Saving is about putting a small portion of your income aside for future use. The key benefit from saving is that it helps us to achieve our financial goals in life but most importantly it helps to ease the bumps and provides a “cushion” when emergencies strike.
For this article, we will focus on emergencies, as these happen when you least expect it. Emergencies are a fact of life and usually we will need money to fix them. Emergencies come in all forms, like loss of income, loss of employment and loss of key equipment around the home or business, medical emergencies for you or family, urgent travel, funeral etc.
The impact of emergencies can be very serious. For example, how would you cope if you suddenly became ill and was not able to work any longer? Would your family survive without your income? Or, if you lost your job tomorrow, how would you pay your bills and buy your food?
These are some of the harsh realities of life that we all need to consider. Having a savings account will certainly not take away all your problems during emergencies but it will help you to cope better.
If we take a situation where a bread winner in a family looses his/her job, the whole family is affected. Worry and stress about buying food, paying bills and making ends meet becomes a reality and adds to the already existing burden. Tension within the family may increase causing discord among members .If the bread winner had a savings plan; the money in the savings account provides them with valuable time to find another job or an alternative source of income.
The first step to saving money is having financial savings plans in place. There are 3 types of financial savings plans short, medium and long term.
Short-term financial savings (from now to 2 years) are those, which are used for meeting both planned and unplanned expenses, such as school fees, medical expenses, funerals, church donations and other obligations important to your family and your community.
Medium term financial savings (2 to 7 years) are to meet financial needs arising over the next few years and may include paying a deposit to buy land or house, car, overseas education of children, or an overseas trip.
Long-term financial savings (7 years and more) primarily is aimed at putting away money for retirement pension, old age or for being self-sufficient when no longer employed or investing in a property to enjoy a retired life. Now that you understand why you should save, set yourself realistic financial goals and make a plan a show you will achieve these goals. But keep in mind that you choose the one that you are comfortable with and that you can stick to it, then go ahead get started today!