Years of skimpy interest rates on savings accounts have caused many of us to ignore the benefits of being a saver. Even those who regularly socked away something have abandoned their steady savings habit. We’re thinking….what’s the point?
Never underestimate the power of saving.
Whether you’re a student or a parent, employed or not, young or old, you should know that having a savings mentality pays dividends…and makes impact far beyond that meager amount of interest the bank pays. Here’s why:
- Savers learn to set (and meet) goals.
There is value in having a goal to reach. Goals give us a focus and reasons to keep striving ahead. Goals for savings might be short-term (like new shoes or buying holiday gifts) or long-term (building a nest egg). You might also have goals like going to college, getting a fun summer job, or learning to buy real estate.
2. Savers allocate resources differently.
When you learn to save money to reach a goal, you often look at overall spending in a different light. You might consider the trade-offs, or opportunity costs. Someone saving for a car and a vacation, for example, might decide they can be happy with less expensive choices for both items and enjoy both sooner. Yes, savers can refine their choices.
3. Savers develop skills in delayed gratification.
Actually, saving is just delayed spending. Savers can get pretty good at not touching their stash after they’ve built it up. But what’s the point of saving if you never spend it?
4. Saving in one area begets saving in others – it’s a mindset.
Once you start saving, your new habit can extend beyond stockpiling pocket change. For example, you might be more inclined to look for ways to save money – changing grocery shopping habits, borrowing books (and e-books) from the library, turning off lights to save electricity, recycling or re-using.
5. Saving becomes a lifestyle, one passed onto your children.
Even simple money-saving acts become habitual—such as emptying your pocket change into a bowl after work, using coupons, buying things only on sale, picking up pennies, or using a budget. Not only do these become part of your ordinary routine, but they are also habits your kids (and grandkids) will model.
6. Saving encourages investing – a key to financial success.
Once savers see how their money can compound, they want that compounding to happen faster. That’s when investing becomes a possibility, even though investors must learn that getting greater rewards means taking greater risks.
7. Savers learn that not saving costs more.
Sadly, those who do not learn to save, pay more for almost everything. This comes in the form of
- Borrowing money – and paying the lender
- Paying credit card fees
- Racking up interest on debt you can’t pay off
- Lacking an emergency fund, so borrowing money for the unexpected
- Not having money in your bank account, so paying overdraft fees
- Having a lower credit score by overusing credit cards and revolving balances, which translates to paying higher interest rates for mortgages and car loans
8. And yes, even small sums add up.
The magic of compound interest should never cease to amaze. Left alone, even saving $5 a week can multiply into a nice nest egg and keep you away from the brink of financial stress. Plus, the interest rates that banks pay savers will eventually rise, and it’s nice to have a nest egg to take advantage of that.
Once started, both good and bad habits are hard to break. You, too, can start the savings habit. Just think what would you do with that nest egg?!