Most things in life can be funded by taking out a loan. It’s less effort than saving money – which begs the question: why bother saving up money at all?
The biggest advantage is, of course, the fact that savings don’t have to be paid back. You also don’t have the added cost of interest when buying things with savings, resulting in you spending less overall.
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Starting a savings account without a real cause can be a risky move as you may find yourself dipping into for all kinds of non-justifiable reasons. Savings should always have a set goal and you should use them for this goal alone. Here are just a few worthy causes that could be worth dedicating a savings account to.
Unplanned expenses can include all manner of things from car repairs to vet bills. Whilst you may be able to take out loans or insurance for these costs, starting a savings account can be the cheapest form of financial security against these expenses. It’s worth keeping this savings account topped up whenever you dip into it just in case there’s another emergency around the corner.
Your first home
Most people can’t afford a down payment on their first home without saving some money up. This is one of the few instances where you may save up money to then take out a loan (that loan being the mortgage). This is a great savings goal for young people.
Your first car
Whilst you can buy cars on finance, owning your first car outright can make things cheaper in the long run. With insurance costs, fuel and repair bills to consider, you don’t also want to be paying car finance repayments. Saving up for a first car is similar to a great goal if you’re young and have money to put aside.
This may be a long way off for some people, but it can pay to start saving early. The more you save for your retirement, the more you’ll be able to enjoy the freedom of not working. There are advisors that you can talk to about retirement planning, which could involve ways to save money. It could also be worth talking to your employer about pension contributions.
If you have kids, you may feel that you want to save money for their future. This could be money to go to college or money to put towards property or simply money to give them a secure start in life. There are special trust funds that you can set up for kids that can be accessed until your child reaches a certain age.
Starting a business
If you have plans to start a business, saving up funds could prevent you have to take out a business loan. There are business savings accounts that you can use that often have very lucrative interest rates. Some businesses may be too expensive to fund initially with savings, but you may still be able to fund some of the startup costs using savings.
You could also save up for personal luxuries such as a vacation, a new TV or a new dress. In such cases, make sure that you’re always saving towards a specific goal. A shopping spree could be a specific goal, but make sure that you’re not dipping into money that was originally reserved for another goal such as a vacation.
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