By Samuel Leach, Director, Samuel and Co
1. It acts as a Safety net
2. Less Stress
3. Enables you to Travel
4. Financially Independent
5. No worry from Unexpected Expenses
6. Comfortable Retirement
7. Peace of Mind
It is all too easy not to think about savings as being a priority. Many of us tend not to think about it what will happen in the future and live for the day.
Making the most of the present is important, but it is also important to think about future finances, whether that be for old age, a holiday or purely as a backup should something happen.
Saving money in times of economic struggle is very important. But this may be the most difficult. The smartest move you can make is to have enough savings that will help you survive through difficult times that may occur.
If you were to save regularly, you will quickly find that your savings add up and keep growing. Get into the habit and watch your money turn into more money
If you are starting your first job, for instance, putting aside a little bit of money each month is one of the easiest ways of saving by setting up a standing order each month. Building up savings can help you achieve funds to enable you to pay off student loans, buy a car and or get on the property ladder.
As your savings build up, they’ll grow faster– even if you’re only paying in the same regular amount.
This is because each time the interest earned on your money is paid into your account it starts earning interest too.
This interest-on-interest is called compound interest, and over the longer term, it makes a big difference to how much your savings are worth.
Ideally, your initial savings should contain enough money to cover three to six months of expenses. There is always going to be an occasion where we have to face a hefty bill we hadn’t planned for, whether it’s to repair a car or replace a broken laptop. But if you have been saving regularly, you can use your savings to cover costs, without having to turn to a credit card or personal loan to make ends meet.
There are a variety of reasons to begin or continue saving money. Different people save for different reasons, but in general, having savings will benefit you in the future, whether you’re avoiding hardship or going after the things you want. It makes it easier if you have a clear goal or purpose for the money you are saving.
You have a good job now, but what if you were to lose that job? Suddenly finding yourself unemployed can be frightening, but it’s something many people will experience at some point. Having savings in place to help cover your living expenses while you find a new job can provide you with peace of mind.
Another option is to invest in the hopes of making a financial gain. Investing is different from saving because it involves a greater level of risk and there is no guarantee that you’ll get your money back.
You can make regular payments from as little as £25 a month into investment products, such as Stocks and Shares ISA or Unit Trust Investment Funds.
Investment products are for the longer term and are generally suitable if you already have enough cash savings to keep you going for 3-6 months if needs be.
Investments generally outperform cash savings over the longer term, but their value can rise and fall, so you have to be prepared to take on some risk.
You need to be prepared for future changes in your circumstances, life will be so much easier if we plan for the future, such as marriage and children eventually.
As you get older you may want to retire early, but that will depend on what savings you have and if you can afford to give up work, which is why it pays to think about savings in the long-term. Saving enough income to cover all your costs when you do eventually stop work, means you need to have a savings plan in place.
Having extra money in times of struggle is very important, it can help you make the most of life and live happier. Knowing you have that fallback is peace of mind.
NB: Before making financial decisions always do research, or talk to a financial adviser.