Why Should You Save Money?

In short, it allows you to enjoy greater security in your life. In this chapter, we will take a look at savings. Why save? When to save? How to save? These are all critical questions, especially if you want to be financially secure in retirement.

Death and taxes are two certainties in life. While we cannot avoid death, we can take steps to minimize our tax liability. In this learning unit, we will also discuss the basics of taxes, how to determine your tax liabilities, and how to reduce, eliminate, or defer your income taxes legally.

In the previous chapter, we talked about developing a budget. When you have a budget surplus, you gain some flexibility with your funds. You can increase your spending, savings, or investment. In this chapter, we will look at savings in more depth, focusing on retirement savings.

Retirement is when you stop selling your labor, and your primary source of income changes from earned income to retirement benefits, personal savings and investments, and Social Security. It is never too early to start planning for retirement so that you can enjoy your golden years without financial worry.

Five Benefits of Savings

  1. It helps in emergencies (e.g., car repair expenses).

  2. It cushions against sudden job loss.

  3. It helps finance big-ticket purchases (e.g., a new car or a first house) and major life events (e.g., going to college or starting a family).

  4. It limits the amount of debt incurred.

  5. It helps prepare for retirement.

Source: Florida State College at Jacksonville, https://fscj.pressbooks.pub/financialliteracy/chapter/making-your-savings-decisions/
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