When you were a child, did you have a piggy bank where you could save your spare coins and dollar bills? If you did, maybe you used your savings to buy a popular toy or bicycle. Today, the idea of saving money is still a valid concept. When you open up a savings account and stash away a portion of your paycheck each month, you build a nest egg for the future. Here are 9 reasons why opening a savings account is a good idea:
1 - Avoid Borrowing
If you want to make a larger purchase such as a car or household appliance, you can usually get it financed and just make a minimum down payment. However, by doing so, you'll end up paying interest each month. While this amount may seem small, it can really add up over time.
The alternative to borrowing money for this kind of purchase would be to create a savings account and save some money. In the future, if your car requires a new transmission or your refrigerator stops working, you have got all or a portion of the money that's needed to remedy the situation.
2 - Weathering Through Difficult Economic Downturns
Another great reason to open a savings account and save some extra cash is to have a backup account when the economy turns south. Every few decades, the economy goes through a cycle that isn't as favorable as it could be. You may become unemployed or own a small business that starts to see a slump in sales.
Having the equivalent of six months or one year's salary set aside in a savings account may help you weather through tough times like this. It pays to be prepared.
3 - Paying For College Education
You've probably heard about the high cost of going to college and the increase in the number of student loans given each year. If you decide to further your education after high school or pay for a child who wants to go to college, you'll find that the cost of tuition can be astronomical.
Any amount of money that you can save for going to school will help cut the cost. If you save enough money, you may even be able to go to a more expensive school than one that's not on the top of your list of choices.
4 - Stay Out Of Debt
If you don't have any accumulated savings as a backup and an unexpected event occurs such as a medical emergency or home repair, you'll probably need to borrow the money. Unfortunately, using money that you don't have can often start a bad spiral down that is difficult to get out of. You may end up spending extra money on interest each month.
By being proactive and saving what you can, you may not have to go into debt when the pipes in your house freeze or you slip and break your arm.
5 - Becoming Financially Flexible
Savings can also create luxury in your life. Your savings don't always have to be used specifically for emergencies. By opening up a second savings account, you can set aside funds for fun things like a vacation, recreational vehicle or another adult toy that you've always wanted.
If you are the type of person that seems to spend the available balance that's in your checking account each month, you may need some discipline to save money. By opening an initial savings account for emergencies and a second savings account for fun things, you'll become more financially flexible and have the ability to treat yourself well.
6 - Taking Control Of Your Finances
Do you know your exact financial situation right now? You may be spending more money than you need to each month. Opening a savings account and setting money aside on a consistent basis takes discipline. This will force you to become more aware of your income and expenses.
You may be able to save more than you think and cut expenses on frivolous items. Having a strong grasp of your finances can reduce stress as well. If you feel like you are living on the edge each month, consider opening up a savings account.
7 - A Sense Of Security
Your life will have its ups and downs. Unfortunately, some of those down times can be quite expensive. However, having the ability to fall back on any amount of savings can provide you with extra cash when you need it most.
Having that sense of security will make life a little easier. If you have a savings account that only pays a little interest each month, having that is better than having nothing at all.
8 - Stop Spending So Much
Some studies have shown that individuals will spend what they make. If your income is in the six figure range, you may spend money on extra cars, boats or other items that you don't really need. The same philosophy is true if you are making $50,000 a year. You may have a perfectly fine barbecue grill that's only two years old, but you purchase a new one anyway.
While there's nothing really wrong with spending your money on nice things, you may be able to save even more money and purchase something more rewarding with it in the future. When you open a savings account, it will help you do this.
9 - Reaching A Specified Goal
Consider having a purpose for your savings account. Whether you are saving money for a house, a new car, an emergency fund or some other type of object that you desire, having a goal and motivation to reach that goal will help improve your management skills and your life.
When you open a savings account online or at the closest local branch of your bank, and you start saving each month, this ensures that you'll actually get something back on the money that you save.
This can benefit you by reducing the risk of a financial hardship, improve your financial health, allow you to take better fiscal control of your life and feel a sense of accomplishment.