Many people don’t ask, “Why is saving money important?” until it’s too late. There are many people who only saved 5% of their income during the great financial crisis of 2007 – 2009. Then they quickly learned a lesson on the importance of financial prudence.
The coronavirus pandemic made everyone’s saving habits better. America had a personal savings rate of a whopping 33% in April 2020. That’s the highest amount in our history! Sadly, just over two years later, that number went back down to an abysmal 3.1%. Boo.
Even as we go through the bear market of 2022, people’s savings rate has been low at 5%. Many people are going to learn just how bad that is when the real financial crisis happens. That’s when people are going to realize why is saving important.
The security and peace of mind that comes with saving money is more valuable than any amount of money out there. To know that you can feed your family even during hard times is what’s important. The good times never last forever and it never will last forever in the future.
It’s more important and crucial than ever to start saving up and padding up those savings accounts. People who don’t save money are coming in for a rude awakening. The good times go up like stairs but the bad times go down like elevators. Change happens fast.
Why is Saving Money Important? 9 Reasons Why
Below are the nine most important reasons why saving money is important.
1) Why is Saving Money Important? It Protects Your Family’s Future
When you have a family, it’s not about you anymore. It’s about your family’s wants and needs. You have to take care of their needs and make sure they eat before you do. That’s why saving money is important. Their needs come above yours because you decided to have a family in the first place.
The burden is on you. This is one of the reasons why I decided not to have a family so far. I do not like the burden that comes with having a family, just yet. It’s hard for me to take care of my own needs, let alone take care of someone else’s needs.
My father was one of the most important figures in my life. I look up to him immensely. I know just how hard it is to have a family and take care of their needs. It’s hard for me to take care of my own needs, let alone the needs of somebody else. Not even somebody else, but multiple others.
Saving money protects your family’s future from turmoil.
2) Saving Money Compounds into Greater Amounts
A dollar invested in your 20s is worth a lot of money. Because of the power of compound interest. The saved money that is invested can 5 – 10x in just forty years. If invested for another generation, it has the potential to even 100x+.
Warren Buffett famously said that $10k invested when he bought his first stock in 1942 would have turned into $51M+ by 2018. That is a very nice chunk of change. Saved money today is worth much more than what it’s worth today because its potential future hasn’t been realized yet.
Why is saving money important? Who wouldn’t like to leave their children and generation with an additional $51MM added to their retirement? And that’s just from a one time $10,000 investment. Imagine what it would have turned into if that was consistently invested in the stock market.
Magic happens when you start with saving money. It will be impactful down the road.
3) It Protects You from Emergencies
These days, emergency funds are the most crucial things right now. I went through many emergencies in 2022. A car accident. A tire blew out. And many more. I know that I will continue to have more emergencies as time passes. Some costed a couple hundred dollars.
Others costed thousands of dollars. Regardless of what it is, emergencies and life happens to you quicker than you would like. Why is saving money important? You think everything will be just fine until it isn’t anymore. I didn’t realize just how much health problems I had until 2022 came along.
My stomach has been the biggest culprit of my bad mood and the like. I had to dip into my savings to pay for doctors visits, tests, and medicine. Even though it was money well spent, I couldn’t afforded it had I not had a good savings account padded up.
Emergencies happen to you. You need to be financially prepared for them. You can’t be the 56% of Americans who can’t afford a $1,000 emergency bill.
4) You Are Less Financially Dependent on Another
You think companies give you free money? Do you think banks give you free yield on your money? No. We are living in a world of, “what have you done for me lately?”. Every dollar you get was in return for something else. No one does anything for free.
The things you have to do to earn that dollar has an enormous cost to you. Not just in terms of your time but in mental and physical strength. There’s a reason why many people are fed up with their jobs and would rather be poor than earn money. The cost to earn the money is enormous.
Why is saving important? You are less dependent on others to earn your next dollar and put food on the table. There are no free lunches and people will try to do everything to get your money’s worth. including making you work on the weekends and nights.
Dependency is not the best position to be in, especially financial dependency.
5) You Can Make Big Purchases with Enough Savings
Cars and houses are expensive. They are so expensive that you can’t just pay for them with a credit card and call it a day. A $10 meal is easy to pay with a credit card. But cars and houses require savings to pay for them.
Why is saving important? So you can purchase these big ticket items that are a necessity. I bought my first car for $10,000, in cash. It’s served me well for six years until I got in a car accident. Believe me when I say that cars are a necessity. It’s not a luxury in America.
You will have to purchase these big ticket items at some point in your life. The only way that you can afford them is if you have the money to pay for them. 20% down payments for a house just doesn’t fall from the ceiling. You need to earn and scrimp and save for them.
It takes a while but the rewards are well worth it. Homeownership feels worthwhile.
6) You Don’t Need to Wait to Buy Something
If something you REALLY need goes on sale today and you have cash on hand right now? That’s great! You can easily buy and afford it. There are times when sales are on a limited time basis and if you don’t have the savings to pay for them, then you just missed your chance and have to pay full price later.
As a result, having savings in your account actually saved you money as opposed to when you didn’t have cash on hand. That’s a beautiful thing. It’s very rare when something costs less today than in the future. Opportunities like that are limited in our world.
Why is saving important? It lets you pounce on deals that come up in the market. The opportunities don’t wait for you to pad up your savings accounts. They come whenever they feel like it. So then it’s up to you to have the money on hand to make those purchases.
You will have to adjust to the market conditions instead of the other way around. I personally bought a $1,000 MacBook Pro as a Black Friday deal in November 2022 when they usually go for $1,400. Money well spent.
7) Savings Let You Have Less Stress
Can you imagine what the people who lost their jobs in a day went through in the bear market of 2022? Savings lets you have less stress in that if you do get laid off, then you have the leeway to look for opportunities and take your time with it.
There are people who went from “Managing Director” to “Analyst” after the 2007-2009 financial crisis. They couldn’t afford to take their time looking for the right opportunity because, well, they didn’t have savings and needed to put food on the table.
Imagine how emasculating they felt. Or how bad they felt that they had to start over from scratch even after years of that effort. Why is saving money important? It lets you have less stress so your back is not up against the wall. You can take your time looking or creating those opportunities yourself.
You don’t want to be at a desperate place. It’s just not good.
8) Saving Money Lowers the Chance of Divorce
We can’t ignore the importance that money plays in divorce statistics. Money is almost always at the top end of the reasons why people divorce. Therefore, when you have a lot of money, you are eliminating that as one of the possible reason to divorce the love of your life.
Why is saving money important? Because divorce is not fun. Divorce doesn’t just cost a lot of money to resolve, it costs mental anguish as well. It’s made exponentially worse if kids are involved. It’s just not a fun thing to endure for anybody.
If you save money, you can view the money as insurance for your marriage to last. It’s bad enough to live life on your own without having money. It’s exponentially worse to live with your family without having money. I’ve been poor and I’ve been rich.
Trust me when I say, rich is better. I’m working my tail off so that I can be rich one day. I hope it happens.
9) Saving Money Lets You Leave Behind Generational Wealth
While kids shouldn’t be entitled to expect their parents to take care of them, we should do our best to leave behind generational wealth whenever we can. I spend as little money as I possibly can for my future family. Why? I don’t want them to financially struggle because I know what it feels like.
I know what it feels like to have the pressure to perform otherwise you can’t put food on the table. It’s not the best feeling in the world. Why is saving important? No one ever left behind generational wealth because they didn’t save money.
The garage full of junk that kids are never going to use is not generational wealth. Even though the real generational wealth is passing down financial literacy, it doesn’t hurt to teach kids prudent financial decisions along with cash to manage for themselves as well.
The struggle lifestyle is not fun by any means. I wouldn’t want my kids to struggle like I did.
Why is Saving Money Important? Now You Know
It’s one thing to know why saving money is important, it’s another to actually save a lot of money. Knowledge is meaningless without execution. There’s a reason why the wealthiest Americans are great at saving money. That’s how they protect their own family.
It’s not bad to use coupons or wait for deals or to skip eating out dinner for that one day. Spending money on memories and experiences are a great thing. However, spending money on expensive experiences that you’re not even going to remember down the road is a bad thing.
I can’t remember what I did at a single expensive dinner that I went to. There are only a few dinner memories that I treasure. All the other memories aren’t all that useful to me. Therefore, I would much rather save that money and look for ways to grow it down the road.
I know my future self and future family is going to appreciate that decision. I only spend approximately $20,000 – $25,000 per year currently. There’s not a lot of things that I need or want in this world in order to be happy. Happiness comes from not having more but in wanting less.
Why is saving money important? Your future self is going to thank you in ways you didn’t even know was possible. Whether we like it or not, money plays such an integral part in our lives. It’s a good idea to master the game of money instead of paying the price for them.
Your family’s future and lives depend on it.
Why is Saving Money Important? 9 Reasons Shortlist:
- Why is saving money important? It protects your family’s future
- Saving money compounds into greater amounts
- It protects you from emergencies
- You are less financially dependent on another
- You can make big purchases with enough savings
- You don’t need to wait to buy something
- Savings let you have less stress
- Saving money lowers the chance of divorce
- Saving money lets you leave behind generational wealth
