Why is saving money important?
Saving is important. We hear this a lot and in most cases, we don’t see this as a possibility in our financial lives. There’s a lot of bills to pay and rarely enough money to cover those expenses, let alone putting money away for a rainy day. Everyone knows millennials earn significantly less than the older generations even with the side hustles to gain extra coins.
As a millennial, you know you want to save but it always seems like everything is stacked against you. Real talk though? Saving is important, as daunting and challenging as it is. It counts as “self-care”. The thing is, we cannot predict the future, so, having some cash on reserve will definitely help you in the case of an emergency.
You don’t have to dive in with big amounts, start small and ultimately, it will all add up to a big amount. Personal saving experts say that the rule of thumb is to start by paying yourself first immediately when you get your salary, no matter the amount and before settling your bills. This means that 10 percent of your salary should go towards paying yourself by saving money on a short-term and long-term investment or savings plan. Living by this rule of thumb will ensure that you can save every single month, without fail.
Saving plays a huge role in how you function in your daily life and it’s vital to understand why it’s important to save. That way, you’re more encouraged to start working on it sooner rather than later. Below, find a list of a few reasons why saving is important.
Major life events
Life itself is an event, within the life event more events happen. This includes things like weddings, pregnancies, birthdays, graduations, traveling, and more events. While some of these can be planned, some typically come as a surprise. Some of these events can be on the expensive side and you might run on costs you were not aware of. So, it’s important to save for such situations.
Having funds for emergencies
Financial emergencies are always unexpected, hence they’re called “emergencies”. These can be anything from unexpected health issues to car issues, salary cuts, and more. Ideally, you should have between three and six months’ worth of living expenses set aside.
If you don’t have an emergency fund, you may end up having to take out a short-term, high-interest loan or carry a balance on a credit card at a high-interest rate, which will in turn have a bad impact on your credit score.
Long-term financial security
Financial security is something we all aspire to and hope to achieve. It’s something that’s attainable to everyone, all it takes is a little bit of discipline.
Saving up as a safety net is a really good idea. Without savings, how will you weather any financial storms? Developing a savings culture early on in your career ensures that your future doesn’t look so scary. Imagine if you start saving 10 percent of your salary, or the tips you make from that waitressing job you do while furthering your studies or from your side hustle. There’s a lot of potential here, use the opportunity to tap into it as soon as you possibly can.
Looking back at the above point, it’s a clear indication that we worry a lot about our finances, which is why we aspire to achieve financial security. Financial stress will keep you up at night or worse, wake you up in a cold sweat. It is important to look at how your stress manifests as a result of debt or not having enough money to pay the student loans you find yourself buried under. It’s not enough to simply ignore and “keep it moving”, as this can result in adverse health issues, which will exacerbate because again, you come to the realisation that you cannot afford that too.
The most appealing benefit of being an adult is the independence and freedom it affords you to do what you want, how you want, and when you want. But if you have financial constraints, doing this can be incredibly hard. And, the more debt you accumulate, the less independent you become and your life becomes about paying bills, bills, bills, and more bills. So, to achieve independence, you need to start saving. Forget what your friends are saving for and find a reason that resonates with you and you alone. That way, you have a goal best suited to your needs and you’ll be more motivated to keep saving. The more it becomes a habit, the more the shackles of bills loosen up and you’ll reach your financial independence in the end.
Creating a saving culture helps mitigate for instances like a COVID-19 lockdown, being restricted from your normal day to day. For most people, the economic impact of a lockdown has caused more harm than imaginable, and having no savings has played a big role.
So, it’s important to save as it helps with unplanned events that can come in the middle of the month when you have maxed out your monthly salary. When you save, you can sustain your living beyond your monthly earnings. Saving not only prepares you for major life events, but it also gives you financial independence, security, stress relief, and financial freedom.
And remember, it’s okay to start small. Many people feel they can’t save unless they save a lot at once, which can be a lot harder in reality. Particularly, if you’re living paycheck to paycheck but if you keep the “go big or go home” attitude when it comes to savings, you may never start saving at all. So, start small.