Importance of Saving Money
It is necessary to save money before you start spending your income on your essential needs; that way, you can set aside the desired funds that you want to save over a period of time. Furthermore, saving money is necessary so that you can fulfil not only your short-term and long-term goals but also create an emergency fund for future use.
For instance, in case the only earning member in a family happens to lose their job and cannot immediately find a new source of income, the emergency fund can help them, and their family can sustain their livelihood over the next few months. Keeping that in mind, always ensure that the emergency fund is adequate enough to meet your financial needs for at least 6 months, if not more.
Additionally, loss of income is not the only emergency one may face. Medical emergencies, such as critical illnesses, not only take a toll on one’s mental and physical health, but the road to complete recovery can be quite long. During such a time, the savings fund will manage the medical and post-recovery expenses of the patient as well as the essential needs of their family.
Medical Emergencies
Medical Emergencies
A medical contingency such as a critical illness or even an accident can be quite expensive. This not only includes the cost of having the injury or illness taken care of but also the post-hospitalisation care and medication over the next few months. Therefore, saving money for such emergencies is necessary.
Loss of Income
Loss of Income
A severe illness, injury or even the loss of one’s source of income means that the family will endure financial troubles. Hence, it is important to have some savings at hand, which can be liquidated when the need arises. Such savings should suffice until you find a regular source of income.
Future Goals
Future Goals
Everyone saves money for their future goals since it can be difficult to fulfil these financial obligations at a moment’s notice. A new start-up, your child’s further education or their wedding are some of the expenses for which you need to have saved enough money for 10-15 years in advance.
Extensive Renovations
Extensive Renovations
Be it a house or a car, it is important to maintain it on a regular basis. While most of this maintenance can be handled with your monthly income, every once in a while, a complete overhaul can be much costlier. Your savings can help you cover these costs without affecting your essential expenses.
Build a Retirement Fund
Build a Retirement Fund
The golden years of one’s life can be wonderful if one’s finances are in place. Post-retirement expenses can be quite different from regular expenses, especially when it comes to health check-ups and medications. Therefore, start saving money well in advance for your retirement years.
Create an Investment Fund
Create an Investment Fund
Irrespective of one’s profession, investing some of your money should be part of your financial plan. However, ensure that this money does come from your daily budget. This is why you must set aside some savings so that you can utilise them for making various suitable investments from time to time.