Building wealth through saving increases financial security |
By David Pilley on February 21, 2011
.jpg.aspx?width=75&height=75) In a world of instant gratification and more more more, saving seems to go against our beliefs. People tend to get into a pattern, making do with what they have and not preparing for the future. But accidents happen. You never know when you might get into a car accident or if a storm may damage your home. Starting a family might even be an unplanned event for some, and all of these situations call for some sort of financial security. You need a savings account.
To get into the habit of saving money, you need to start early. If your parents set up a savings account for you when you were young, you are ahead of the game. Even if your parents didn’t do it for you, you can still set up your own personal savings account. The longer you have it, the more security you will have knowing that you will be able to handle an emergency if it happens.
Whenever you get a paycheck, you should set aside a certain percentage for savings. A nice round number to keep in mind would be 10%. Setting aside a portion of your earnings may get you in the habit of not spending everything you have, and it might also keep you from overspending on things you don’t really need. It will also be a foundation toward future transactions, such as having an ample down payment for a mortgage.
A savings account is a fallback to a financial emergency. If you get a pay cut or lose your job, you need to have something there to keep you from immediately becoming insolvent. A goal would be to have at least six months worth of living expenses in the case that you lose a reliable source of income.
A strategy involving spendable money is smart shopping. For basic needs like food and clothing, look at all of your options and compare prices. You might find the same product is being sold at a lower price in a certain store. You should also look at the quantities at which you are purchasing goods. Buying in bulk might actually save you a few dollars. For example, a 20-ounce bottle of Gatorade costs $1.25. A six-pack of Gatorade might cost about $5.00. Purchasing the six-pack would be equivalent to purchasing four individual bottles, and you should obviously buy the product in bulk if you find comparisons like this one.
If you get into the habits of setting aside money and shopping around, you will be better prepared for an emergency. You will also be prepared to take on new and exciting challenges of raising a family, if you are not already doing so.
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