4 reasons why savings are important

4 reasons why savings are important

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One of the most important things you can teach anyone about money is the importance of saving it. Spending it on important items and keep some aside in your bank account is all well and good, but saving money is something different entirely. There are plenty of reasons why saving money is a fantastic idea, but here are four important ones.

Interest

Savings accounts with decent interest rates will mean that your money grows without you needing to lift a finger. The more money that is in a savings account, the greater the interest. It might seem like a small amount at first, but if you save money each month into this account, then it can grow and grow. All of this and you don’t have to do a thing. One thing that you should probably do, though, is change your savings account if the interest rate drops. This way you will constantly be getting the largest amount of interest possible. Using interest rates cleverly can earn you a lot of money without needing to do anything.

It Is There Just In Case

Savings are useful because they mean that you have money outside of your current account. This means that if there is an emergency, then you don’t need to take a small loan to cover the cost. For example, if you have been saving money then you will be able to cover the cost of getting your car fixed, buying a new fridge or plenty of other things without panicking about where the money is coming from. Saving money allows you to plan ahead and feel reassured that you have money in case of an emergency.

Allows You To Afford Expensive Things

If you want to be able to afford to buy a house in the future, then you will want to start saving money as soon as possible. In order to afford a deposit, you are going usually going to need somewhere between 5 and 20% of the total house value. This means that you are going to need to have saved a lot of money up to be able to afford the deposit. If you regularly make payments into a savings account, then over the months and years this will add up to an amount that you can use to buy yourself a house. Without doing any saving, this would otherwise be nearly impossible.

Retirement

Retirement might feel like a lifetime away, but saving a tiny amount each month can make a massive difference when you retire. If you keep a retirement savings account and only put the cost of a few cups of coffee into it each month, then by the time you come to retire you will be surprised by how much is in it. You will be saving such a small amount that you will hardly notice not having it, so it is well worth investing into your retirement. It is good to start as young as possible for the largest gains.

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