18 Reasons to Save Money

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Saving money is important because it gives you more financial security, stability, and freedom. Having savings also protects you during financial emergencies, helps you avoid debt, and reduces stress. Additional reasons to save money include helping others and leaving a legacy for your family.

Posted By Jerry Graham

Posted In Spend Less Money

Last Updated: 09/11/2022

18 reasons why saving money is important.

Why Is Saving Money Important?

We’re taught that saving money is good. It’s hard to find someone who would disagree, but sometimes it just doesn’t feel very good.

Sometimes when you’re working hard at a job you don’t love and sacrificing to get ahead, you start feeling down. You wonder what it’s all for. Maybe a little doubt creeps in and you question if it’s all worth it.

It’s not always fun, and it’s not always easy, but it is worth it. If you need a refresher on the importance of saving money, here are 18 reasons to save money for your financial future:

1. Freedom

Saving money is all about freedom.

You might save to buy a house or for long-term goals like paying for your child’s college education. But what you’re really saving for is freedom.

Money in the bank is freedom from:

Landlords
Debt
Financial fears
Doing things you don’t want to do
Inferior products and solutions
Having choices made for you
Having no choices at all
And much more

Having the freedom to live life on your own terms starts with saving money.

2. Emergencies

Having money saved up for emergencies can stop a bad situation from getting worse. An emergency fund gives you some cushion when unexpected expenses present themselves.

It can prevent you from turning to credit cards or relying on high-interest loans for handling emergency expenses. The ability to get through an emergency without jeopardizing your financial security illustrates the importance of saving money.

Aim to have six months of living expenses tucked away in your emergency fund, but try to put aside $1,000 as quickly as you can. You can work your way up to six months’ worth of expenses once you have that $1,000 put away.

3. Home Ownership

We could fill a book with the awful experiences we’ve had as renters. Absentee landlords, noisy neighbors, parking problems, and huge rent increases. And that’s just for starters.

If home ownership has always been your dream or you’re sick of renting, make saving money for a down payment on a house a priority.

How much you have in savings available for a down payment affects how much house you can afford. If you can save 20% of the purchase price, you can:

Avoid private mortgage insurance
Get a better interest rate on a home loan
Reduce the amount you need to borrow
Lower your mortgage payments

If you don’t think you can save enough to put 20% down, you can still buy a home. There are government programs backed by agencies like the Federal Housing Authority (FHA) and the Department of Veterans Affairs (VA) that allow for lower or no down payments.

You can determine how much to save each month by examining your household income, determining how much house you can afford, and looking at your other savings goals.

4. Your Child’s Education

The price of an education only moves in one direction: up. Every year tuition and fees go up, making it harder to pay for schooling without taking on a crippling amount of debt.

It’s difficult, but with careful planning and a firm commitment, it is possible to save enough so your children graduate college without debt. Whether your child is a newborn or a teenager, now is the best time to start a college fund.

5. Major Purchases

Saving for a large purchase rather than financing in has advantages. You stay out of debt, you pay no interest or loan related fees, and you might negotiate a better price for paying in cash. There’s also one less bill you have to worry about every month.

The way to save for major purchases is to incorporate it into your monthly budget. That way, you make steady progress every month rather than putting aside different amounts when you can.

6. Periodic Expenses

Sometimes you know well in advance that you have an important but infrequent expense coming due, like a tax bill. To make sure you have the money available when it’s due, save for it every month. If you’ll owe $800 in 10 months, save $80 per month toward the expense.

Sometimes people forget about periodic expenses. It’s easy to remember your rent is due since it’s a recurring fixed expense. But your car registration might slip your mind until the last minute since it’s only due once a year.

If you need to come up with the money for a bill you forgot about in a hurry, you must aggressively save money. Giving up buying coffee for a few days will not cut it, but a no spend challenge where you cut out all discretionary spending for as long as it takes might. It’s an extreme way to save money, but it works.

7. Compound Interest

One of the great benefits of saving money is compound interest. Compound interest is money you earn on your savings, plus the interest you earn on your interest. Your money makes money while you sleep.

If you don’t save, your money can’t passively earn you more money. If you put your money in a piggy bank or savings jar instead of a bank or high-yield savings account, you lose out on this effect. Also, a bunny might eat it.

Compound interest makes your money grow faster. The only way to take advantage of it and reap the benefits of compounding is through saving.

8. Building Wealth

Saving money is the cornerstone of your wealth-building strategy.

The basic formula for generating wealth looks like this: live below your means, avoid going into debt, and make smart investment choices. Simple. Here’s how saving money figures into that.

By living below your means, you free up money to put toward savings. Avoiding debt allows you to put your money to work for you instead of paying interest to make someone else wealthy. You invest your savings regularly and wisely so your money grows.

9. Major Life Events

Most major life changes will affect you financially. Being prepared for them is important. Whether expected or sudden, major life events usually involve spending a lot of money all at once.

Impactful life events that can cost you a lot of money include:

Getting married
Starting a family
Moving cross country
Caring for elderly parents
Divorce
A death in the family

With a solid savings plan in place, you might navigate your way through these events without draining your finances or going into debt.

10. Stress Reduction

Not having any savings is stressful.

Constant stress causes many health problems that can lead to an untimely death. Stress leads to depression, weight gain, ulcers, high blood pressure, heart disease, and other negative health consequences.

You can ease financial stress and the potential health problems that come with it by saving a percentage of every paycheck.

11. Your Marriage

As much as my wonderful wife Sara and I love each other, we agree that marriage is work. Anyone that tells you it’s easy is lying or hasn’t been married long.

We’re blessed to be on the same page about money because money is one of the biggest sources of conflict in a marriage. Arguing about money is also one of the leading predictors of divorce according to this Kansas State University study.

Should relationships be 50-50 financially? Not necessarily, due to income differences, individual financial obligations, and other factors. It’s more important to agree on money matters than it is to divide everything right down the middle.

When you agree about money, you work together, you share, you grow, and you achieve goals together. That makes for a rewarding and happy marriage.

Building a nest egg makes you feel safer as a couple, prevents fighting, and gives you confidence in your relationship.

12. Setting a Good Example

My parents led a frugal life. They sacrificed, taught me the value of a dollar, and emphasized hard work. They saved enough so my brother and I didn’t graduate college with a ton of student loan debt.

I haven’t always done the best job of managing my money, but it wasn’t their fault. They gave me a piggy bank and the tools to fill it up.

My wife and I want our kids to be financially responsible. They likely won’t pick up good money habits in school or from their peers. That leaves it up to us to teach our kids about money, savings habits, and responsible spending.

Since kids watch everything their parents do, we need to be financially responsible as a couple. We feel we owe it to our kids to set a good example by showing them the importance of saving money through our actions.

13. Fun Stuff

There’s a long list of practical things and life events you should save money for. But that doesn’t mean you can’t save for fun things, too.

By saving for anything, you exercise discipline, delay gratification, and condition yourself. If saving for a new outfit or a PlayStation gets you saving money regularly, it’s not all bad or totally frivolous.

Making sacrifices to save more money feels like a real grind at times. You get sick of being frugal. Sometimes you need a win, any win, to get past those feelings.

It feels great to reach any financial goal, big or small. Don’t feel guilty about saving for something fun.

Having a fun, attainable goal makes putting aside money every month easier. The satisfaction you get when you reach that goal provides motivation for staying on course toward larger financial goals.

14. Helping Others

Everyone needs a little help once in a while. The charities and causes we believe in need support. And sometimes money is the only way to help.

When the people in our lives come to us in need, wanting to help but saying no because you can’t is heartbreaking. Believing in something, but not being able to contribute toward furthering its growth is disappointing.

Not being to help financially doesn’t make you a bad person. You can still be generous with your time and offer emotional support.

If you want to provide financial support, however, put yourself in a position that allows you to. You do that by saving money.

15. Minimizing Risk

You know establishing an emergency fund lowers the risk of ending up broke or in debt when a financial emergency occurs. But when you’re not saving money, you’re taking on additional risks beyond not being financially prepared for an emergency.

For example, how are you planning to take care of yourself as you grow older?

Without savings, you might have to work into your seventies and depend on Social Security. You might have to sell your home and live off the proceeds. Maybe your kids will take care of you.

None of those things are guaranteed. There are a lot of risks involved in relying on:

Perfect health
A strong job market for seniors
The government
Your local housing market
Your kids

Even if all of those things somehow go your way, it could only be temporary. Without savings of your own, you’re subject to whims, fluctuations, and decisions someone else makes upending your life. To me, that’s an unacceptable level of risk.

It’s worth saving as much money as you can, starting as soon as possible with a goal of financial independence.

16. Taking Calculated Risks

While limiting risk is important when saving money for the future, taking a calculated risk can lead to greater gains in the long run. If you want to pursue an opportunity that will temporarily reduce your income, having cash reserves allows you to do that.

For example, you might want to go back to school or start a business. You can only pursue those opportunities if you have enough savings to get by until those decisions pay off.

Building your savings allows you to take calculated risks with less worrying about financial ruin.

17. Career Flexibility

Saving money gives you a little cushion in case you want to try something new or change careers altogether.

I started my career in financial services. I didn’t love it. I didn’t hate it either, but I knew I didn’t want to work for a mutual fund manager forever.

The area I excelled in and found fascinating at work was the computer systems we relied on to gather, process, and share data. I wanted to learn more about computer information systems, databases, and websites. I decided I wanted to pursue a career in IT.

I had a degree in English Lit. My only full-time work experience was in finance, a career I fell into by chance. I needed a fresh set of skills.

I had enough money saved to take classes at night. I didn’t quit my job and live off my savings while I was studying. I started slowly, burning no bridges in case I hated it, or I sucked at it, or it just didn’t work out.

Eventually, I left my job to go back to school full-time. I lived off my savings and did some freelance work on the side using my newly gained skills. Having the runway my savings gave me allowed me to find my calling and switch careers.

18. Leaving Something Behind

When you think about retirement savings, you might also think about your legacy. You wonder how you’ll be remembered and what you’ll leave behind.

If you want to leave a legacy for your kids, grandkids, or a charity with a cause you believe in, that takes some planning and a lot of saving.

Your legacy is the impact you make on those who remain when you pass. It includes the lessons you taught and the memories you created, but it can also be a sum of money, real estate, an established business, or your prized possessions.

You can’t leave anything behind if you’re living paycheck to paycheck or spending every dollar you make. If your legacy is important to you, save.