Many of us—especially when we’re young, at the bottom of the pay scale, and always strapped for cash—blow off saving. We’ve got enough financial worries, bills to pay, debt to wrestle, food to buy—who can afford to just throw money into a savings account and sit on it?
Well, you can. Savings isn’t just a luxury: it’s a necessity. It provides a cushion of security in case something unexpected happens, and it gives you that extra cash you need to make an important move in your life—from buying a house to changing a job to moving across the country. Without savings, you can’t live the life you want to live—and it’s only a matter of time before a major financial disaster hits. Here are eight reasons why you should be putting a little away each month.
Because you might get hurt or sick. If you have health insurance, you’re lucky. One-third of people age 21-24, and one-quarter of those 25-30, have no coverage. Health insurance is offered less and less often at big and small businesses alike, and for those who run their own businesses or who have no insurance through their jobs or spouses, the cost to buy it on their own is prohibitive. That means that if you get in any kind of accident, twist an ankle walking down the street, or have any kind of health scare that requires an ambulance, you’d better have some savings to cover the costs. And those can run well into the thousands.
If you have insurance, don’t count on everything being covered, either. Because the costs of health care are rising so quickly, many companies are switching to cheaper plans for their employees—and that means higher co-pays and deductibles, and fewer things covered, for you. Better have some savings just in case.
Because you might lose your job. Job security is a thing of the past. There’s still the danger that you and your boss might not get along, but no matter how good you are at your job, there’s a chance you could become downsized through no fault of your own. Without savings, the loss of a job could put you in financial trouble right away—and leave you scrambling for another job anywhere. When you’re desperate for another job, you could wind up taking anything that comes along—even if it pays far less than you need. With savings, you’ll have a buffer that will help you pay bills while you look for another job that’s more appropriate for your income level and skills.
Because you want to quit your job. Forget about getting fired—you might want to leave your job someday. Maybe you want to change careers, go back to school, or start your own business. Whatever the reason, it’s all a pipe dream without savings. When you have savings, you have the flexibility to pursue your dreams—even if they don’t pay off right away. Without savings, you’re shackled to the next paycheck, with no way to make a move toward your dream job.
Because you want to buy a house. Buying a house takes a certain amount of savings for the down payment—and savings are especially important if this is your first house, without the cash from the sale of your old house to help you through the buying process. Buying a house is still a principal form of creating wealth in America—and it’s pretty tough to get started without savings.
Because you need to buy a car. Many people need a car to get to work. And if you have a car, you’d better have some savings. You never know when it will break, when you’ll get into an accident, when a vandal will key your door and it won’t be covered by your insurance. Cars are a big drain on funds, even if you buy used—so you’d better have plenty of savings to take care of car problems quickly and effectively, especially if you depend on your car to commute to work.
Because you need to make major repairs. You never know—your dishwasher could explode, your roof could collapse, your car could break down, or any number of other disasters could occur. When you need to make major repairs, you’d better have savings to take care of it—or you could wind up suffering serious consequences.
Because you want to get married and have kids. Most of us want to do at least one—and usually both—of these at some point. Weddings are expensive, and unless you’re fresh out of school, the tradition of parents paying for everything is rapidly on the wane. If you want a nice wedding—and enough money left over for a honeymoon —you and your new wife or husband had better have enough savings to take care of it. When you have children, you enter into a whole new level of need for savings—from having enough money to take care of your children through thick and thin when they’re younger, to having enough to plan for college when they’re older.
Because eventually you’ll have to retire - and you can’t count on Social Security. The responsibility for paying for retirement is increasingly being taken off companies and the government, and settling firmly on the shoulders of individuals. If you want to have a comfortable retirement—without having to work into your 90’s—you’d better start saving when you’re 25.
Having a solid savings account is crucial to getting through life—from managing unexpected hassles and tragedies to making a big move. If you don’t have any savings, the smallest unplanned mishap could put you in financial trouble—and you’re stuck at the financial level you’re in, with no freedom to change jobs, buy a house, or get married. Savings give you both safety and freedom—two things it’s tough to live without.