Why saving money is important

Why Saving Money is Important – 5 Reasons to Start Saving Money Today

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Are you overwhelmed by the state of your bank account? Do you feel like you should be saving money, but just can’t figure out how to get started? Every time you get a couple of dollars saved, do you seem to spend them just as fast?

According to Bankrate, the average American has $8,863 in savings. Whether you fall above or below that, it’s important to know that saving money is completely possible. You can take control of your finances and your life. Saving money is crucial to building wealth and eventually living a long, financially stable retirement. This article will cover 5 reasons why saving money is important as well as tips for getting started with saving your money.

Why Saving Money is Important

Saving money helps you live your best life. The way you save (and spend) your money should align closely with your values. There are many reasons why saving money is important – but the top 5 reasons are that it helps you stress less about money, it can improve your health, it helps you make better decisions, saving allows you to do what you love, and it also helps you set a good example for your children.

1. Stress Less About Money

Did you know that 60% of people in the United States don’t have $400 to cover an emergency? A lot of emergencies pop up – from unexpected car repairs, increases in utility bills, stolen bank information, family emergencies requiring travel, unexpected hospitalizations, and much more. While money can’t prevent emergencies from happening, they can help you feel less stressed when they do.

2. Improve Your Health

Money can’t buy happiness – but it can improve your mental health. The truth is that being broke and suffering financially can take a huge toll on your mental wellbeing. Your mental wellness is directly related to your physical health. By saving money and making efforts towards becoming more financially healthy, you’ll also make huge positive strides regarding your physical and mental health as well.

3. Make Better Decisions

Having a savings account probably isn’t going to prevent you from drinking so much with your friends this weekend that you get a hangover – but it will help you make better financial decisions. Let’s look at an example. What would you do if your car broke down today? If you don’t have any money saved, you’d probably choose to borrow money from a friend, put it on a credit card, or be without your car. You might also consider a paycheck advance, which charges a LOT of interest. None of those options are good for your financial health.

It is stressful to owe money to your friends and owing tons to credit cards is also stressful. You probably can’t (or don’t want to) go too long without your car, even if your city has decent public transportation options.

A paycheck advance is expensive, and too often results in being dependent on advances to get by – because you don’t have enough money to pay off the advance AND pay your current bills, so you just end up having to take another advance. It becomes a vicious cycle that is very hard to break free from.

Instead of taking those routes, if you had money in savings that you could use to cover the car repairs, you could simply pay for them yourself, and then replenish your savings account over time. This would save you a lot of stress.

4. Do What You Love

Having money in savings also allows you to do what you love. It allows you to spend your money on things that make you happy.

Have you ever been invited on a trip at the last minute, only to have to decline because you don’t have the money to cover it? You probably spent the entire time watching your friend’s social media accounts with envy. Savings accounts allow you to spend money on what you want, when you want.

But even if you don’t love traveling, you can still save up to pay for your passions when they arise. Maybe you love gardening and want to invest in some higher-quality flowers for next spring when they go on sale at the end of season. Without money that you’ve saved, you may not be able to afford that kind of investment when the time comes. However, saving up for a few months beforehand will give you the cash you need to pay for the flowers on time.

Whether you want to save up for a trip, expensive items, adoption, or a wedding – you can use the money you’ve saved to buy things that matter the most to you.

5. Set a Good Example

For all of the reasons listed, as well as the tons of other reasons it is good to save money, you probably want your children to learn to save money too. Even if you aren’t a parent, by saving money, you can set a good example for your nieces and nephews, or your friends and family. Like we said at the beginning of this article – more than half of folks do not have $400 to cover an emergency. By not allowing the unexpected to blindside you, you can set an example for those around you to follow.

6. Unexpected Emergencies

Life’s simply unpredictable, and you really never know what the next day might bring. From common expenses such as house and car repairs to big, serious emergencies like expensive medical bills or the loss of a job.

This is one of the major reasons to save money and build an emergency fund; being financially secure and stable during difficult times.

7. Being Unemployed

One of the worst things that can happen to you is facing employment where one day, you suddenly find yourself unemployed.

Truth be told, there’s no such thing as job security, it’s merely an illusion. That means you need to have a solid money-saving plan in place for such circumstances. If you save more money now, you can create a great savings buffer to help you cover living costs and expenses as you look for a new job.

8. Retirement from Work

Retirement is inevitable, and at some point in life, we all will go through it. So, why not save money for retirement to prevent yourself from being a burden on your family and stop relying on social security?

One of the many benefits of saving money is that it helps pave the way towards a happier, easier, and more comfortable post-retirement life.

After all, when you are retired, you don’t want to be worrying about money and finances. But the importance of saving money doesn’t end here. In a way, you’ll also help your family and those around you who need money or are going through tough financial times.

7 Tips to Help You Start Saving Money

Saving money sounds easy, right? You just spend less, and throw the excess in a savings account, and call it a day.

However, most people struggle to save money for one reason or another. We’re going to walk you through 7 tips to help you start saving money right away so that you can be financially healthier and hit your financial goals.

1. Open a Savings Account

If you don’t already have a savings account, now is the time to start one. It is significantly harder to “save” money that you leave in your checking account. It is imperative for you to stash it in a completely separate account.

The reason another account is helpful is that it allows you to set a very clear intention with your money. People who say, “oh, I’ll save whatever money is leftover…” will probably never have any money left over.

Once you have a savings account – you can get started. Sometimes the hardest step is just getting started – so as you open your account, put some money in it and do not touch it. Once you have a little saved, it often becomes easier to build upon that. The goal is to create a habit of saving instead of a habit of spending.

2. Name Your Savings Account

Another quick tip is to name your savings account. Most banks and many other financial institutions will allow you to add a name or nickname to your account. You can name your account anything that might help motivate you. Perhaps you could name it “travel” if you’re saving up for travel expenses, or something more humorous like “don’t touch unless you’re dying” if that’s more your style.

Regardless of whether you officially name your account or not, you should set an intention for the money. It is much easier to save money when you’ve labeled it for a specific purpose – like “hobbies” – rather than just putting it back to “save.” Keep in mind though that this stash of money is primarily a tool to help you out in a financial emergency. You don’t want to drain your entire bucket of savings for a vacation, for example.

Some people find it easier to actually create several smaller accounts and divide up their savings between those. If you like that idea better, it may be wiser to use an app instead of an official bank – as banks may have limits on the number of accounts you can have, or they may charge you a fee for each account.

3. Create a Budget or a Financial Plan

If you feel like you never have enough money to save, or you aren’t sure how much money you have available for saving, creating a budget or a financial plan can help you. There are many budgeting methods you can try including:

If you aren’t sure which budget sounds right to you, read the Ultimate Guide to Making a Budget. This resource will give you an overview of each budget type and also provides guidance for beginning a budget. The Ultimate Guide to Making a Budget also includes app recommendations, if you’d like to set up your budget in a more tech-savvy way.

4. Cut Your Expenses

If after making a budget, you feel like you don’t have enough money left over to save – it might be time to cut your expenses. While you might not be able to move to a cheaper home or reduce your car payment immediately, you might be able to cut back on your variable expenses – like groceries, for example.

You can also check with alternative cable and cell phone providers, to see if cheaper options exist. Put any savings that you create or find into your savings account. You were already “spending” it – so you shouldn’t notice it if you’re now putting it in savings instead.

5. Grab a Side Gig

So while working a second job may not be feasible, it might be critical to your financial health if you truly couldn’t find anywhere to cut expenses from and you’ve found yourself spending more money than you make every month.

Your side gig doesn’t have to be waiting tables or working retail on the weekends though. Consider turning your passion into a part-time job. Do you love fitness classes? Consider teaching one. Are you a math wizard or history buff? Consider tutoring high school students in the subject. Are you crafty? Consider an Etsy store.

6. Save it Automatically

If after creating your budget, you have an idea of how much you can save each pay period, have it transferred automatically.

Think of it this way. Does your health insurance ever not get paid? No – because your employer likely takes it out before your check ever hits your bank account.

The same concept can apply to the money you want to save. Simply set up an automated transfer for each of your paydays with the appropriate amount. Worst case scenario, if you end up needing some of that money, you can always transfer it back to your checking account. Be mindful of any fees that could accrue from too many savings withdrawals.

7. Follow Through and Track Your Progress

Once you start saving money, it is important to continue to do it and keep track of your progress. Some people find it helpful to set small rewards for when they achieve certain savings milestones. You obviously don’t want these rewards to wipe out the progress you’ve made in regard to saving, but it can be a great way to keep you motivated.

Another great way to keep track of your progress and stick to your savings plan is to keep a written log of how much money is in your savings account, what you’re saving towards, and how it makes you feel. If you’ve been particularly stressed about money in the past, having this log showing how much more relieved you feel can go a long way when it comes to keeping you on track.

Think of saving like dieting. Diets don’t work very well if we focus on all of the things we can’t have. But, if you change your mindset to one that focuses on all of the positive things that are coming from your improved diet – like your increased energy, your improved mood, and your heightened focus – you will feel more fulfilled and you’re more likely to stick to it. With savings, you have to focus on what that money allows you to do or gives you in the future – instead of focusing on that extra extravagance that you aren’t purchasing right away.

Eventually – something will come along and you’ll need to use a big portion of your savings (if not all of it.) This can also be a discouraging time, especially if you haven’t been saving money for very long. Simply remind yourself of how much better you were able to handle the financial situation by having the money saved – and that should another situation come up in the future, you need to be prepared.

8. Consider Investment Options

When it comes to financial planning for young adults, people often suggest them to begin investing as early as possible.

Some of the most common and popular investment options include stocks, bonds, mutual funds, and exchange-traded funds.

According to the rules of investment, you should invest at least 10% to 15% of your income each year. However, if you have monetary limitations, you can start out with a small amount and gradually increase it.

Saving Habits to Build

If you want to know how to start saving money, you must understand that you need to build a habit of savings and don’t start with a goal that’s too high. You can get discouraged and then give up. Consistency and discipline are the keys. For example, if you want to save up for a house, don’t try to make yourself save so much of the monthly income that you can’t enjoy the activities that you like. Be realistic and allow flexibility so that you are saving a good amount and getting to enjoy going out to the movies once in a while.

How to Start Saving Money

If you need a few saving ideas to help you build the habit, here are three that you can try:

  • Spend less than you make consistently. It doesn’t matter how much you make; a savings habit requires you to let go of the spending mindset. Figure out what you’re spending your money on then reduce those expenditures. A budget is the best way to save money fast because it is an accurate representation of your spending habits and where to start cutting.
  • Save something every day. A habit is built on repeating a new pattern regularly. Make money-saving decisions every day so that you’re thinking about saving constantly. It could be as simple as making your coffee at home or bringing your lunch to work instead of going out.
  • Set up automatic transfers. Have a portion of paychecks automatically transferred into a savings account. You’re not as likely to miss that amount when you don’t have it sitting in your account.
  • See your savings grow. Staying focused on your goal becomes a resilient habit when you see your work in action. Look at your savings account to see your money accumulate, encouraging you to continue your savings habits. Once you can reach your short term financial goals, you will get motivated by saving more.

Where to Put Your Savings

Now you have some saving ideas, but you might be thinking about where to put it? It will be easier to reach your long term and short term financial goals if you put your savings in a different account. There are a lot of options out there that you can choose from. Here are a few different types that might work for you.

Regular Savings Accounts

These types of accounts usually don’t allow any check-writing, and the interest rates are the lowest. Some online banks have higher rates on their regular savings accounts than what you find with a bank.

High-Yield Savings Account

There is a higher initial deposit and limited account access to most high-yield savings accounts. The incentive is that you earn a higher interest rate than a regular savings account.

Certificate of Deposit

CDs offer higher interest rates than typically any type of savings account. You promise to allow the bank or credit union to hold a certain amount for a specified amount of time. If you break that time period, you’re penalized part of the interest accrued.

Money Market Funds

A type of mutual fund that invests in low-risk securities, returns are similar to short-term interest rates. There is no guarantee on interest rates, so research is needed to find one with a good track record.

Easy Ways to Save Money on Extras

Remember, the choice is yours as to what tips you want to apply to your life. Not every one of them will apply to your life. Use any combination that makes sense for you.

Manage Subscriptions

You would think that by cutting out cable, you’re already saving a lot of money. But once you start adding your Netflix, Hulu, Disney+, ESPN sports, Spotify, and YouTube TV, you are already back to a cable bill. Take a look at what you’re paying for and manage subscriptions to those services that you don’t use that often. You can also limit yourself to one or two, then swap out subscriptions once you’ve gotten maximum “use” out of them.

Sign Up for Customer Reward Programs

Just about every national retailer you can find offers a rewards program for shopping with them. You probably don’t want to get all those emails sent to your primary email. However, you can create new Gmail or other mail accounts used only for this purpose. Then check the account for coupons or other savings when you’re ready to shop. Many of these customer reward programs use a point system that allows you to earn points too. You can redeem these points for cash back and other benefits on purchases.

Use Your Credit Cards Responsibility

Racking up purchases that you can’t pay in full is not a savings habit you want to develop. If you have a problem with overspending, come up with ways to avoid the temptation. Leave your cards at home when you’re out and use cash instead. To reduce your purchase impulses, make a rule that you must give yourself until the next day before buying something. You’re less likely to want it after that timeframe, especially because it requires that you must go back to purchase it.

Turn on your autopay bill feature, too, so you never forget to make a payment. You’ll avoid late fees and prevent your credit from being negatively impacted. Every credit card company offers an autopay bill feature so take advantage of it!

Stick to Your Shopping List

A trip to the grocery store without a list will almost certainly lead to many impulse and unplanned purchases. Get into the habit of making a shopping list before heading to the grocery store, and most importantly, stick to that list. The items on your list should fit with your menu plans for the week and prevent having to make multiple trips to the grocery store. Your purchase planning will save you hundreds of dollars over a year. We’ll explain more about how to meal to save money in this later.

Entertain Your Friends at Home

Millennial saving habits can get challenging to implement with this generation with their love of experiences. Going out with your friends for dinner, drinks, and other activities make for an expensive evening that slashes away your entertainment budget. Instead, make plans for friends to come over and do some activities together.

Host a potluck or bbq where everyone pitches in. Some fun activities that you could have could include playing cards, watching a movie, binge-watching a series, lawn games, or viewing a sports event.

Look for Free Events to Attend

Going out with a family of four to the movies is well over a hundred dollars with tickets, popcorn, and drinks. Instead, find events around town that are free to attend. These locations might include museums, parks, walking trails, and other activities. Check out your city’s community calendar for some ideas on free events. Your local library may host events like author readings, book clubs, concerts, and film nights. Plus, they have access to entertainment in CDs and DVDs that are perfect for weekend activities.

Conclusion

Saving money isn’t easy – that’s why most people don’t do it or don’t do enough of it. Everyone knows that saving money is important – but it can be a challenge because it requires discipline and sacrifice.

On your savings journey, you probably won’t be perfect. However, even saving a little here and there can go a long way in helping you head off or reduce the impact of any financial emergencies in the future. Hopefully these tips help to start saving so that you can stress less about money, improve your overall health, make better financial decisions, do what you love, and set a good example for those in your life.

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