bet the farm on a speculative venture.
Savings will enable you to reduce your interest on borrowings. If you are buying a house or a car, you will most probably have to borrow money from the bank and they will charge interest. After all, that’s how the bank makes money. So, by borrowing a smaller amount, you can get smaller and cheaper interest, and save thousands on large items.
How much of your income should you save?
About 10% of gross earnings is a reasonable figure to aim for but any little bit will help. The main thing is to start saving now and be consistent. If you have a retirement fund into which you are saving already, you are saving already so you don’t have to save at 10% but those who don’t better start saving as much as they comfortably can now.
The secret to saving money
And finally … If you save 10% of your income, invest it wisely and do not borrow large amounts of money for items of depreciating value, you can do whatever you like with the remaining 90% of your income. Your financial success is guaranteed because of compound interest which will make your money work for you. The longer you do it the more money you will gain through accumulating interest.