Saving money is an important piece of moving towards financial independence. I’m not talking about saving money by using coupons or getting a discount (that’s spending). Saving money simply means putting money aside in a safe place for future use.
You can save it in a piggy bank, under your mattress (not recommended), or in a savings account (recommended). Regardless of where you put it, it should be risk free and readily accessible.
Savings should not be expected to grow much, but there are online savings accounts available that pay 1.5% interest or more. While this isn’t going to make you rich, it’s $15 of passive income per year for every $1,000 you save. More importantly, saving is your best defense.
Your Best Defense
Saving can be your best defense when disaster strikes. It is so important because it literally saves you from bad financial situations. Nearly half of Americans lack the ability to pay $400 in the event of an emergency. Perhaps you are one of them. What happens when (not if) you get a flat tire, you need to go to the emergency room, or you lose your job? You need to borrow the money or put it on your credit card and pay 20% interest on it for the next 3 years.
It is recommended to save 2-4 months worth of expenses. This probably seems like a lot if you don’t have anything saved, and it is. You don’t have to do it all at once though, so just start somewhere. If you can put in $10 per month, you will have over $1,000 saved in 2 years.
Ultimately a well-funded savings account gives you the flexibility to make whatever financial decisions are best for you.
One of the main reasons I started Wise Money Home was to help people get a grip on their finances. For so many people, it is money controlling their life rather than them controlling their money.Keep Reading