All the Benefits of Saving Money
Updated: May 3, 2020
Knowing the benefits of saving money will help you plan out a strategy that will be more effective for your personal situation.
Saving money requires a lot of discipline and a strong determination is not a difficult habit to adopt. The benefits of saving money are extensive and the strategies you choose will be determined in part by what point of life you’re in, whether or not you have any savings, or if you're starting from scratch. These factors will determine how aggressive or lack thereof you need to be. Perhaps you are simply looking to build a rainy-day fund. Whatever the case maybe we can help you decide what to consider. Saved money can be leveraged and offer a wide range of benefits.
These factors will determine how aggressive or lack thereof you need to be. Perhaps you are simply looking to build a rainy-day fund. Whatever the case maybe we can help you decide what to consider. Saved money can be leveraged and offer a wide range of benefits.
1. Helping in emergency situations – Sudden illness or accidents, your central air dies, etc. A crisis is obviously unforeseen so, when they happen, the assets required are typically not part of the standard spending plan. There will be a strain to search for additional money at a spur of the moment.
This issue can be intensified if the crisis is an unexpected health issue, fender bender, or a life or death situation. Gathered investment funds and or savings can go far in easing the circumstance and getting the necessary treatment right away. Different crises that could be financed through investment funds are critical house fixes, vehicle fixes, and in a worst-case scenario burial service costs.
All things considered; such crises require large amounts of cash. In the event that one comes up short for the necessary funds, they can consider applying for a loan with an authorized loan specialist. This will assist with the financial burdens for the time being.
2. Sudden job loss - Job loss is usually traumatic and can leave a family in a huge crisis. Saving can be a great cushion of comfort at this time of sudden loss of income. It is usually very difficult to borrow money when one is left jobless. Therefore, those who have not been wise enough to save will be down to zero completely after a job loss.
3. Spending flexibility - Let’s say your son decides he wants to get involved in RC cars or get a train set to bond with his dad. Some of these hobbies can get quite pricey and having the financial flexibility can really be helpful and allow you to be more apt to follow through without excuses with such an important endeavor.
4. Help to finance vacations or any large know expense - Having accumulated savings can make the dream of going on vacation a reality. Family and friends can enjoy a time of rest, relaxation and bonding together. Using savings to go on vacation is a much better option than getting into debt.
5. Limits debts - Having some amount in savings can help one to limit the amount of debt burden that they have. Savings can be used to finance certain expenses instead of using a credit card. This will definitely limit the amount of debt liability and will also save the amount that could have been spent on interest. Savings also help one to avoid taking emergency loans when urgent situations occur, further limiting existing debt.
6. Gives financial freedom and peace of mind - Accumulated savings gives one peace of mind and helps him or her to enjoy financial freedom. There is a comfort in knowing that there is a buffer than can be used if funds are needed urgently. This is in contrast to those who live from one salary to the next. They immediately become stuck financially if any unexpected expense arises.
7. Helps prepare for retirement - Another important reason to save money is your retirement. The sooner you start saving for retirement, the less you will have to save in the future. You can put your money to work for you, especially if you take advantage of the magic of compounding interest.
For example, if you opened an account with $1, deposited $100 every month for 10 years, and earned a 6.5 percent interest rate or return, you'd have $16,842. Keep it up for another 10 years (20 total) and you'll more than double your money to $49,045. After 30 years of just $100 each month saved, you'd have $110,624 (including compounded interest) from your $36,000 investment.
As you continue to contribute over time you will be earning more interest on the money you have, than you put in each month. You should at least be contributing up to your employer's match and eventually, you should contribute 10 to 15 percent of your gross income. You can contribute to your 401(k) as well as an IRA.
8. Helps finance further education - Accumulated savings will enable one to further his or her education without having to source funds elsewhere. This will help one to progress quickly in his or her career. This is especially beneficial for those who may not be eligible to apply for a personal loan or education loan.
9. Helps finance a down payment on a mortgage - Save money for a down payment on a house. Your negotiating power goes a lot farther when you have a significant down payment towards your home. You will receive better interest rates, and be able to afford a bigger home.
Don't worry if you don't think you can save enough for a 20-percent down payment. Certain government-backed programs offer down payments as low as 3 percent or no down payment at all, and the national average, according to The Lender's Network, is 6 percent.
You can determine how much you save towards this each month depending on your circumstances. Saving for a bigger down payment will help you move into a better neighborhood and make it easier to buy your dream home. It also reduces the amount of your mortgage, making your payments more affordable.
10. Helps to finance a wedding - Many couples end up postponing their ceremony because of financial constraints. Having accumulated savings enables the couple to plan their day confidently. Using savings to finance a wedding is a much better option than taking a wedding loan because the couple will start their married life together free from debt.
11. Helps finance a down payment for a car - Depending on the amount required for the car, one can use savings either to purchase the car in full or pay the initial deposit for a car loan. It is more ideal for one to budget for a cheaper car which can be fully financed by the savings, and avoid taking the car loan. This will enable the buyer to save the money that would have been spent on interest.
12. If you borrow money from your savings is interest-free - If you have a healthy amount saved up and you decide you would like to get a motorcycle. Rather than borrowing from a bank and paying that high interest, borrow from yourself. This does take discipline to pay it back, however, if you come up with a payment schedule and plan it out, it may be easier for you to execute that proposition. For some folks this may not be a good idea, so really think about it.
13. Save to Maximize Interest Rates - When interest rates go up, put your money into savings vehicles that pay the highest rates, whether you use Certificates of Deposit (CDs), a high-yield savings account, or another investment that pays a high enough rate to offset inflation.
On the flip side, when interest rates rise, your credit card rates will also go up. In this case, it makes sense to fatten up your savings account before interest rates go up so that you can pay cash for expenses instead of relying on more expensive credit.
Let's face it the older you get, the greater the odds of potential health issues and the more money you should have saved up. So if you are getting up there in age and your savings are less than you desire, you may want to consider being more aggressive about saving - even if it is an extra $20 a week, 80/mth, 960/yr and $4800/5 yrs can help. On the other hand, if you in your twenties or thirties you have more time. It does not mean you should not begin saving, however you do not have to be more aggressive if you so choose. So regardless of your age put together a game plan for you that is achievable and take small steps consistently and you will get there.
If you are just not good at "bootstrapping" and you would like a software that literally does it for you. I would recommend a program called (M1 Finance (Click here to get information).
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