There are some people that really like to have a lot of savings, but others that are not really that worried about it. You may wonder whether you have the right attitude to saving and whether the amount of savings that you have is right. It is worth understanding the importance of savings and then you can decide whether they are right for you.
Can save you borrowing money in emergencies
If you are in a situation where you need money in an emergency then having some savings behind you can really help. It will mean that you will be able to use that money to buy what you need and you will not need to worry so much. If you did not have the money then you may need to borrow money which could take valuable time to arrange and will cost you money. So, by having the savings there, you will be able to avoid this.
Can pay for or towards big purchases you may need
If you need to buy something new which is expensive, such as a car or white good, then having some money to help out can be really useful. It can mean that you will be able to afford a better one as you have some money to put towards what you can afford to borrow or it may mean that you will not need to borrow in order to buy one. Either way it will be useful for you to be able to have some savings to help out in this sort of situation.
Can give you a feeling of security
We never know when we might have a financial problem. It might be that we need to replace lots of things at once, that we lose our job and have no income or something else. Whatever the situation, we will be better off if we have some savings behind us. We never know when this sort of situation might happen and so by knowing that we have some money there in case we need it, it means that we can feel more at ease all of the time. There will be no need to worry that we might get into difficulties in the future as we have the security of having the money there just in case.
Can earn you some interest
Savings accounts usually earn interest. Although it will not be enough to give you a significant income (unless you have a huge amount of savings) it is still a bonus and reward for saving the money. If you keep the interest in the account then you will be able to get interest on that, which is called compound interest and it means that your money will grow faster. Savings accounts do not pay out huge amounts but if you are prepared to tie your money up for a while you can get more. This might be in the form of a bond or in a notice account. Either of these options are suitable for anyone that wants to get more interest and is prepared to tie their money up. It is worth noting that if you do need your money quickly, you will be able to get it but you will lose interest as a result.
It is also worth thinking about your own personal situation. If you have commitments, such as a mortgage and bills to pay, a family to look after financially or a loan to repay then you will need to make sure that you have money available for this. If you lose your job or your source of income, then you will no longer be able to manage. However, if you have savings you will be able to manage for a little bit longer. It will buy you some time while you look for another job as you will be able to use the savings to pay for these things. It is therefore wise to think about how much money you may need to live off for three months or so and trying to save up that much so that you can feel confident that you will at least be able to manage for a little time. On top of this having some emergency money to fall back on can be useful in case you just struggle to make ends meet, have an unexpected bill or need to replace something expensive.
So, having savings can be really important. It can save you money in the long run due to potentially avoiding the costs of a loan and gaining interest. It can also give you a feeling of security. Therefore, it is something that we should all be aiming to do if we can. Even if we just save a small amount each month, putting something away for our future is really worthwhile.