Did you know 70% of wealthy families lose their money by the second generation? That’s why even the rich should start saving for retirement. In fact, you must start saving for retirement from the day you receive your first paycheck. Even if you start saving money for retirement as early as the age of 30, it can reap incredible benefits. By doing so, before you realize, you have good amounts of wealth to sustain well after retirement. As a result, it can also enable you to not rely on your children and enjoy the money you have saved and invested all your life! After all, money is an essential tool that prevents any uncalled stress or uncertainties.
One cannot deny the importance and the benefits of saving money because it is the most necessary tool we require to live a stress-free life.
Imagine spending a day without money. I am sure life would be close to impossible. From traveling places to eating food, money is needed everywhere. Just like you need food to live, similarly, you need money to survive. It isn’t easy to sustain without money as it is a basic necessity.
Saving money should be a non-negotiable which goes beyond any excuses.
People will always make excuses for not saving, but the truth is that the only way to save money is to start. Unfortunately, most of them learn the importance of saving money the hard way.
Statistic suggests that 53% of US households don’t have an emergency fund. In this post, we will specifically talk about the importance of saving money!
Why Is It Hard To Save Money For Some People?
But first, let’s see the top four reasons why people can’t seem to save money intentionally.
1. Expensive Lifestyle
During the initial days of their career/jobs, many youngsters spend all their salary on buying expensive things, partying, eating out, or just living an extravagant life.
While some people consider money sacred and are always very cautious in using it, some have no regard for money and end up spending it ruthlessly.
There’s no doubt that a general lifestyle of a middle-class family has significantly improved over the last few decades. But, unfortunately, this also means an increase in spending on expensive gadgets that can provide comfort to the customers.
According to a CNBC post, middle-class family life is 30% more expensive than 20 years ago. Furthermore, another research analysis by Pew Research states that today’s average salary holds the same purchasing power, similar to 40years ago.
Therefore, the rate of expense is greater than the income of an average person. As a result, people find it difficult to save money consistently.
2. Long Term Debt
There are so many people struggling with paying off debt. People even take loans to buy things they don’t really need.
They even end up taking a credit card to fulfill their wishes. But, with credit so easy to get, why would anyone want to save money and buy with cash?
If you want something, you pull out the plastic and then pay it back with payments over who knows for how long.
But later on, when it’s time to settle down, they are broke or have extremely little savings and thus end up taking huge loans. They have to repay these loans for the rest of their lives along with the considerable interest.
Although taking a long-term debt can have a fruitful outcome if done strategically, unfortunately, reports indicate a completely different scenario.
In fact, only a mere 30% of the US population believe they’ll be able to pay off their credit card debt within a year, whereas 70% of Americans say otherwise.
Furthermore, 13% of working Americans cited debt being their number one reason not to save money.
3. Job Quality
Sure we all want a job that provides good salary benefits, but a low earning can hinder saving money for retirement.
According to experts, saving 15% of your monthly income should be a fundamental step to building wealth until retirement. But, unfortunately, a survey found that only 16% of respondents can save more than 15% of their monthly earnings.
This signifies that other respondents are either in a job with less pay or don’t have the clarity to save money.
But worry not! We will give you some doable tips that you can still implement for saving a good amount of money.
4. Alcohol And Addictions
We all know that the daily expenses have been increasing at a rapid pace with each passing day. As a result, this can cause money stress among individuals.
A recent survey finding on stress by American Psychological Association, 72% of Americans disclosed feeling stressed about their money.
This hits them hard, and they end up highly stressed, resulting in them adapting to an unhealthy lifestyle (like alcoholism) to deal with their stress.
In addition, another study published in the Journal of Studies on Alcohol and Drugs states prolonged financial strain can expose older adults to unhealthy drinking habits.
Why Is Saving Money Important? The Benefits of Saving Money
If you are a teenager in college or a young adult at your first job, here are a few reasons why you need to start saving money from today!
1. Save Money For Emergencies
The first and foremost importance of saving money is to be able to handle emergencies. When you have financial support at challenging times, it becomes a lot more relieving to tackle the situation otherwise.
Saving money prevents any unforeseen events in the future. You never know what unfortunate incident can strike you. Anything can strike you at an hour you are not ready from a personal loss to medical or educational emergencies.
One of the significant benefits of consistently saving money is you have something to fall upon as the money saved up can become a blessing during emergencies.
Additionally, saving money can help you become financially secure and provide a safety net to anyone in case of an emergency.
A Chinese proverb says, “Do not wait until you are thirsty to dig a well.”
2. Money Is Independence
Financial independence is something that we all desire. Saving money enables you to live life the way you want without relying on someone else. It also makes you capable of making important financial decisions without stressing out about losing money.
For instance, you can use your saved money for your further studies or travel to different places. But this doesn’t mean you should end up exhausting all your savings.
In the process of saving money, careful planning is critical to help in minimal expenditure. Some people even start their dream business with the help of their savings. If you begin to save money now, you will have some financial security in the future.
3. Save Money For Your Future
Saving money demands discipline! Without discipline, it’s not practicable to save money with proper order.
When you diligently save money, you also extract the vital benefit of using it for future purposes.
Accumulated savings can play a vital role while making crucial future decisions. For sure, many people to buy their dream home someday, and money helps you turn that wish into a reality.
Did you know buying a house, a car, or any other appliance at the right time can be one of the best decisions you’ll ever make, mainly if it goes up in value?
Not only that, you can even have your dream wedding, and your savings can be one of the deciding factors that will help you achieve this dream.
Banks also prefer to conduct a background check of your savings before granting you a loan. So, this shows that you will be able to access these perks because your lower loan to value ratio means you are at a lower risk of lending money.
4. Save Money For Retirement
When you start saving money early, you allow yourself to spend your retirement days tension-free.
Yes, this is one of the most important reasons why you need to save money! We usually think, “let’s spend now; we can save for retirement later.” But, unfortunately, the latter never comes!
You may even believe that a retirement pension is sufficient to sustain. But that’s also not true either!
One study in 2009 showed that pension coverage is not adequate to meet basic needs.
And before you know it, you are bombarded with the responsibilities of your family, your children, etc. Then, slowly, medical bills also start becoming a part of your life.
With all of these, you will be left with very little savings. By the time your kids are married or settled in their lives, you are being left with extremely little savings, and you have no other choice than to depend on others for your daily expenses.
Having a decent level of savings for a time when you go well over the hill means you’ll have the funds to get some quality support and care.
So, save now!
5. Adequate Money = Less Stressful Life
Financial concerns, including not having enough money to pay bills or worrying that money will run out, are a leading cause of stress.
Savings will not eradicate stress but will indeed reduce it. Even the simple act of putting a minimum portion of your earning in a savings account every month for emergencies significantly reduces financial stress.
You can sleep peacefully with a sense of security. If you plan on quitting or switching your job, you won’t have to worry much, and you have your savings to fall on for a few days.
6. Save Money For Your Family
Remember those childhood days when you saved all your pocket money only to buy gifts for your parents or friends on their birthday?
I’m sure the happiness you witnessed on them was nothing but priceless.
Similarly, money-saving fosters happiness as it doesn’t only benefit you but also the people around you. With your savings, you can bring about a change in someone else’s life.
You can do something special for your parents, your siblings, your spouse, or your kids. Additionally, you can donate and help someone in need. You can also fund your child’s future.
The financial freedom that saving provides can help you feel confident in giving something to others.
7. Save Money For Happiness
Saving enough money to live a lifestyle that gives you a sense of freedom is a reason in itself to start saving.
One survey study of 500 people in the UK that our bank balance determines our happiness levels more than our income does. The study concluded that people who saw a low bank balance were more likely to feel sad than people with a good bank balance.
Besides, a growing body of research has shown a notable relationship between savings and behavior.
One study published in the Journal of Economic Behaviour and Organization cited savings for having favorable consequences such as health, education, and agricultural investment.
Therefore, your savings contribute to building up your self-esteem and self-confidence.
Haven’t you noticed that people with financial security live a happier life than those in debt? However, there are massive emotional, psychological, and physical concerns to always living stressfully, from hand to mouth, paycheck to paycheck.
Savers say socking money away makes them feel better because it helps them:
- face the unknown,
- gives them peace of mind,
- makes them feel proud,
- and gives them independence.
How To Save Money For Retirement At 30?
If you’re in your 30’s and wondering if it’s too late to save money for retirement, it isn’t! As long as you are ready to take the proper actions, you’ll be left with enough money in the band when you retire.
Here are a few simple ways you can commence your journey of saving money.
1. Analyze Time
Before you start deciding on different saving and investment schemes, you have to measure your current age until you retire. When you do this, you lay the basic framework that helps you develop a robust saving plan.
For instance, if you decide to save 25 until 50 years of age, you get 25 long years to build your wealth. This also means the longer the time you have until your retirement, the better the risk your portfolio can bear.
2. Track Your Budget
Tracking your budget is an essential step to saving money for retirement. It makes you capable of identifying any unwanted expenses that could have been saved. Tracking your budget also helps you focus on paying your earnings on essentials.
For example, these are the essentials you have to at any cost pay every month:
- Rent and mortgage
- Grocery shopping
- Electricity, internet, and phone bills
- Children education
3. 401k Retirement Plan: Tax Benefits
The next step to start saving money at 30 for retirement would be to apply for a 401k retirement plan.
In simple terms, a 401k retirement plan is an investment scheme in America, where employees working in US organizations can opt to put a certain amount of money from their monthly salary to their 401k account, and the employer may match up a certain limit.
One of the significant benefits of this plan is the tax benefit you get. In 401k, you don’t have to pay taxes until you withdraw the money.
A smart thing to do early in your career is to figure out other tax benefit schemes or ways to lessen the amount you pay as tax, thereby taking home a good bunch of your earnings.
How Much To Save For Retirement By Age?
According to a financial report of Fidelity, you should have six times your yearly salary in the bank if you retire in the ’60s.
Here’s a breakdown to save money by age for retirement if you plan to invest from the ’30s.
- The 30s: You should be saving an amount equal to your annual salary. For example, if your yearly income is $50,000, your bank balance should reflect $50,000 by the age of ’30s.
- By the age of 35: You should have twice your annual salary saved, including your retirement contributions, investments, and cash savings.
- The 40s: By the age of 40, saving two times your annual salary is recommended.
- The 50s: Save four times the annual salary.
- The 60s: Strive to save six times the annual salary.
- The 70s: It’s finally time to enjoy all that you’ve saved.
To conclude, start saving your money from today itself without any further delay. Make a plan about your expenditures and cut out any unnecessary expenses. Have some personal finance rules set in place.
Always deposit at least 30% of your salary in your bank account.
Prepare special fixed deposit accounts to help you in extreme emergencies. Instead of spending all your money on buying luxuries now, save it or invest it. Money, when invested, can increase in the amount which will let you buy more luxuries.
Key Takeaways On The Importance Of Saving Money
- We all know, with each passing day, the daily expenses have been increasing.
- One cannot deny the importance and the benefits of saving money because it is the most necessary thing that we require.
- Saving money can help you become financially secure and provide a safety net in case of an emergency.
- You can also independently start your own business with your savings.
- If you start to save money now, you will have some financial security in the future.
- Accumulated savings can play an important role while making crucial future decisions.
- Buying a house, a car or any other appliance at the right time can be one of the best decisions you’ll ever make, mainly if it goes up in value.
- Having a decent level of savings after retirement means you’ll have the funds to get some quality support and care.
- The simple act of putting money away in a savings account every month for emergencies significantly reduces financial stress.
- With your savings, you can bring about a change in someone else’s life.
- The financial freedom that saving provides can help you feel confident in giving something to others.
- Lastly, saving enough money to live a lifestyle that gives you a sense of freedom is a reason in itself to start saving.
What is the definition of “Saving Money”?
Saving refers to the part of the income that you decide not to spend. It is the method of depositing a certain portion of your income aside for long-term benefits.
What are the types of savings?
There are mainly four types of savings:
- Personal savings.
- Emergency savings.
- Retirement savings.
- Health savings.
What is the importance of saving money for retirement?
- Helps in an emergency.
- Provided financial freedom.
- Prevents monetary stress.
- Promotes overall happiness and life satisfaction.
Share the tricks you know to save money in the comments section below. Help others understand the reasons why you need to save money by sharing this article.
Also, subscribe to us for more posts and stay tuned with us. You can also follow us on social media channels.