We all know how important savings are… or at least we have probably been told this throughout our lives. But why? Why should we put money away that we could spend now? Why sacrifice buying things when you could have them now? Why live frugal when you can live in luxury?
I don’t claim to have all the answers, but I have FIVE that may help convince you to start saving today.
You Can Never Expect the Unexpected
This sounds trivial, yet is so true. Whether it be a washing machine blowing up or an unexpected car repair, you just never know when you are going to need money. There is no way of knowing when things are going to go wrong – but you can be prepared for when they do. Saving for this eventuality. If I can persuade you to do only one thing, put some money away as a contingency plan, for a rainy day. Start an EMERGENCY FUND. Automated deposits to various savings accounts can help.
Savings are Critical for a Comfortable Retirement
I am way too freaking young to be worrying about retirement. Ok So I am 24 and I agree with that statement… however you need to understand the power of COMPOUND INTEREST. By starting this whole saving business now, you will not only save yourself a whole lot more, but you will make yourself a whole lot more. Take the following example:
If I save £200 per month right now @ 24 years old, for 36 years (until I am 60) and assume an interest rate of 6% (I am going for slightly higher risk options given the long term investment) I will end up with a nest egg of over £300,000. Sounds good right? If I decide damn I can’t be bothered with this yet and wait until I am 30: This decision would cost me about £100,000. How can this be? 6 years at £200 pm (£2400 per year) is just over £14k I hear you say… welcome to the concept of Compound Interest. Effectively I am stopping my savings accruing faster and depriving them of interest. If you don’t believe me, work it out on a spreadsheet. It will literally blow your mind!
It doesn’t matter how seemingly insignificant your contributions are now; these amount up over the years and you can always add to them at a later date.
Save Worrying in Future Life
By saving money you save yourself worrying! It’s simple! The fact that you can grow old knowing that you worked it out and you know what you will end up with and you know that you will be comfortable is such an amazing feeling.
There are Always More Important Things than your Immediate Wants
So Apple are releasing the new iPhone 5 next week, but do your really need it? OK so it looks like it will be pretty sweet, but the iPhone 6 is only just around the corner. Why blow your savings on something that is short-lived, when you can always by the latest model next time? There will always be something newer and better. I can’t help but feel sorry for the fools who queue up to buy brand new cars with the latest features from the dealership, probably signing on 5 years worth of crippling debt. There are 2 main reasons I think this is a ridiculous idea:
- You instantly wipe £1000s of the value the minute you drive out the dealership
- There will be a newer model available in 6 months and you will no longer have the latest version. Short-lived or what?
Saving is the Basis of a Frugal Mindset
By introducing saving targets in the form of goals you can change your life today. Consider this-
There is never a good time to start saving. The excuses are always the same:
I’ll start when I get a payrise
I’ll start next year
I’ll start when I am older and have real responsibilities
I can’t afford it
I want to live for the moment
The list goes on…
There are so many options when it comes to savings accounts. Fixed term savings accounts are handy if you have a set target in mind, where as other options may meet different needs. Don’t be one of the middle-aged people full of regret of not starting saving when compound interest can really make a difference – make that difference today.