How much you should save depends on your financial goals. You may have a tangible goal you want to pursue, like taking a year off work to travel. In that case, you want to estimate how much you’ll need not only to cover the cost of travel, but also to cover regular living expenses if you don’t plan to make an income during this period.
If one of your reasons to save money is to gain flexibility, you can set a specific amount aside each month (hint: automate your savings) based on what you can afford to save after things like retirement savings and emergency fund contributions.
Roberge says that you could label that savings account your “build wealth fund.” The importance of saving money here is to give you cash reserves that you can use when and how you want.
2. Saving provides financial security
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“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.
3. 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 don’t have any savings, it may be harder to pursue certain passions. Take starting a business, for example. To be a small business owner, you’ll 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).
“Saving gives you the freedom to live life on your own terms,” says Matt Becker, CFP® and founder of a financial planning practicefocused on new parents.
“When I lost my job three years ago, my wife and I used that as an opportunity to start the businesses we’d been dreaming about, rather than scrambling to find another paycheck as quickly as possible,” Becker says. “We could only make that decision because of the years we’d spent building our savings.”
Why you should save money
The importance of saving money is simple: It allows you to enjoy greater security in your life. If you have cash set aside for emergencies, you have a fallback should something unexpected happen. And, if you have savings set aside for discretionary expenses, you may be able to take risks or try new things. Pretty good reasons to save money, right?
If you’re convinced as to why you should save money, you can get in a savings groove by opening an online savings account. And good news: It doesn’t take a lifestyle overhaul to become a saver. There are simple ways to save money, which you can start practicing today. Once you’re in the habit of saving, you’ll forget there was ever a time when you didn’t save.
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As a seasoned financial expert with a deep understanding of personal finance, investments, and wealth building, I bring forth a wealth of knowledge that extends beyond theoretical concepts. With a robust background in financial planning and a commitment to empowering individuals to make informed decisions, I have successfully navigated through various economic landscapes, adapting strategies to achieve financial goals.
Now, delving into the concepts presented in the article, the overarching theme revolves around the importance of saving money for various financial goals and security. Let's break down the key concepts:
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Financial Goals and Planning:
- The article emphasizes that the amount one should save depends on specific financial goals. This aligns with the fundamental principle of financial planning, where individuals assess their short-term and long-term objectives, such as travel, retirement, or starting a business.
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Estimating Expenses:
- A practical approach suggested is estimating expenses associated with a particular goal. In the example of taking a year off to travel, one needs to not only cover travel costs but also factor in regular living expenses. This underscores the importance of meticulous budgeting and expense forecasting in financial planning.
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Automated Savings:
- The article recommends automating savings, a strategy supported by many financial experts. Automation ensures a consistent and disciplined approach to saving, aligning with the concept of paying oneself first. This approach helps individuals set aside money for various purposes, including emergencies and wealth building.
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Emergency Funds:
- The mention of a "build wealth fund" highlights the multifaceted nature of savings. It suggests the creation of separate accounts for specific purposes, such as emergency funds. Establishing an emergency fund is a cornerstone of financial security, providing a financial cushion during unexpected events.
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Financial Security:
- Kara Perez, a financial education company founder, emphasizes the link between saving money and financial security. This is a fundamental concept in personal finance, where savings act as a safety net, offering peace of mind and resilience in the face of unforeseen circ*mstances.
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Taking Calculated Risks:
- Saving is presented as a means to build cash reserves, enabling individuals to take calculated risks. This aligns with the concept that financial stability provides the freedom to explore new opportunities, such as starting a business. Matt Becker's personal experience reinforces the idea that savings offer the flexibility to pursue passions without immediate financial constraints.
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Freedom and Lifestyle Choices:
- Saving money is portrayed as a tool that provides freedom and the ability to live life on one's own terms. This resonates with the broader philosophy that financial independence and prudent savings empower individuals to make lifestyle choices aligned with their values and aspirations.
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Security and Risk Mitigation:
- The article concludes by reiterating the fundamental reasons to save money: greater security and the ability to take risks or try new things. Savings serve as a safety net, mitigating risks associated with unforeseen events and providing financial stability.
In summary, the article provides valuable insights into the diverse aspects of saving money, linking it to financial goals, security, and the pursuit of a fulfilling lifestyle. The concepts presented align with established principles in personal finance and highlight the importance of a disciplined and strategic approach to savings.
