Economy and Markets

Why is it important to save money?

August 25, 2022
By
Bobbob Team

Why is it important to save money?

Saving money is one of the best financial habits one can adopt and there are countless reasons why saving money is important. We were all taught from young that saving part of your allowance is important but have you ever stopped to ponder why is it that important? If you’re living paycheck to paycheck and can barely pay your bills, the idea of saving money might seemed too farfetched. When you only have a few dollars left at the end of the month, why even bother trying to save? 

Saving money is important because it helps to provide financial security and freedom. Having savings can help you navigate through tricky situations such as providing protection against financial emergencies, meeting financial obligations, and most importantly, building wealth, without having to borrow money and pay high interest rates—as well as allow you to enjoy the things in life that make you happy without the stomach churning feeling of owing a bank or someone else money.

With so many benefits of savings, the importance of savings cannot be understated. However, despite being well aware of the importance of savings, we often lose sight of it—and just as we know not eating the chocoloate cake will be better for us in the long-run, we still often go against our rational self and eat it, just like we spend money in the present and forget, or worse, neglect to save. 

This article is a reminder, a gentle nudge, for you to get back on track just in case you’ve forgotten to save in the past few weeks. And for those who feel that saving money doesn’t come easy, — this article aims to be the motivation and reasoning for you to get your savings journey started.

Often the hardest barrier to anything is the first step, yet the first step is the best thing anyone can do, it’s the start of your momentum and can carry you through to the end of the race. 

So, why is it important to save?

Saving your money is importance because it can:

▪︎ Boost your Mental Wellbeing

▪︎ Improve your Financial Wellbeing

▪︎ Provides Financial Security

▪︎ Empower you to achieve financial freedom

Boost your Mental Wellbeing

We all know the importance of good mental health. But did you know that managing your money well and particularly saving money can help with your mental well-being as well? Saving money can improve your mental wellbeing by reducing stress, builds relationships, puts you in control and gives you confidence to navigate through life. When you save money every month, you know you’re secure from once-off events and is prepared for future expenses.

There's nothing like financial stress that keeps you up at night and feeling unsettled all the time. Financial stress can increase your risk of poor health and negatively impact your mood and productivity. In addition to experiencing higher levels of mental stress and depression, those who report high debts tend to be more stressed in general. It is common for them to have high blood pressure as well. The stress that comes with having debts beyond your mortgage can be particularly intense, especially if you have credit card debt, personal loans, and more. The opposite is also true: saving money leads to better mental and physical health.

By simply having more money, all these could be prevented. Well, you might be thinking “You don’t say”, but the truth is, many people want to have more money, yet very few of them work hard to save that money. And unless you strike a lottery (which is highly unlikely), the only method to have more money is to save it. Many people have the misconception that you have to choose between saving and having fun, but this is a poisonous mentality. As a matter of fact, having fun is an essential part of your financial success. By setting money aside for savings, you can spend the rest on doing things you enjoy (and do it without guilt or worry that you may harm your financial future). Therefore, saving money gives you the freedom to do what you want, and that includes enjoying life, stress free.

Savings can prepare you for long-term expenses - Education: The cost of education is increasing every single year. College, elementary, middle and high school all come with a generous price tag. This makes it increasingly more difficult to pay for education without going into debt. Most college students are graduating with hundreds of thousands in debt before securing their first job. Education is important - whether it’s your own or your children’s. Long story short, knowing that there is money set aside for educational pursuits is helpful.

Improve your Financial Wellbeing

Financial wellbeing is about feeling secure and in control of your finances. It is about making the most of your money and having the ability to reach your financial goals, deal with the unexpected situations, build savings for the short- and long-term and managing your credit and debt. Ultimately, saving money gives you the flexibility and confidence to pursue your dream.

In short: you are empowered, confident and financially stable. Being healthy financially is beneficial for individuals, communities, businesses and the economy. In contrast, being financially stress can have a knock-on effect on your mental health, causing relationship breakdown and physical health to deteriote. One important way to improve your financial wellbeing is to save regularly. 

Provides Financial Security

The biggest and most negatively-affecting error by far is not creating a rainy-day/what-if pocket of money to be used for unpredicatable situations. No matter how hard we try, we cannot predict the future. Think about it – without saving, how will you weather any financial storms? If you lose your job, will you be able to pay your bills... There have been many instances of people not being able to pay or having to take out hefty loans to pay for medical treatments. In these cases, with an emergency fund, you can avoid using credit cards or taking out high-interest loans (which compounds over time, it is so not worth it). 

Having money set aside for emergencies can save you a lot of financial stress in times of need. When these things happen, it hits deep and can affect your long-term savings/investing goals by months, sometimes years! Saving money is important because it provides you with financial security. And the more you save, the more secure you will be. 

Achieve financial freedom

Pursue your dream career or the side hustle you have always dreamed of. We all know of someone that is stuck in a job that they hate, always complaining about the long hours and pay. Or you have always wanted to open an art studio and put your talent and passion into use. However, you’re too afraid to quit that job because you don't have the financial freedom to quit and pursue something that you truly enjoy. Well, if you had enough savings, things would be different. Therefore, saving money has the potential to provide you with the freedom to pursue a career you love. If you have ample savings and investments earning interest, you have no reason to accept a situation that you don't like. Basically, if you have a large pile of savings, you can quit the job you hate and pursue your passion.

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