Some people do not see the importance of savings and investment. This is particularly because they claim to be living while they can. This means that they can use the money to fulfill their current needs because they are not guaranteed of being alive tomorrow. Some people also assume that they will always have the kind of money they have forever. However, these views are not very helpful. Saving and investing money is a way of securing one’s future. Even if a person dies, their savings can help their generation after them. Therefore, the fact that we want to enjoy living in the moment should not hinder us from saving money or investing it.
There are some people who would like to save money for the future but are unable due to several reasons. For instance, the lack of employment and increased expenditure can leave a person without anything to save. Other people also lack knowledge on how to save money for the future.
How to save money for the future
The economic times may get harder and expenses could increase as well. However, there are strategies that individuals can use to save money for future use.
1. Cutting back on expenditures
One way to save money is by cutting back on expenditures. Some expenses are unnecessary and once avoided, a person can have some money to save. A good way to eliminate such expenditures would be coming up with a budget. A budget enables one to only spend money on things that are necessary.
2. Direct banking
Another saving tip would be to have some amount of one's salary sent to the bank directly. With this method, you will barely come across the money to be tempted to use it. Some banks allow you to save money on a fixed term such that you can only access it after some months or years.
3. Living within your means
Living an affordable life also enables one to save money. Part of the reason some people find it hard to invest is that they want to lead luxurious lives that they cannot afford. If you live within your means, there will be plenty to save.
The importance of saving money
Discussed below are the reasons to save money.
1. Save for emergencies
In case you are wondering why do people save money, this is one of the major reasons. You might be living comfortably now but you never know what would happen in the future. You could lose your job, you could fall ill, a natural disaster could take place and destroy your property or the breadwinner of the family could die. If any of these things happened, you would be left broke and poor if you did not have emergency funds. But, you can cushion yourself to a considerable extent by saving money for such emergencies. This money can help you cater for the unexpected situations and help you get back on your feet in good time.
Your emergency fund should be an amount equivalent to the money you spend in three to six months. This sounds like a huge amount, right? But it is what would be approximately sufficient to cater for emergencies. In case you do not want to save such an amount of money in the bank, you could plan on taking an insurance cover. This is where you regularly pay an amount of money to an insurance provider so that they would cater for expenses in the future, should the unexpected happen.
2. Save for your education
It could be that you are currently employed but your educational qualifications are preventing you from soaring high in your career. In this day and age, you definitely need to have high standards of education for you to grow in your career. This is one important answer to the question why is it good to save money.
Having money can enable you to enrol for the course that you have always wanted. Even though it could take several years to get there, you would finally achieve the education that you have always wanted. Also, there are parents who want their little children to pursue their higher education without struggling in the future. Therefore, by saving, you could be securing a good educational future for your children. This is among the best benefits of saving money.
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3. Save to become financially independent
Part of the reasons why people save is to become financially independent. When you are financially independent, you can make decisions without limitation. When you are caught up with problems or unexpected events, you do not start borrowing money or leading a poor life. Instead, you are able to move on with life as if nothing happened.
Being financially independent also means that you can take up a job for the satisfaction that it gives and not the money that you receive from it. You are able to have peace of mind knowing that you have no financial issues to worry about.
4. Save to buy a home
Without any doubt, owning the home of your dreams is not easy. You need to have the money to build or buy it. Whichever the case, owning a home requires you to have money. By saving money over some years, you can be in a position to buy a home. What you need to do is to have the actual idea of the home you want. Do you want a bungalow, a mansion, a villa or a ranch-style house?
Once you have identified your kind of dream home, you can then determine where you want it to be. Should it be in urban areas or in the upcountry? Have an idea of the home you want places you in a better position to save. If, for instance, it will cost you Ksh. 5,000,000, you can decide on the amount of money you will save each month and the number of years it will take for you to have the actual amount.
5. Save to go on a vacation
Occasionally, people need to take a break from work and the daily routine of doing things by going for a vacation. However, going for a vacation especially to high end destination can be quite expensive. The good thing is that you can start saving and go to that place that is on your bucket list. Just get the right estimates for all the money required for the vacation and then set out a plan on how much you will be saving every month.
6. Save to start your business
Being employed has some disadvantages such as the lack of flexibility and freedom. It can also make it difficult for you to pursue your talents. On the other hand, when you are self-employed you are able to pursue your goals and find some job flexibility. However, you can only reach this point if you develop the habit of saving.
You need to identify the kind of self-employment job you want to pursue. Research about it to determine the equipment you will need among other aspects of the business. By doing this, you will know how much you will need to save to become self-employed.
7. Save for retirement
Even though retiring is important, it can be quiet difficult especially when you do not have money. Remember, at this stage of your life, you probably do not have the energy to create several income generating strategies. Therefore, it might be difficult for you to have the money that you used to have in the past. To avoid being caught up in such a situation, it is wise to save specifically for retirement. When retired, you can even use that money to establish a business of your own. Also, you can afford to access quality healthcare services and also live a quality and peaceful life. Therefore, save now to have a good life once you retire.
8. Save to buy a car
Some people have the tendency of buying cars using loans. This deprives them financial freedom as they have to keep paying the loan for an extended period of time. In the long run, they end up paying more money than they would have paid had they used cash. When you have savings, you can buy your dream car without straining a lot. Also having all the cash puts you in a better position to negotiate the price of the car.
The other importance of saving is that it can help you get out of debt, you can travel the world, provide a good life for your family and for yourself. If you want to create a habit of saving, set your goals. Identify what you are saving to achieve and how much money will be required to achieve it. Then, let that goal be a priority in any financial decision that you make. Eventually, you will become good at saving and will be in a position to afford anything you have always dreamt of. While at it, be patient and do not let your saving goals be interrupted by anything else.