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We’re taught that saving money is good. It’s hard to find someone who would disagree, but sometimes, saving money can be challenging and not very enjoyable. Sometimes, you start feeling down when you work hard at a job you don’t love and sacrifice to get ahead. You wonder what it’s all for. Maybe a little doubt creeps in, and you question if it’s all worth it. It’s not always fun or easy, but saving money is 100% worth it.
The Benefits of Saving Money
Here are 19 reasons to save money and prioritize your savings over spending:
1. Freedom
Saving money is all about freedom.
You might save to buy a house or for long-term goals like paying for your child’s college education. But what you’re saving for is freedom.
Money in the bank is freedom from:
- Landlords
- Debt
- Financial fears
- Horrible bosses
- Doing things you don’t want to do
- Inferior products and solutions
- Having choices made for you
- Having no choices at all
- And much more
Having the freedom to live life on your terms starts with saving money.
2. Emergencies
Saving money for an unexpected emergency can prevent a bad situation from worsening. An emergency fund gives you some cushion and peace of mind when a family emergency, unplanned medical expenses, or other unexpected expenses present themselves.
Emergency savings can prevent you from turning to high-interest credit cards or relying on personal loans to handle unforeseen expenses. Getting through an emergency without jeopardizing your financial security or creating a financial burden illustrates the importance of saving money.
Aim to have 3 to 6 months of living expenses tucked away in your emergency fund, but start an emergency fund by putting aside $1,000 as quickly as possible. You can work up to six months’ worth of expenses once you have that $1,000 put away.
Keep your emergency fund separate from the money you use for everyday expenses. You can keep it in a savings account at your local bank or credit union, a money market account, or a high-yield online savings account. Choose an account that gives you quick access to the money when needed, does not charge fees, and pays interest on your balance.
3. Home Ownership
We could fill a book with the awful experiences we’ve had as renters. Absentee landlords, noisy neighbors, parking problems, and substantial rent increases. And that’s just for starters.
If home ownership has always been your dream or you’re sick of renting, make saving money for a down payment on a house a priority.
How much savings you have for a down payment affects how much house you can afford. If you can save 20% of the purchase price, you can:
- Avoid private mortgage insurance
- Get a better interest rate on a home loan
- Reduce the amount you need to borrow
- Lower your mortgage payments
You can still buy a home if you don’t think you can save enough to put 20% down. There are government programs backed by agencies like the Federal Housing Authority (FHA) and the Department of Veterans Affairs (VA) that allow for lower or no down payments.
You can determine how much to save each month by examining your household income, determining how much house you can afford, and looking at your other savings goals.
4. Your Child’s Education
The price of education only moves in one direction: up. Every year tuition and fees go up, making it harder to pay for schooling without taking on a crippling amount of debt.
It’s difficult, but with careful planning and a firm commitment, saving enough so your children graduate college without debt is possible. Whether your child is a newborn or a teenager, now is the best time to start a college fund and save money for education.
5. Retirement
You probably don’t envision working 40 hours per week at your job for the rest of your life, even if you enjoy what you do. Winning the lottery is not a financially sound retirement plan, so you must put money aside to retire.
If you have a 401(k) or employer-sponsored retirement plan available, try to contribute enough to get the maximum match from your employer. Once you have a fully funded emergency fund, you can put money aside in a traditional IRA or other tax-advantaged retirement account.
The sooner you start saving for retirement, the less you’ll worry about it as you age. With a decent rate of return, you may even be able to retire early if you start while you’re young.
6. Major Purchases
Saving for a large purchase or expensive items rather than financing has advantages. You stay out of debt, you pay no interest or loan-related fees, and you might negotiate a better price for paying in cash. There’s also one less bill you have to worry about every month.
The way to save for major purchases is to incorporate it into your monthly budget. That way, you make steady progress every month rather than putting aside different amounts when you can.
7. Periodic Expenses
Sometimes, you know well in advance that you have a necessary but infrequent expense coming due, like a tax bill. Save for it monthly to ensure the money is available when it’s due. If you owe $800 in 10 months, save $80 per month toward the expense.
Sometimes, people forget about periodic expenses. Remembering your rent is due is easy since it’s a recurring fixed expense. But your car registration might slip your mind until the last minute since it’s only due once a year.
If you need to come up with the money for a bill you forgot about quickly, you must aggressively save money. Giving up buying coffee for a few days will not cut it, but a no-spend challenge where you cut out all discretionary spending for as long as it takes might. It’s an extreme way to save money, but it works.
8. Compound Interest
One of the great benefits of saving money is compound interest. Compound interest is money you earn on your savings plus the interest you earn on your interest. Your money makes money while you sleep.
If you don’t save, your money can’t passively earn you more money through the power of compound interest. You lose out on this effect if you put your money in a piggy bank or savings jar instead of a bank or high-yield savings account. Also, a bunny might eat it.
Compound interest makes your money grow faster. The only way to take advantage of it and reap the benefits of compounding is through saving.
9. Building Wealth
Saving money is the cornerstone of your wealth-building strategy.
The basic formula for generating wealth looks like this: live below your means, avoid going into debt, and make intelligent investment choices. Here’s how saving money figures into that:
Living below your means frees up some of your monthly income toward savings. Avoiding debt allows you to put your money to work for you instead of paying interest to make someone wealthy. You invest your savings regularly and wisely so your money grows.
10. Major Life Events
Most major life changes will affect you financially. Being prepared for them is crucial. Whether expected or sudden, major life events usually involve spending a lot of money all at once.
Impactful life events that can cost you a lot of money include:
- Getting married
- Starting a family
- Moving cross country
- Caring for elderly parents
- Divorce
- A death in the family
With a solid savings plan, you might navigate through these events without draining your finances or going into debt.
11. Stress Reduction
Not having any savings is stressful. Constant stress causes many health problems that can lead to an untimely death. Stress leads to depression, weight gain, ulcers, high blood pressure, heart disease, and other adverse health consequences. You can ease financial stress and the potential health problems that come with it by saving a percentage of every paycheck.
12. Your Marriage
As much as my wonderful wife Sara and I love each other, we agree that marriage is work. Anyone who tells you it’s easy is lying or hasn’t been married long.
We’re blessed to be on the same page about money because money is one of the most significant sources of conflict in a marriage. According to this Kansas State University study, arguing about money is also one of the leading predictors of divorce.
Should relationships be 50-50 financially? Not necessarily due to income differences, individual financial obligations, or other factors. It’s more important to agree on money matters than to divide everything right down the middle.
When you agree about money, you work together, share, grow, and achieve goals together. That makes for a rewarding and happy marriage.
Building a nest egg makes you feel safer as a couple, prevents fighting, and gives you confidence in your relationship.
13. Setting a Good Example
My parents led a frugal life. They sacrificed, taught me the value of a dollar, and emphasized hard work. They saved enough so my brother and I didn’t graduate college with a ton of student loan debt.
I haven’t always managed my money well, but it wasn’t their fault. They gave me a piggy bank and the tools to fill it up.
My wife and I want our kids to be financially responsible. They likely won’t pick up good money habits in school or from their peers. That leaves it up to us to teach our kids about money, savings habits, and responsible spending.
Since kids watch everything their parents do, we need to be financially responsible as a couple. We feel we owe it to our kids to set a good example by showing them the importance of saving money through our actions.
14. Fun Stuff
There’s a long list of practical things and life events you should save money for. But that doesn’t mean you can’t save for fun things, too.
By saving for anything, you exercise discipline, delay gratification, and condition yourself. If saving for discretionary expenses like a new outfit, a dream vacation, or a PlayStation gets you in the habit of saving money regularly, it’s not all bad or frivolous.
Making sacrifices to save more money feels like a real grind at times. You get sick of being frugal. Sometimes, you need a win to get past those feelings.
It feels great to reach any financial goal, big or small. Don’t feel guilty about saving for something fun.
Having a fun, attainable goal makes putting aside money every month easier. The satisfaction you get when you reach that goal motivates staying on course toward larger financial goals.
15. Helping Others
Everyone needs a little help once in a while. The charities and causes we believe in need support. And sometimes money is the only way to help.
When the people in our lives come to us in need, wanting to help but saying no because you can’t is heartbreaking. Believing in something but being unable to contribute toward furthering its growth is disappointing.
Not tithing, not giving to charity, or being unable to help someone financially doesn’t make you a bad person. You can still be generous with your time and offer emotional support.
However, if you want to provide financial support, put yourself in a position that allows you to do so. You do that by saving money.
16. Minimizing Risk
Establishing an emergency fund lowers the risk of ending up broke or in debt when a financial emergency occurs. But when you’re not saving money, you’re taking on additional risks beyond not being financially prepared for an emergency.
For example, how are you planning to care for yourself as you grow older?
Without savings, you might have to work into your seventies and depend on Social Security. You might have to sell your home and live off the proceeds. Maybe your kids will take care of you.
None of those things are guaranteed. There are a lot of risks involved in relying on:
- Perfect health
- A strong job market for seniors
- The government
- Your local housing market
- Your kids
Even if all those things somehow go your way, it could only be temporary. Without your savings, you’re subject to whims, fluctuations, and decisions someone else makes, upending your life. To me, that’s an unacceptable level of risk.
It’s worth saving as much money as possible, starting as soon as possible with a goal of financial independence.
17. Taking Calculated Risks
While limiting risk is essential when saving money for the future, taking a calculated risk can lead to more significant gains in the long run. If you want to pursue an opportunity that temporarily reduces your income, having cash reserves allows you to do that.
For example, you might want to return to school or start a business. You can only pursue those opportunities if you have enough savings until those decisions pay off.
Building your savings allows you to take calculated risks without worrying about financial ruin.
18. Career Flexibility
Saving money gives you a little cushion in case you want to try something new or change careers altogether.
I started my career in financial services. I didn’t love it. I didn’t hate it, but I knew I didn’t want to work in the industry forever.
The area I excelled in and found fascinating at work was the computer systems we relied on to gather, process, and share data. I wanted to learn more about computer information systems, databases, and websites. I decided I wanted to pursue a career in IT.
I had a degree in English Lit. My only full-time work experience was in finance, a career I fell into by chance. I needed a fresh set of skills.
I had enough money saved to take classes at night. I didn’t quit my job and live off my savings while studying. I started slowly, burning no bridges in case I hated it, I sucked at it, or it just didn’t work out.
Eventually, I left my job to go back to school full-time. Then, I lived off my savings and did freelance work using my newly gained skills. Having the runway my savings gave me allowed me to find my calling and switch careers.
19. Leaving Something Behind
When you think about retirement savings, you might also consider your legacy. You wonder how you’ll be remembered and what you’ll leave behind.
Leaving a legacy for your kids, grandkids, or a charity with a cause you believe in takes some planning and a lot of saving.
Your legacy is your impact on those who remain when you pass. It includes the lessons you taught and the memories you created, but it can also be a sum of money, stocks, real estate, an established business, or your prized possessions.
You can’t leave anything behind if you’re living paycheck to paycheck or spending every dollar you make. If your legacy is important to you, save money.
The Importance of Saving Money
Saving money is vitally important for a variety of reasons. Your savings give you freedom, peace of mind, options for improving your quality of life, and safety in case of a financial emergency or unexpected expense. Find a reason to save that matters to you and start saving.
