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Saving – Five Reasons Why You Should Start Saving

Why Saving Is Important And Five Reasons To Start Saving

Introduction

Savings can be defined as money or income not spent after removing daily consuming disposable. It is also referred to as a money kept for future preference after an accumulated period of time. For example, a monthly earning of N300,000, which may cover other daily expenditures ranging from food, transportation and fuel can be deducted and spent; whatever is left can be saved for further future plans, this saving process( money) can be termed as savings.

savings

It is recommended that one must learn how to save at least 30% of his/her income, either by investing which in turn will yield profitable revenue.

Types of Savings.

Effortlessly, benefits of saving aren’t hidden, this segment will divulge the different savings types any individual can partake .

1 Personal

With reference to the name, personal savings involves money saved to achieve a significant purpose, result or expenditure after settling one’s personal needs. Personal savings can be used to achieve a long-term hence, temporary saving in this category should be avoided and imbibe as a lifestyle.

For a plan of a vacation getaway, saving towards it, can remedy and create a lasting best vacation goal and also help in personal money management. Earning more money should compel one to save more.

2 Emergency

Emergency savings can be defined as funds saved to remedy sudden financial needs without being stranded. Emergency savings prevent debt incurred living by making one stay and overcome unexpected upsides of circumstances be it sickness, family crisis and loss of job.

According to the rule of thumb, one must have enough financial backup that can sustain for the duration of 3-6 months, this can only be done with adequate saving plans. For instance, proper savings can cater for one’s needs during unexpected loss of source of income till another job resurfaces. Emergency savings must have a target, hence giving a strategic saving plan, in this regard, money can be deposited into an emergency savings account at any given time.

3 Retirement

Retirement savings involves a saving plan or investment disbursed into an account for a retirement purpose. Due to daily spending, many aren’t ready for retirement because of inadequate saving plans. Evidently, the government has mapped out a plan to support retirees, this support plan however cannot be relied on due to the instability of the format of paying retirees. Saving for retirement should have a dream focus of where to live and lifestyle goals.

Why You Should Start Saving

Understanding the benefits of savings has not only helped one set up a priority list but also understand when one ought to spend wisely and save the rest to avoid a regretful end. To further explain why we should save, below are 5 valid reasons to adopt a lifestyle of savings.

Financial Freedom: Savings has supplied the comfortability of living a debt-free life especially during emergency situations by tying loose ends of irrational spending, hence, creating a financial freedom from bankruptcy.

Limit Debts: Savings has inculcated a financial disciplined life void of debt or the ability to pay off any substantial outstanding loans.

Financial Security: Savings has created a financial security sensation to back one’s unexpected loss.

Education: Education involves cost and to obtain a higher education, one must plan by saving ahead be it for self or for family.

Vacation: Vacation goals can be achieved by adequate savings.

Difference Between a Current and Savings Account.

Savings and current accounts have different features and they serve different purposes. Savings accounts, as the name implies, involves an account where an individual can save his/her money. While current accounts are accounts owned by working class individuals, firms and companies. In a Savings account, an individual can save and have a considerably low account balance . In a savings account, the interest rate is quite higher due to the account’s liquidity than that of the current account . Current accounts which are usually for firms or companies, have no transaction limits, unlike savings accounts which have a limit.

The financial need of an individual can determine the type of account they open. Nevertheless, owning a current account is best for managing daily transactions while savings accounts are useful for saving extra money and earning interest in the process.

 

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