Saving Is About More Than Just RetirementPaul-Martin Foss
While much of the focus on savings and investment revolves around retirement, that isn’t the only reason to save money and invest. Money is what allows our society to flourish. It allows us to purchase goods and services, go on vacations, and purchase houses and cars. Saving and investing can put your money to work for you, give you a higher standard of living, and help you reach all of your financial goals.
Purchasing a House
Homeownership is still the American Dream to which many people aspire. Homeownership rates remain above 60%, so most Americans will purchase a house at some point in their lives. But with ever-increasing housing prices, buying a house is expensive. In order to get the best rates on mortgages, buyers need to put enough money away to afford at least a 20% down payment. In some areas that could mean paying as much as $150,000 just for the down payment on a first home. Having that kind of money on hand requires a consistent pattern of saving and solid investment choices.
Raising a Family
Children are expensive. From diapers and formula to college tuition, the average cost of raising a child today is over $230,000. Without putting away money and saving and investing it wisely, the costs of raising children will eventually take a significant portion of your salary. The last thing anyone wants to happen is to get to the point where their children are headed to college and realize that they have no money saved away to pay for it. Start saving as soon as possible, as soon as your children are born or earlier. Eighteen years of investment returns will ensure that your children have at least a fighting chance at paying for college.
Saving for a Rainy Day
Almost 60% of Americans don’t even have enough money saved away to pay an unexpected $500 bill. That’s not a lot of money – hitting a bad pothole that blows out a tire and cracks a rim could easily cost $500 or more. Most financial experts recommend having ready access to at least three months of living expenses, with six months worth of living expenses being preferable. That way if you have a car accident, or a health scare, or lose your job, you won’t be forced to resort to credit cards to pay bills or, worse, end up on the street.
Saving that money requires, first of all, a knowledge of how much money you’re spending each month. Once you have that information, you may be surprised at how much you’re spending. But knowing your monthly spending figures makes it easier to dial back on your spending too and makes it easier to save up three to six months worth of money to live on.
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Saving and investing can offer financial security far greater than what a steady paycheck can offer. Practiced consistently over decades, saving will enable you to achieve many of the major financial goals you may have. Rather than living paycheck to paycheck like so many people do, you’ll have the freedom to do what you want without wondering where the money will come from.