Importance of Saving Money for Financial Freedom

Why Save Money?

I learned the importance of saving money for financial freedom at a young age. When I was six years old, my mother showed me a savings account passbook. She had opened the account for me at our small town bank not long after I was born. The first deposit was for $19.59, followed by a few other deposits. Each time a deposit was entered, the bank teller also stamped another small amount in the book.

I asked my mother what the smaller amount was, and she told me it was for interest. She explained that the bank paid me interest so that other people could use my money.

When I realized how easy it was for me to make money in a savings account, I was hooked on saving money! Every penny I could scrape together, from my allowance to birthday gifts to earnings from jobs went into my piggy bank. When the piggy bank was full, I would excitedly walk to the bank to deposit the money.

I had so much fun watching that little account grow!

Too many people are spending money today that they haven't even earned. On the other hand, good personal money managers realize they need to save today's earnings for expenses they will have in the future.

So, why save money?

The first reason for saving is to build an emergency fund. This is extremely important. An emergency fund provides for expenses that can occur from unplanned events such as job loss, health problems, accidents, and home repairs.

If you are self employed, or your income varies greatly from year to year, you need to save to smooth out income fluctuations.

You also should save money for large purchases which you can’t afford with your regular income. Examples include a car, college education, or down payment on a home. The more money you save ahead of time for these types of expenses, the less you will pay in interest charges in the long run.

Most people realize that they need to save for retirement. Unless you are assured of a large pension or some other source of income, savings will be a large portion of funding for retirement needs.

Finally, you should be saving to increase your wealth. Savings are a good way to fund investing. Investing can supercharge your accumulation of wealth.

No one spends exactly what they earn. Those that spend more are either depleting their savings or going into debt. Those that spend less are either paying off debt or saving. The importance of saving money cannot be stressed enough for those who want to experience financial freedom.

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