We all have our reasons to save money up as we dream about living better lives in the future. And we also know that money is never too much.
It does not matter whether your fantasy is to purchase a brand-new phone, a 5-bedroom house on the suburbs of New York or a luxurious yacht to sail across the Caribbean.
Every one of us has our own dream to chase, and the sooner we make our dreams come true, the happier we will be. But, remember that collecting money for the sake of owning more things is not a strong enough motivation for people to save money.
Here are some other more important reasons that came up to my mind on why people collect cash.
1. Paying off credit cards.
Credit card debt is one of the highest interest debt that exists in the economy at usually around 15%-25% interest rate annually. When owning a credit card and not paying it back in full and on time, all roads lead to debt. If you do not know how to use credit cards properly, avoid them like fire. Many financially savvy people use their credit cards for shopping to benefit from a free credit period that usually lasts for 50 to 60 days while making better use of their own cash in very short-term profitable investments.
If you are one of those people who have huge debt on your credit card, you should get the grip and start saving towards paying off the credit card debt in full. Once your credit card debt is paid in full, never repeat the same mistake again.
2. Paying off student loan debt.
A student loan allows many young people to pay tuition fees and graduate from the university. However, it also makes them ‘loan slaves’ for many years after graduation. This debt is owned by those in their 20s and their families, mostly from developed countries like USA, England or Western Europe, especially many young Americans in their mid-twenties are heavily in debt.
3. Buying a car.
Many young people around the world save money for a car. It is great to own a car, if you really need one because you live in a countryside and need to drive to get to work every day. You can travel faster and more comfortably.
4. Buying furniture and home appliances.
Once you move into your new house or freshly-painted apartment, you might want to have additional cash allowing you to furnish the new place a little bit. The number of things you are going to stuff your living room with is up to you because this is your house and nobody else’s.
But do not clutter your new place too much because less is usually more. No matter whether replacing old appliances or setting up the place with brand-new equipment, remember to first buy only those things which are essential. Later, with a new portion of savings, you will add more or buy better quality stuff.
5. Holidays.
Some people save money to go on holidays every year. They put a holiday option in their saving plans because they want to have fun every once in a while, escape from daily problems and just relax. You can save up for a backpacking tour around Europe which is very popular among young Japanese and American tourists, for a luxurious Caribbean cruise which brings middle-aged Germans out of their homes, or for a honeymoon in the Maldives which is a first-choice destination for just-married Asian couples.
6. Hobbies.
This is another fun reason to save money. Nobody asks you to be miserable saving extremely hard every day. Spoil yourself from time to time. We all have our own activities that we like, e.g. collecting expensive cars (if you earn a lot), buying a new book or cooking favorite foods, etc. Hobbies are definitely one of the most motivating reasons to save money because hobbies are fun. And this is what saving is all about – being free to decide how we spend our lives doing whatever makes us happy.
7. Emergencies.
We all want to feel secure when something bad happens, e.g. we become unemployed or undergo a complicated surgery, etc. That is why we create different emergency funds either in a separate bank account or by hiding deep down extra sums of money to rescue ourselves when emergency happens. With the emergency fund, you will not have to use a credit card or take high-interest loan.
An emergency fund is used to set aside money to be used in an emergency, such as the loss of a job, an illness or a major expense like fixing the roof. The purpose of the emergency fund is to improve financial security by creating a safety net of funds that can be used to meet emergency expenses as well as reduce the need to use high interest debt as a last resort.
Some people say that the emergency fund should contain enough cash in a checking or saving account. It allows you a quick access to cash in emergency situations to cover between three to six months of your family living expenses. But, it is really up to you how much your emergency fund will be.
Here are the most popular emergency funds:
a.) Medical expenses fund. Nobody wants to get sick, but when it happens, you need to be prepared to cover doctor’s visits or surgery costs, especially, if those costs are not included in your medical insurance plan.
b.) Sinking fund. Use this money when your car or furniture breaks down, or anything that you own needs to be fixed.
c.) Unemployment fund. Losing a job is never a nice feeling. Finding a new one usually takes a couple of weeks or months, so be prepared to cover daily costs of your household during that difficult time.
Are there any other short-term reasons that come to your mind why people save money?
