The importance of saving money is very simple- it makes your life more secure. Different people save for different reasons. We can’t predict the future, so, generally, many people decide to save and become financially secure in case of any unexpected happenings or emergencies.
To make saving easier, you have to have a clear goal or purpose of saving money. If you haven’t started saving your money yet, it may be the right time to start, and here are some of the most important reasons to begin.
Reasons to save money
It takes discipline to save money and it may require a certain sacrifice. This is one of the most basic pieces of financial advice out there.
Everyone should have an emergency fund for unexpected emergencies and expenses. Many Americans don’t have an emergency fund and say that they’re unable to cover a $1,000 emergency without borrowing money.
You never know when your car may need a repair, or when you suddenly have to pay medical bills, or even lose your job. It’s recommended to have at least three to six months’ worth of savings in case the unexpected occurs. It’s important to start- baby steps at first and later you should work on increasing the amount of money you save.
Retirement is another extremely important reason to start saving as soon as possible. People usually save for retirement using special accounts such as a 401(k). Money invested in these special accounts has the potential to appreciate in value, earning interest.
Maximize interest rates
If you want to earn interest in your savings, you should pay attention to where you save your money. When you decide to start saving, use one of the following: regular savings account, high-yield savings account, money market account, savings bond, or certificate of deposit (CD). When using these types of accounts, you know that when interest rates go up, your yield will go up as well.
But, you also need to know that when interest rates go up, credit card rates do, too. For this reason, you need to have money in your savings account in case an emergency happens, so you don’t need to borrow large sums of money to cover your bills.
Down payments for a house
If your goal is to buy a house, then it’s a smart idea to start saving as soon as possible and to save at least 20% of the price of the house. This way you can avoid private mortgage insurance (PMI) and possibly receive better interest rates on a home loan. Additionally, your mortgage payments in the future will be more affordable if you have saved money.
In the 2019-2020 school year, an average cost for in-state tuition and fees at four-year public universities has been $10,440 per year. This price may be a good reason to start saving for a college education.
All parents should consider saving for their children’s education. There’s an attractive 529 plan, where you can grow your money tax-free.
Irregular or recurring expenses
For any irregular or recurring costs that you know will occur eventually, you should have a so-called sinking fund. These are funds that you set aside for taxes, improvements, holiday gifts, car repairs, and other irregular expenses.
These savings will be beneficial because you won’t need to take money from your emergency fund.
Saving money means that you can take calculated risks and not worry about it. It can give you peace of mind and expand your opportunities and impact the quality of your life.
When you decide to start saving, you can open a savings account, and you won’t need to worry about any additional costs that you may incur.
Contact Prudential Bank’s experts and discuss the importance of saving money and our savings account offers. Call at 215-755-1500.