A lot of young people, especially those who are just starting to earn money, may not see the point in saving just yet. You may think that you can always save later once you’re earning more or in a higher position at work.
The problem with this, however, is that when you realize that you need to reach a financial goal like buying a house or retiring, it can be too late to start saving.
This is why you need to understand the importance of saving money and make it a priority from the get-go.
So, is saving money important? Yes, it's no secret that saving money is important. But sometimes, it can be hard to get motivated to start saving, especially if you're not sure why you should bother in the first place.
In this blog post, we've outlined some of the reasons why you should make saving a priority, no matter what your age is. We've gathered some of the most important insights from financial experts who saw the value of saving money.
You'll want to read this article to get the motivation you need to start saving and prepare for your future. You can stop living paycheck to paycheck, struggling to make ends meet, and worrying that you’ll retire with little money to get by.
Let’s dive in!
1. Reach Your Financial Goals Faster
Saving money is important because it allows you to reach your financial goals. Whether you want to buy a house, save for retirement, or take a dream vacation, you'll need to have money saved up in order to make your goals a reality.
“Not only does it help you to avoid unnecessary spending, but it also allows you to invest in more important things, like your future,” said Paw Veg, Finance Leader at Financer.com.
“When you have a steady stream of income, you are in a better position to take on larger financial goals and achieve more in life.”
When you get into the habit of saving, you can start to set aside money little by little. This will allow you to hit your goals faster and make the most out of your hard-earned money.
If you don't save, it will be difficult to reach your financial targets.
2. Build a Safety Net Against Unexpected Expenses
Another reason why saving is important is that it can help you build a strong financial foundation for yourself, especially when faced with unexpected life events.
No matter how much you budget, there will always be unplanned-for expenses that pop up throughout the year.
Whether it's a car repair, a medical bill, or even just a night out that ends up costing more than you planned, having money saved up will help you avoid situations where you need to scramble at the last minute to secure these funds.
“With emergencies, it’s not a matter of if things will go wrong, but a matter of when,” said Kimbree Redburn, an Accredited Financial Counselor® and a Financial Coach at Illuminate Financial.
“Having funds set aside, even if it is only a small amount initially, can make difficult situations less stressful and can let an individual react to the situation at hand instead of being paralyzed with money concerns.”
3. Get Peace of Mind
Saving money can provide you with peace of mind. This is one of the most important reasons to save money.
A lot of times, money is the primary cause of stress and anxiety for many people, especially if they’re struggling to make ends meet or have no emergency fund in place.
“Financial stress can devastate your life. It has the potential to destroy not only your lifestyle but also your physical and mental health,” said Adam Wood, Co-Founder of RevenueGeeks.
“When you are prepared for the future and have a plan for your personal finances, you feel more at ease in your life and are able to relax, knowing that whatever happens, you will be prepared.”
Once you have solid savings, you'll have a cushion to fall back on in case you ever lose your job or face a financial setback.
This will help alleviate some of the emotional stress that comes with not knowing if you'll be able to make ends meet.
4. Avoid Debt
Saving money is important because it can help you avoid debt. How many times have you found yourself needing to take out a loan or put things on your credit card just because you didn't have enough money saved up for your financial obligations?
“Credit card debt and other types of debt can quickly spiral out of control, making it hard to ever get ahead financially,” warns Linda Chavez, the Founder & CEO of Seniors Life Insurance Finder.
“Focus on saving enough money so that you can pay for things in cash. This will help you avoid debt and keep more of your money in your own pocket,” Chavez recommends.
If you have money saved up, you're less likely to turn to credit cards or loans to cover unexpected expenses. This can help you avoid high interest rates and fees that come with debt.
5. Achieve Freedom in Your Life Decisions
Having money saved up gives you the freedom to make life decisions without being constrained by your finances.
For example, if you want to quit your job and start your own business, or take a year off to travel the world, you'll be able to do so if you have enough money saved up to cover your living expenses in the meantime.
“Let's be honest: no one wants to be forced to do something they despise all day every day, even if they are paid for it,” said Dr. Frederik Lipfert, Founder & CEO of VPNCheck.org.
“Life is brief, and you shouldn't waste it by wasting your time doing something you don't enjoy. This is when the value of budgeting comes into play. Saving money is vital since it permits you to leave such a job and pursue a career that you would genuinely enjoy. “
If you're still starting out in your career, this might not make sense to you yet. However, many people who have experienced mid-life crises and burnout have found that having the financial security of savings gives them the freedom to make big changes in their lives without as much stress.
“Savings can help you take the leap, quit, and find a career that allows you to thrive,” Dr. Lipfert added.
6. Retire Comfortably
One of the most common goals people have is to retire comfortably and one of the best ways to achieve this is by saving money throughout your working years.
Even if you have a retirement plan or 401(k), it’s still more than likely that you'll need to supplement your income with savings.
“Retirement is the only expense you cannot borrow for. And it’s looking more and more different each day,” said Sara Lohse, director of marketing for BFG Financial Advisors.
“If you look back at our grandparents and even parents’ generations, they had what we call the 3 legged stool—the three sources they would rely on to cover their expenses and live comfortably in retirement. These were a pension, social security, and their savings which only needed to cover about 10% of their living expenses. “
“Now, pensions are nearly extinct outside of government jobs and social security is shaky at best. With only one reliable leg left—your savings—the 3 legged stool model becomes the YO-YO model. You’re On Your Own.”
The earlier you start saving for retirement, the better. This is because you'll have more time to grow your money. You need to save strategically, with tax implications, inflation, and market changes in mind.
If you wait until later in life to start saving, you'll need to save more each month in order to make up for lost time.
7. Build Wealth Over Time
Saving money is important because it allows you to build wealth over time. While the amount of money you have in your savings account may not seem like much, it can add up over time.
This can allow you to grow your net worth and have the security of knowing that your future is covered. If you want to start building wealth, it's important to set aside money every month and make smart investments.
“If you want to build wealth, you need to harness the power of compound interest. Saving and investing as early as you can will enable you to build more wealth over time,” said Alvin Carlos, Financial Planner and Managing Partner at District Capital Management.
8. You Can Have the Option to Invest and Grow Your Money
One of the best things about saving money is that you can then choose to invest it in order to grow your wealth even further.
If you have a large amount saved up, but don't want to cash out your entire investments right away, you can also leave these funds invested and continue contributing to them over time.
“You can earn interest on your investment portfolio or have your property value appreciate over time,” said Sandy Yong, an award-winning author of The Money Master.
“That's why compound interest is the 8th wonder of the world when it comes to investing in the stock market.”
However, it's important to note that investing comes with risks, so be sure to do your research and talk to a financial advisor before making any investment decisions.
When making investments, it’s best to be prudent and not put all of your savings at risk in one basket.
9. Develop Good Financial Habits
Saving money is a good way to develop healthy financial habits. When you make a habit of setting aside money each month, it becomes easier to do so without thinking about it.
This can help you stay on track with your finances and make better decisions with your money.
“Good money habits give you total control over your finances, making informed decisions,” said Carl Jensen, a financial and Management consultant and the founder of Money Mow.
“People who do not have solid money habits are more likely to make financial decisions based on their emotions rather than what is best for them in the long run.”
The good financial habits you develop while saving money can carry over into other areas of your life as well.
For example, if you have the discipline to save, you may also be able to make a budget and stick to it. This can help you stay out of debt and live within your means.
“If you're serious about saving money and reaching your financial goals, it's important to develop good financial habits now,” Chavez added.
How to Get Started with Saving
You want to start saving but you're not sure how to begin. How much should you set aside? Is there an ideal amount you should try to save each month? What's the most effective way to save?
There are a few steps you can take to get started with saving money. Below are some tips to help you get started.
1. Have A Target
When you're just starting to save money, you should have a target in mind. This will help you stay focused and motivated.
Figure out how much you need to save and what you're going to use the money for. This can be anything from a rainy day fund to a down payment on a house.
For example, if you want to save $10,000 in a year, you'll need to save $834 per month. If you want to save for a down payment on a house, you'll need to figure out how much you'll need based on the price of the home and your savings goals.
2. Use Budgeting Tools To Keep Track Of Your Money
Before you can aim to save money, you have to understand first where your money is going.
One of the best ways to do this is by using budgeting tools that can help you track your expenses.
You can use fintech tools like apps which you can connect to your bank accounts and credit cards to make tracking your spending easier.
If you’re not comfortable with apps, you can also use free printable budget templates that you can find online.
Once you have an idea of where your money is going, you can start identifying how much you can afford to save and spend each month.
3. Cut Down Unnecessary Expenses
A lot of times, people don't save because they think that there isn't enough money to start with.
However, you'll be surprised that just by cutting down on a few unnecessary expenses, you can free up a lot of money to save.
For example, if you cut out your daily latte or stop subscriptions you don’t use, you can save hundreds of dollars in a year.
You can also minimize impulse purchases and put that money towards your savings goals instead.
4. Automate Your Savings
The best way to save money is to automate it. This means setting up a recurring transfer from your checking account to your savings account on a weekly, bi-weekly, or monthly basis.
This will help you set aside money without even thinking about it.
Ideally, at least 20% of your income should go to your savings but if you're just starting out, you can start with a smaller amount and increase it over time.
5. Make It a Habit
Finally, remember that saving money is a habit. As such, you should try to make it as automatic and routine as possible. This can help you stay committed and focused on your goals.
Conclusion: Save Money to Achieve Financial Success
Saving money is an important part of living a financially secure life, but it can be difficult to get started if you're not sure where to begin. By following these tips, however, you can begin saving money and working toward achieving your financial goals.
Whatever your reason is or even if you may not think you have a reason to save money right now, it's important to develop good financial habits early in your career. Not only will this afford you more opportunities and choices down the line, but it will also give you a sense of security and peace of mind.