The importance of saving money is rarely disputed. Saving is one of the most basic (and most repeated) bits of financial advice out there. Despite the importance of saving money, many of us aren’t following through on that tip. When it comes to doing the right thing financially, just knowing you should save isn’t enough. If you’re wondering why you should save money, imagine giving yourself freedom to choose what you want to do, rather than feeling stuck in a particular situation or position because you rely on the paycheck. 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.
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. It is important to have an emergency fund set aside to cover unexpected expenses. This could cover an unexpected car repair, your emergency appendectomy or a sudden job loss. Ideally, your emergency fund should be about three to six months of your expenses. If you are just starting out you should put aside at least $1000.00 for this. In addition to your emergency fund, you need to make sure you have a plan and good insurance in place to help you survive the unexpected financial events in your life. Once you are out of debt, you should work on bringing your emergency fund up to between six to twelve months of your income. If you are single or living on just one income, you may want to go with a larger emergency fund. Another important reason to save money is your retirement. The sooner you start saving for retirement, the less you will have to save in the future. You can put your money to work for you. As you continue to contribute over time you will be earning more interest on the money you have, then you put in each month. You should at least be contributing up to your employer’s match and eventually, you will want to contribute ten to fifteen percent of your gross income. You can contribute to your 401(k) as well as an IRA. In conclusion there is plenty of ways to stay debt free and reasons to why you should save money, it all just comes down to the person.