7 Reasons You Should Save Money

When you are facing a big bill with payday days away, it can feel like you are stuck between a rock and a hard place. In a pinch, this is where a savings account comes in handy. It is generally recommended to set aside at least 20% of your paycheck into a savings account. Building a savings sets up your financial future with all kinds of possibilities.

Emergencies

Life happens. One day you’re on top of the world with a great job until the economy tanks the next day. Then, layoffs occur, setting you in a precarious situation if you don’t have savings built up. When opening a savings account, your first goal is to build enough for an “emergency fund.” An emergency fund should cover at least 3 months of your expenses, so if you temporarily lose income, you have time to breathe and get back on your feet.

Reduces Stress

If one paycheck doesn’t stretch as far as your last paycheck, you can tap into your savings account Having a savings account allows for the peace of mind that your bills will be paid on time, every time. A well-built savings account can also alleviate some of the financial burdens when a vehicle breaks down or an unexpected home maintenance project arises. Peace of mind when it comes to your finances is accomplished with a savings account.

Earn Interest

Did you know if you open a savings account you will earn more money? It’s not a lot usually, but every cent counts! To encourage people to open a savings account, financial institutions offer dividends on money set aside in a savings account. These dividends can be anywhere from .01% to a whole 5% and more. The more you put away, the more you earn!

Make Bigger Purchases

Have you ever wondered how people have down payments for a car or house? By saving! When you have a chunk of savings built up, financial institutions can work with you to lend the rest of the amount you need. Or, depending on the purchase, you may be able to buy it outright if you have enough saved.

Investment Opportunities

Once you get a savings started, you can grow it with investment opportunities. These can include a high-yield savings account or savings certificate, which offer higher dividends than a traditional savings account, or something with more risk like stocks.

Avoid Debt

Once you are in consumer debt, it’s hard to dig yourself out of it. One way you can avoid it is by having a savings account and carefully making sure you don’t overspend. Your savings account is great for paying off a credit card statement if you don’t have the funds in your debit account for one month, but definitely shouldn’t become a habit.

Reach Financial Goals

A savings account is the key to all your financial goals. If you want to accomplish one of the following, you need a savings account:

  • Buy a house
  • Buy a car
  • Retire
  • Pay off debt
  • Save for college
  • Launch a business
  • Home improvements

There are other ways some of these goals can be achieved, but having a savings account makes it easier!

If you don’t have a savings account yet, it is a good idea to open one! Usually, local credit unions can offer higher dividends than big banks. So, if you want to open one, start there!