Read on to find 10 very crucial reasons to save money, so you get inspired, get yourself some new financial goals, and start filling up that piggy bank you’ve neglected!
All of us generally know that it’s a good idea for us to save money and not waste it. Despite the prevalence of this “common sense”, most of us still waste huge amounts of money year-in year-out. We do this in many ways, and if we were to actually reflect on that, we might be shocked by what we find.
In early 2020, economists reported that the average American household wastes around a third of the food they buy, adding up nationally to $240 billion as an annual bill. When you split that amount to a per-household amount, it comes to $1,866 a year!
Now, remember that this number is only for food. We haven’t gotten into electricity, gas, and needless frivolity. In May 2019 The New York Post published an estimate on non-essential expenses that Americans have during a year: $18,000!
Which translates into $1,494 per month. Here’s some of the “non-essential” waste:
- Coffee – $20 a month
- Restaurant dinners – $209 a month
- Drinking with friends – $189 a month
- Cable TV – $91 per month
- Streaming services – $23 per month
The more you think about it, the more expenses you could find to cut out of your life and increase your savings. The question for many, however, is why? What’s the importance of saving money? Can’t it wait?
Get the answer to those questions below, as you find out some very good reasons to save money.
10 Best Reasons to Start Saving Money Now
When you’re still in your 20s and 30s, it seems odd to be thinking about retirement, but it is absolutely the best time to do it. You might put your money into a 401(k) or some other long-term savings plan.
If you start saving as little as $100 a month every month for 30 years from the age of 25, you can build up a nice tidy sum well over $100,000 by the time you’re 55, after you factor in compound interest. That’s a nice start to a retirement fund, now imagine doing that with increasing sums every month as you earn more.
2. Cutting Down Debt
The average American is about $92,000 in consumer debt. That’s according to Bankrate information published in February 2021. That sounds incredibly alarming, and some of it certainly is but this figure also includes “good debts” like a mortgage.
Saving money from early on can help you cut that down to the point where only the good and useful debt like house payments remain. Savings can help you cut out credit card debt, student loans, personal loans, car loans, and more.
Reducing your debt burden to just the house and perhaps a few other small areas is the key to smarter financial living, and one of the best reasons for saving money.
3. For Emergencies
As the saying so nearly goes, “stuff happens.” There are things that happen in life that we neither expect nor typically prepare for. It could be a sudden illness in the family that incurs medical bills, or even death and the resulting funeral costs. It might be something less saddening but still expensive, like major car repairs.
Whatever the emergency, the common thread is that large sums of money are needed quickly, and your savings can help with that. Having a large emergency fund is one of the reasons why people save money.
4. Buying a House
You might not be able to scrimp and save enough every month to buy an entire house with the savings, but what you probably can do is make the essential down payment.
Being able to put 10-20 percent (or more) down on a property will increase your chances of gaining good terms on a mortgage and you will enter that iconic status that is such a part of the American dream – home ownership.
One of the good reasons to save money is to get your savings working for you in the longer term. The money you are spending on a house that you own is smart because the money contributes to a real asset that gains in value. It’s not like burning money on a depreciating car or the rent for an apartment.
5. Take Advantage of Higher Interest Rates
Two of the most beautiful words that monthly savers get to know are “Compound Interest”. Find a high-yield savings account, savings bond, monkey market account, or certificate of deposit (CD) and you will earn a lot more interest on the money you save.
Interest rates have been low for a long time, but they can’t stay that way forever. When interest rates do go up, the money you have in savings will start working even harder for you.
6. For a Big Purchase
Not everything about saving is just squirreling money away for the long term or just to buy a house. There are other big purchases that may not on the surface appear to be “smart”, but that are still part and parcel of living a better life, and that’s important, too.
One of the reasons why we save money is to have the capital to invest in larger purchases such as a new car, new personal electronics like the latest smartphone or laptop, or even a fantastic family vacation or a once-in-a-lifetime experience that fulfills one of your ambitions.
In any event, the way to get any of these things is by saving money, the sooner the better. One of the best reasons to save money as a teenager or a young adult is that you’ll have a longer time to build a substantial savings account.
7. Higher Education
Saving for college could be for yourself or for your kids. Some people missed out on college after their high school years, but might still be in a job where they earn enough money to save some each month. If you do that during your 20s, then you can save money to retrain and change your career path, probably to something far more lucrative.
If it’s not for yourself, it can be for your kids’ future college placement; think of the importance of saving money for student loans and how much you can relieve your children from that potential debt burden.
Student debt can be a crushing burden after graduation, but if you have the foresight to start saving now, then your kids needn’t feel it on their own shoulders.
8. To Reduce Stress
Living paycheck to paycheck or under the growing specter of personal debt is a very stressful way to live your life. Each month feels increasingly hopeless as you see more and more that those dreams you have of home ownership, a family vacation, a new car, new appliances, and whatnot are all getting fainter and fainter.
That stress has a big toll on your physical and mental health, and not saving money contributes to it.
A life with a balance of work, achievement, leisure, and freedom is the key to avoiding this trap. It’s nearly impossible to achieve that if you are not saving money from a relatively early age.
9. Helping Family
Saving money is important because it can help you be the person that can get your family out of a jam when times are tough.
None of us want to see members of our family needlessly suffering when they face emergency costs or financial losses. Equally, we want to be there for them when they have a killer business idea but are lacking the capital and the credit to get it going.
You could provide seed money into a new family business that takes off and becomes another great investment for your long-term prosperity. At any rate, saving money now can ensure that whatever your family needs, you can be there for them.
Another great reason for saving money in the bank is legacy. It’s a way to provide for your family after your time in this world is done. It’s a bit macabre to think of this when you’re young, perhaps, but it’s an eminently practical consideration, especially if you are just starting a family.
You can help your kids and other family members have a more comfortable future by providing a significant and meaningful financial legacy for them to inherit after you’re gone. Some of that can also go to your own funeral costs, which further eases the burden on your family.
Whatever kind of legacy you wish to bequeath to your loved ones, it takes a good life of saving and smart financial decisions to make it so. The earlier you start, the better.
Start Saving Now: Reap the Rewards Later
Hopefully, now you are fully convinced about the value of saving money now. Start by sitting and down and working out your monthly income and outgoings, and start analyzing where you can make savings in your own life.