The importance of savings

Posted on 8th Nov 2017

Life is not a bed of roses. There are unforeseen emergencies and reverses that we have to encounter every now and then. Without having adequate savings/investments we expose ourselves to a number of risks and unexpected financial shocks. Money may not be able to buy you happiness but it can make you financially independent, give you a better night's sleep and face life with more confidence. How often do you realise that the money that you had planned to save has been already spent? Living pay check-to-pay check or hand-to-mouth is dangerous because bad things can happen to anyone. Putting aside a part of your income into a savings fund is about being smart and controlling your wasteful expenditure. If you end up spending all the money that you earn you can never afford that vacation which you had always dreamt of, cope with a job loss or any other adversity in life. Saving is a habit and the sooner you get into it the better, because no one else is going to do it for you. There is always room for budget, you just need to set your priorities right. Here are a few reasons why you should save:

1.  Emergency fund: Saving for a rainy day should be an immediate priority. When you have a job loss, a business setback, an accident, a sudden trip to make or some medical emergency you need considerable savings to overcome those situations and get by. Living on credit during such circumstances will only worsen things further. It's always better to be prepared for them rather than become the victim of another crisis.
2.  Retirement: If you plan to retire someday it's best to start planning for it right away. You will need savings/investments during your post-retirement years to substitute your current income. While you are young, retirement savings might seem unimportant. But the earlier you start off the more time you will have to make your money grow by compounding and you will be wealthier when you hang up your boots. If you have a high income and lesser expenses you might be able to retire after 10 years. However, for most people it might take up to 40 years on an average. The bottom line is if you have savings to depend on you can retire whenever you want to rather than work because you have to.
3.  Paying off debts: When you are deep in debt you must consider cutting down your expenses to be able to pay off your loans quicker. Living on credit will increase your stress levels and may affect your physical, emotional and psychological wellbeing. Paying only the minimum amount in your credit card will only set you on a vicious cycle of never-ending debts as credit cards have high interest rates. Peace of mind can come from being organised. It's wiser to always have a reserve fund rather than dealing with emergencies on credit and thereby incurring insurmountable debts.
4.  Short-term goals: If you are planning to buy a car or purchase a property etc. within the next few years it's inevitable that you should start saving for them. For these things it's best to stash away funds in a savings account with a bank as there is no risk of losses. Also, the faster you pay off your debts the more amount of money you will have to utilise towards your goals. Reducing your expenses can also be of great help.
5.  Better quality of life: No one has seen the future. So, putting aside some money to use when you need it is taking charge of your financial future and ensuring a better quality of life. Taking a vacation whenever you wish to, taking a career sabbatical, starting a business, retiring in your 40s-all this is possible only when you have enough savings to fall back on. Make savings a habit now and you will thank yourself later.
6.  Funding your child's education: The costs of funding your children's education are ever-increasing. If you have savings accounts for securing your child's future that you are regularly funding then you have nothing to worry. So, it's better to accumulate funds from the outset in order to be able to afford it through realistic savings goals.