Saving money can be challenging. It can be tempting to deal with expenses by taking on debt, either by getting credit cards or through loans, especially when interest rates are low. But creating a savings account is critical to financial security and independence. Although it can be difficult to sock away money, you’ll thank yourself down the road for saving rather than racking up debt. Here are some of the top reasons why saving is the best choice.
Establishing Financial Security
Creating and maintaining a savings account means that you’re prepared for whatever life might throw at you. For example, if you lose your job, you’ll need a savings account to keep paying your bills as you look for a new one. Or, if you have a medical emergency or some kind of accident, you’ll likely have some pretty sizable expenses. Saving also makes it easier to invest, helping you establish income streams to use after you retire.
Pay for the Fun Stuff
Finances don’t have to be all work and no play. Keeping a healthy savings account means that you can occasionally splurge on something you enjoy, whether that’s a large purchase or a vacation, without taking on debt and damaging your financial health. You can set savings targets in line with things you want and work toward them.
Dial Down the Stress
Money matters are stressful. Millions of people lie awake at night worrying about money, and finances may lead to strife among married couples. There’s no way to avoid stress about money altogether, but you’ll sleep better knowing that you have a financial safety net in case of emergencies.
Take Care of Your Family
For those with children, it’s imperative to have a savings account in place. Whether it’s paying for expenses like college or a child’s wedding, or just having something to pass on after your death, creating a savings account is one of the best things parents can do for their kids.
Buy a Home
Owning a home is one of the best ways to achieve financial security. It gives your family a place to put down roots and truly become part of a community. To purchase a home, you first need a down payment, traditionally expected to total 20% of the home’s value. This can be a big chunk of change in today’s expensive housing market, so you will need to start saving early and aggressively to purchase your first home.
Many of us are responsible for significant annual expenses that go above and beyond the regular monthly payments we’re equipped to make. Those who own property must pay property taxes every year, for example. Expenses like tuition, car registration, or even holiday shopping can throw a wrench into a regular budget, but with a healthy savings account, you can prepare for these expenses and pay them without impacting the rest of your financial health.
Get Your Money to Work for You
Saving allows you to take advantage of special accounts that accrue interest or make investments, like a 401(k) or Roth IRA. These accounts are beneficial for saving for retirement and help you maximize your earnings by making money passively, even as you’re saving it.
Saving money comes with countless benefits that you’ll enjoy for years to come. While it may be easier to simply take on debt in the short term, you’ll set yourself up for financial success in the long term by applying a little bit of discipline and saving early and often.