At some point in our lives, many of us have heard about the importance of saving. However, it’s surprising to see that many people fail to practice this. In fact, many people slide into poverty and debt due to the aforementioned reason. Worst still, many people make up excuses like “I don’t earn enough to save!” to explain their inability to do so. This mentality will only cause you to be financially trapped. So let us see why saving is so important. Before you continue reading, make sure you follow my page and subscribe to my newsletter.
Reason #1: Emergencies
As humans, we can never predict what will happen in the future. We might lose our jobs, lose a loved one or lose money in the stock market. We might even be hit by a pandemic such as the current COVID-19. Saving ensures that you will always have a back-up in times like these, especially when you do not have enough money to repay your bills. The good news is that you have the ability to plan now and strategise.
Reason #2: It Will Grant You a Better Retirement
As we grow older, our ability to work declines. Our health might begin to fail and you will naturally lose the ability to sustain your previous lifestyle. Saving early helps to reduce the financial burden you might face when you grow older and allows you to do the things you enjoy.
Reason #3: Financial Independence and Freedom
As we grow older, we learn that we have to rely on ourselves to survive in this world. Nobody is going to fork out the money you need when you are in debt. You have to plan, strategise and manage your money yourself. To achieve financial security and independence, saving is a must as it allows you to prepare against unexpected events and emergencies. Fun fact, even chipmunks know that they have to store nuts to get through the winter. Let us not rely on others, especially our parents and friends, to take the fall for us when we end up in debt or end up bankrupt, since nobody owes us a living. Saving also allows you to make life decisions without overly worrying about your finances as you are prepared. You control your finances, not the other way around. This is what financial freedom means.
Reason #5: Take Advantage of Interest Rates and Compounding
Albert Einstein once declared that compounding is the 8th wonder of the world. Saving over the years allows you to multiply your finances, albeit slowly at first. Let us take for an example that you deposited at total of $300,000 worth of savings in a bank with a 2% annual interest rate. In 30 years, you would have $543,408.48! That is almost double your principle! This is the beauty of saving early. Take for another example. You deposited a total of $1 million in a bank with a 2% annual interest rate. In 30 years, you would have $1,811,361.58 in your bank account! See what I mean now?
Also, did you notice that I started with the letter A for every paragraph? If you did, comment down below. Anyways, this is my 5th post on this blog and I look forward to blogging throughout this month of December and further on. If you are looking for a guide as to how you should develop the habit of saving, check out my article at https://bestofwrite.com/2020/11/30/how-to-build-a-habit-effectively/. Happy reading and remember to like and subscribe before you go.