We might often hear that it is a good idea to save some money. However, this is not an easy thing to do and so we may wonder whether it is actually worth it or not. It can be good to think about the reasons why people might want to save money and then we can decide whether we think it is a good idea for us to do it as well.
To get some return on it
If we have savings and we put them in a bank or building society we will be paid some interest on the money. This amount will vary a lot depending on the company that we decide to save with and the type of savings account we have. If we want instant access to our money, then we will not get that much interest on it. However, if we are happen to tie our money up, perhaps in a notice account or for a fixed term (i.e. a certain a mount of time such as a year) then we will get more interest in it. It can be good to know that our money is giving us some return because otherwise we may as well be spending it.
To have something to fall back on
Many people will save money because they like to have something to fall back on. What this means is that they like to have a sum of money there so if they need to buy something in an emergency they have some there. This might be a bill that suddenly arrives that they had forgotten about, replacing a broken white good or having the car repaired. We will often find that there are situations where we need some extra money and this can help us. It can also give us peace of mind to know that we have the money there in case we need it in the future.
To save up for something specific
Many people will save up because there is something specific that they would like to buy. This might be something small, like a new outfit or it might be something larger like a car or a deposit on a house. There are many different things that we might want to save up for. Saving is useful because it means that we can still buy more expensive items but we do not need to borrow money in order to do so. While borrowing can be extremely useful in some circumstances, it can be cheaper to pay for things from money that you have saved rather than borrowing the money, so if you can avoid this then it is better to do so.
So, as you can see, it can be really useful to save some money if you can. This may not always be easy, but savings can be useful in many ways. Whether you are saving up to buy something specific, want some money to fall back on or want to collect some interest on the money. However, if you have a loan, then it could be better to use your money to repay this rather than saving. This is because the loan will be costing you money, usually a lot more than you get in interest on savings. If you repay this you can be a lot better off financially. If you do need money in an emergency and do not have any, there may be other loans that you can use, but hopefully you will not be in this situation anyway if you have a good way to make sure that you stay in control of your spending. If you want to buy a larger item, then you may be wise to wait longer if you can and repay your loan before you then start to save up for it.