According to Bankrate, more than half of Americans are behind in saving for retirement, and 21% of Americans are not saving at all.
The importance of saving money is rarely disputed. Saving is one of the most basic (and most repeated) bits of financial advice out there. Despite the importance of saving money, many of us are not following through on that guideline. When it comes to doing the right thing financially, just knowing you should save is not enough.
It is tough to do something consistently without understanding why you should save money and put in all that effort in the first place. After all, saving money takes discipline and a certain amount of sacrifice.
Knowing the reasons to save money can be critical if you want to stick with a savings plan for the long term. If you need help understanding the importance of saving money, consider these key reasons why you should save money now:
- Saving Gives You Freedom
It can be tough to allocate some of your cash to a savings account if you do not have a set goal for that money. Why save for later when you can spend on what you want today, right? But among the many reasons to save money is that even if you do not know exactly what you are saving for right now, you will likely find something you want to save for in the future.
A new car, a new home, a child’s education… the possibilities are endless. Plus, it is critical to have some cash set aside for emergencies and unexpected expenses as they come up.
- Savings Provide Financial Security
“I love saving money because it means financial security,” says Kara Perez, who founded a financial education company that aims to empower women by providing them with the tools and education to reach their financial goals.
“Plain and simple, having money makes your life easier,” Perez says. “I save because I want my future self to have the same great lifestyle I have now, and I don’t want to get caught in a financial emergency.”
Perez recommends putting money in both a liquid savings account where you can keep cash for unexpected expenses and emergencies, as well as putting money into something like a brokerage account where you can invest for the future.
- Saving means you can take calculated risks
Part of the importance of saving money is to build cash reserves so you can take calculated risks with less worry. If you do not have any savings, it may be harder to pursue certain passions. Take starting a business, for example. To be a small business owner, you will need financial backing to get it off the ground.
But if you set a savings goal and contribute to your savings each month, you can explore new opportunities, even if they may temporarily impact your earnings (if you set off as a small business owner, paychecks could be slow to come at the start).