No one can argue the benefits of saving as much money as possible. It gives you more financial assets when you retire, forces you to live off less income, and allows you to earn interest as your savings grow. However, setting money aside takes discipline and isn’t always an easy thing to do. We explore each of these benefits further to help give you even greater incentive to start saving money or add more to your savings today.
Saving Money as a Way to Build Assets
Although financial planners often recommend saving 20 percent of your net income, any amount you can save today will help you in the future. Even putting aside one percent of your income helps to establish a savings habit that you can increase as your income grows. Rather than spending money on things with no long-term value, saving money now gives you greater control over your later years. Whether you want to retire early, pay for your kids’ college education, or travel the world, you will have the nest egg to do what you want.
Spend Less, Save More
The benefit of starting a savings habit early in life is that it creates discipline not to spend money on things like fast food and expensive entertainment. Fortunately, it’s never too late to learn this type of discipline. You might be surprised at what a difference it makes to your finances when you don’t spend money based mostly on emotion, but on discipline instead. The goal is to get to a point where you don’t even miss the money that you’re putting into savings each pay period.
If you think living this way will make you feel deprived, be sure to create a category for the occasional splurge item in your budget. Never allowing yourself to have fun could make you grow resentful of the savings plan to the point where you stop contributing as much or as often. By sticking to your savings plan, you will have more to draw from when you cannot work as much or no longer desire to do so.
Compounding Interest
Although the interest paid on American savings accounts is typically very low, you have several other savings options available to you. A savings bond or certificate of deposit, for example, can provide you with a much higher interest rate in exchange for your guarantee of keeping money in the account for a specified time. A banker can provide you with current interest rates and minimum investment times to help you decide if this option is right for you.
How much money you put into savings and how long you save money are the two most important factors in determining your financial comfort later in life. Just do the best you can now, increase savings when you’re able to, and know that you will one day appreciate the sacrifices you made today.
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