There are some aspects of money management that you couldn’t miss if you wanted to. For example, everyone knows that it’s important to have a realistic budget. Similarly, most people know that you need to pay your debts if you want a solid credit score. But when it comes to saving money, it’s different.
Technically, you could get by financially for weeks, months, or even years without making a serious effect to build up your savings. However, even if it’s possible to get away with a lean savings account, there are more benefits to building up a long-term savings account than many people realize. In fact, by our count, there are at least four really good reasons to build up a savings account.
Keep reading to learn more.
#1: You Can Finance Your Dreams More Easily
Most of us have that one thing in our lives that we look and think, “Man, if I’d had more money when I bought this I would have gotten something a little nicer.” On a micro level, you could be thinking about your headphones or your phone. But the same concept also applies to major life events.
For instance, how many people do you know who wanted a destination wedding but couldn’t afford to have one? How many times do folks go car-shopping only to come back talking about how they would have bought something more expensive if they could have made the numbers work?
In personal finance, people will often talk a big game about saving and making lifestyle compromises when budgeting. And to be clear, those things are important. But sometimes there’s also value in being able to buy things that are a little bit nicer. And to that end, a hefty savings account can only help you.
#2: Savings Can Help Protect You From Job Loss
As it stands at the moment, you could be crushing it in your professional life.
However, as hunky-dory as everything might be right now, you can’t always see the future coming. The company could go be acquired. You could be offered a position at another place.
For instance, during the worst of the pandemic, Canadian unemployment hit a high of 13.7% in May of 2020. And even during non-pandemic times, when you’re stuck waiting for EI or otherwise trying to make it work for yourself between jobs, it’s easy to find yourself under a lot of financial pressure.
When you have a healthy amount of savings. It’s easier to be prepared for anything.
#3: It Gives You an Interest-Free Source of Funds
Interest rates may be one of the biggest financial expenses that nobody ever talks about.
And to be fair, when you’re used to paying everything off at the end of the month, it can be hard to wrap your head around just how quickly these debts can accumulate over time. But here’s the thing – sometimes major expenses come up that your budget just isn’t able to accommodate.
And when you’re under that kind of financial strain, there’s a point where it can be tempting to take out higher interest loans to get by. The beauty of having a savings account is that you can treat your savings like a line of credit. Except for one key difference: You don’t have to pay yourself back interest.
#4: You Can Let Your Money Earn Money
Warren Buffett, who is perhaps one of the most successful investors of all time, once talked about the importance of finding a way to make money while you sleep.
And truthfully, the more you spend time learning about how to manage your money, the more you start to realize that – Mr. Buffet had a point.
When you’re working for every penny you make, it’s possible to reach a point where you simply max out. Everyone reaches that point where it becomes necessary to rest and recuperate.
A high-interest savings account makes it possible for you to get paid by the bank. And even if the interest amounts aren’t necessarily all that high, those interest payments are still adding to your income even if you never touch that money.
Savings accounts are in many ways the unsung hero of personal finance. They’re not as flashy as the stock market and they’re not as in-your-face as a budget. But they’ll steadily grow while acting as a financial safety net whenever you need relief.
Life can be tough. The future of the economy is never totally certain and the job market is as competitive as it’s ever been. A savings account can give you the flexibility you need to navigate these sorts of situations from a place of financial strength.