The importance of daily saving: 4 crucial reasons to save money

person putting coin in a piggy bank

Nowadays, many Americans fail to save oney to deal with unexpected expenses. The importance of daily saving: 4 crucial reasons to save money According to a Federal Reserve survey, 32% of U.S. adults could not cover an unexpected $400 expense using their cash, savings, or a credit card fully refunded on the next bill. However, these savings gaps have not always existed. In the 1960s and 1970s, American families saved on average about 10 percent of their disposable income, while today that average is 5 percent, barely enough to keep up with inflation. It’s clear that saving money no longer has a tangible impact at this rate. In this article, we’ll take a closer look at the benefits of saving and present four crucial reasons why saving for your future is essential.

1. Emergencies The importance of daily saving: 4 crucial reasons to save money

We can’t control the unexpected, but we can prepare for it. When emergencies arise, such as a hospital visit or a faulty water boiler, planning for these expenses can prevent you from taking out problematic loans or getting into credit card debt. A common rule of thumb is to save the equivalent of three to six months of expenses to be able to deal with these unforeseen situations.

2. Education

The cost of post-secondary education has risen dramatically over the years, and many professions and employers still require certain degrees. Students are taking on more and more debt, which increases their financial burden. According to a U.S. Treasury Department report, the average student borrower takes out more than $33,000 in federal loans. Saving aggressively is the easiest way to reduce yo

3. Major life events

Getting married, traveling the world, buying a house, having a child… All these events come at a significant cost. Saving for these stages of life will allow you to reduce inherent tensions and focus on what really matters.

4. Life expectancy

As we age, our ability to work and earn more money to support our lifestyle naturally decreases. Moreover, with advances in technology and healthcare today, life expectancy has increased, requiring more funds to live safely. Saving now will help you when professional advances are no longer realistic.

Now that we’ve explored why saving money is crucial to your future, let’s take a look at how you can set your savings goals.

How to set your savings goals

It’s important to set detailed savings goals before creating an action plan. Why is this important?

  • This will help you visualize what you are aiming for.
  • This will allow you to identify responsible ways to achieve your goal without having to backtrack.
  • This will help you make smart decisions when faced with “spend vs savings” situations.

To maximize the benefits of saving, it is best to take a methodical approach by setting S.M.A.R.T. (Specific, Measurable, Achievable, Realistic, Time-bound) goals.

Follow these three steps to make your goals more S.M.A.R.T.:

Step 1: Choose clear reasons to save

Think about your future plans and the things you want to accomplish. What do you need to save for? Remember, saving is a long-term game. The more you practice the basics of saving, the more competent you will become.

Step 2: Assess your finances

It’s important to assess where your money is going. How much money do you have available and how much should you set aside each month?

Step 3: Determine your savings schedule

Depending on your finances and the money available, do you need to reduce your expenses to save more? If so, where can you reasonably reduce costs and how can you create a schedule to do so?

Now that you’ve set S.M.A.R.T. savings goals, let’s move on to practical ways to spend less and save more.

3 Easy Ways to Spend Less and Save More

Now that you’re familiar with S.M.A.R.T. savings goals, try putting them into practice. It’s easier than you think, and the exercises below can guide you to better control saving on a daily basis.

Consider the present versus the future

Think about what you can do with $10 in your pocket. Maybe a quick lunch? That $10 isn’t much to spend overall, but it can add up quickly over time.

Try the $10 experience

Starting from $10 as a base, make a bet with yourself that you can save $10 every day by avoiding unnecessary expenses. (This is where your personal budget sheet comes in handy.) Keeping track of our daily expenses highlights areas where we spend more than necessary and helps us address them.

Instead of a one-time trial, make this experience routine. If you win the bet with yourself, you have saved 10 dollars. Now remember to put them aside.

Once you master this habit, try to increase the amount you save each day. It’s $10 now, but how about $20 next month and then $25 or $30 the next month? After a year of diligent experimentation, your savings could reach several thousand dollars.

The $10 experience is all about helping you start saving. Customize it to suit your lifestyle, whether you’re saving daily, weekly, or even monthly.

Make a list of five future goals

Writing down your goals helps make us mentally accountable.

Grab a piece of paper or use a note-taking app, then list five big things you’d like to start saving for — this could include a two-week vacation in Europe, or maybe you’d rather invest in your home by finishing the basement or renovating the kitchen.

Next, write down five things you regularly spend money on and could do without. For example, do you pay for cable TV, internet, and multiple streaming services? Maybe it’s time to evaluate what you’re actually looking at and remove the one you use the least.

DON’T WORRY: Listing them doesn’t mean you have to get rid of them. It just makes you aware of the areas you might be looking at.

Now that you’ve identified savings goals and ways to reduce your expenses, you need to know where to put your saved money.

3 Places You Can Consider Saving Your Money

Once you have acquired some tips to save, the question arises: where can you put this money?

Your unique situation will help you determine what’s best for you, but here are four proven ways to keep your hard-earned money safe.

1. Chequing Accounts

Chequing accounts are great for managing day-to-day expenses, paying bills, and managing your finances. While they usually offer lower or no interest rates, they offer unlimited access to your money.

2. Savings accounts

Options vary, but for those who need simple ways to put money aside, it’s hard to go wrong with regular savings accounts and savings accounts for young people. Both offer variable interest rates and free online banking to keep up with your savings.

Money market accounts are similar to regular savings accounts, except that money market accounts usually offer a higher interest rate. In addition, they offer the possibility to write checks.

3. Certificates of Deposit (CD)

A certificate of deposit (CD) requires holding a balance for a certain period of time, but it may offer a higher interest rate than a savings account or money market account. Penalties may be applied if the account holder withdraws money prematurely.

While most types of accounts are comparable, the main differences between them are the interest rates offered and the means of accessing deposited funds. Before opening an account, take the time to assess your needs and study the savings options offered by your bank.

Fortunately, most types of traditional accounts, including checking, savings, money market and CDs, are insured by the FDIC (Federal Deposit Insurance Corporation) up to a specified amount. However, some banks don’t offer FDIC insurance, so be sure to confirm this with your banker.

Need more information or support on savings?

No matter how experienced you are saving, there’s always more to learn. The good news is that you don’t have to do it alone and you don’t have to become an expert overnight.

Talk to a banker

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