Have you ever been told that you are a saver or spender? Even if you are more a spender (and can’t wait to buy those next pair of shoes with your paycheck), saving money has many significant benefits.
Saving money is necessary to live and is also a great life skill and habit to master at any age.
Saving money may sound like a boring topic, but once you recognize the importance of savings in life, you may decide to change your mind about it.
The importance of saving money may be different for everyone, but here are the top 10 benefits, in my opinion on why saving money is crucial:
- Life can be unexpected
- It takes time to save up for big purchases
- Saving can teach you self-discipline
- Saving money can ensure you prioritize what you really need
- To do more fun things in the future
- To be less stressed out
- To be able to give to and help others more freely
- Saving helps avoid debt
- Saving for your own education or your family’s education
- To travel more (post-pandemic)
1. Life can be unexpected
One of the most important reasons why saving money is important is that life can be widely unexpected.
As we all live through this major coronavirus pandemic of 2020, we are experiencing how life can be unpredictable. Unfortunately, many people in the world are losing jobs, unable to pay for their rent, or are struggling to pay for groceries. Unexpected events could also include having to replace your car, helping a family member who is ill, seeing a vet for your animal, or having to take a trip that requires extra gas and traveling money.
Although I hope that no one has to go through any horrible experience where money is tight, I think that it is essential to prepare for any situation that could potentially arise.
2. Buying big purchases
The second reason why saving money is important is to buy big purchases! Big purchases could include your first home, a new car, a better computer, or a particular item you have always wanted.
Although saving for a big purchase is not instant gratification, you will be much happier knowing that it took time to save for something you have always wanted and that feeling of affording it yourself will be greater than any other.
3. Saving teaches self-discipline
Saving money can be very hard, but it can also teach you self-discipline.
Since we live in a world where material things are at your very fingertips, it can be tempting to spend money without thinking twice about it. Self-discipline can come in many forms, but someone who can say “no” to something they don’t need to buy will benefit them.
An excellent way to practice self-discipline when it comes to saving money is just by starting small. For example, if you usually buy yourself a morning coffee every single day (generally around $4.95), begin by limiting this purchase to six days a week while reducing down a day each month. I’m all for buying things that make you happy, though, and if coffee is one of them, it’s okay!
Moderation is vital and small steps lead to big change!
4. Saving money can ensure you prioritize what you really need
Another reason why saving money is important is that it will prioritize your needs versus wants.
In general, your needs are the things that you have to pay to live. Needs could include your rent, groceries, and insurance. Your wants include things that you don’t need but enjoy to have, including Netflix, excessive Doordashing, gifts, etc.
To learn more about what your needs and wants are and a general guide to saving money, read my article titled “How Much To Save Each Month – A Quick Money Rule.”
5. To do more fun things in the future
My favorite reason to save money is to do more fun things with it in the future!
One of the best reasons why saving money is important is to do the things that money can buy. Saving for fun looks different for everyone, but for me, it includes going to a nice rooftop bar (and not feeling bad about buying that $18 drink), being able to splurge on brunch with my friends, or purchasing that cute shirt that you see in Zara while shopping.
6. To be less stressed out
According to the American Psychology Association, 72% of Americans have felt some type of stress over money, making it the top cause of stress for most people.
Stress is never good and can cause serious health problems that can last a lifetime. Although money can be stressful, saving money can help ease your money stress. If you start to feel stressed out about money, take a deep breath, and try to refocus your mind on what you have rather than what you lack.
Remember that there are always ways to make or borrow money and that you have the power about how you view it. Life is way too short to be constantly worried about money!
7. To be able to give to and help to others more freely
A great reason to save money is to be able to give to others more freely.
Whether giving means donating to a favorite charity, helping out a go-fund-me account that you care about, or supporting a family or friend through a hard time, helping others financially can be a good feeling and very valuable to others.
Although you should always pay yourself first, it is important to think about how you could potentially help others financially when the time comes.
8. Saving helps avoid debt
The debt cycle is a scary cycle that is easy to get trapped into if not careful. Many reasons can cause debt, but debt usually results from spending more than you can afford to pay.
By having a savings buffer and expected budget, you will understand what you can afford versus what you can’t afford.
9. Saving for your own education or your family’s education
The cost of education does not come cheap. The average price of attending college in the United States is $39,889 per student.
Not only is that unaffordable for most individuals and families, but the cost only continues to rise. That number also doesn’t include books, rent, food, or other costs associated with earning an education.
Although saving money for school might take time, it is essential to consider putting money away in a savings account for education. One of the best ways to save money for college is by investing that money into a tax-advantaged savings plan that will grow over time, like a 529 plan.
10. To travel more (post-pandemic)
One of the best reasons to save money is to travel and see the world!
One of the best pieces of advice that I received was from my amazing aunt, who once told me, “You want to work to live, not live to work.” And she is 100% right!
The world is full of incredible places that should be explored and seen – but it does take money to travel. An excellent way to start saving money for travel is by creating a vision board of all the places you want to see, visit, and explore. Once you have that vision board (like the one below), try to make a little piggy bank to help motivate you to save. Even coins add up!
What’s the point of having a savings account?
You may be wondering what the point of having a savings account is. Even if you have a checking account set up, a savings account can help be a safer place to keep your money. Also, by just opening a savings account, you can start heading towards the direction and goal of saving money through that first step.
Savings accounts allow you to earn a small amount of money over time, just by keeping it there. This is because the bank will pay you interest on your balance. The amount of interest depends on the bank and current interest rate, and it is always best to research before deciding on one. Typically, a high-yield savings rate account is the best form of account to offer higher returns.
Why is saving money important for students?
If you are a student, you may think that there is no reason for you to save money while you are studying. Although it is difficult to save money and go to school, it is important to be mindful of your spending habits early before hitting the “real world.”
Students shouldn’t stress out or worry too much about saving money while studying, but instead should be cautious about what things they tend to spend lots of money on. If you are continually going out to eat dinner, try staying in and cooking 1-2 nights a week.
How should I save money if I want to move out but can’t afford it?
Moving out and wanting to start my own life while living at home was something I often felt, especially in my early college years. Although I wanted to go to a four-year university badly after high school, my family was in a position where that just wasn’t possible to do with my twin sister and me.
Our parents told us that we had no choice but to attend a community college for two years. Looking back, community college was one of the best decisions (another post on why for that to come!) But in all honesty, there were many times where I just wanted to move out and get away from my parents.
If you are in a similar position where you want to move out but can’t afford it, here are three things you could do that helped me:
- Get a part-time job. It doesn’t matter what the job is as long as it pays something! Part-time jobs teach you a lot about working hard, customer service, and balancing your time. Many of my best skills have been from the part-time jobs that I held.
- Start saving money where you can. If you want to move out, you will need to start saving. Remember to start small and not to get too worried about what you don’t have.
- Learn about money. The best thing you could do to plan for a big event like moving out is to learn about money! You can learn from books, blogs, and podcasts for free.
Closing thoughts
In conclusion, I hope you can see some of the reasons why saving money is vital for your life and your financial health that you maybe didn’t know about before.
Although saving is important, it is not all you should focus on in life. Life is to be enjoyed making memories, traveling, and living through new experiences. Think of savings as a tool to do more of the things that make you happy.
Now I want to know what are you saving for?
Ashley is a finance graduate from the University of San Francisco and currently works at a financial technology startup in San Francisco that is focused on providing affordable and accessible 401(k) retirement plans to other startups and small businesses. Prior to working at a startup, she was an associate at a large private wealth management firm working with high-net-worth clients. She is born and raised in Orange County, CA, and loves spending time at the beach, in a pool, reading, and with her friends.
[…] If you are interested in learning more on how saving money relates to living below your means, check out my post titled “Why Is Saving Money Important: 10 Benefits of Saving Money and More.” […]