3 reasons you should save money

Most of us know that we should save, but we don’t always know why. “For a rainy day” is so vague that it’s easy to ignore.

But it’s not just about rainy days! Sure, saving money lets us deal with life’s unexpected challenges. But saving also lets us live comfortably, retire securely, and maybe even follow our wildest dreams.

Saving also brings us more money. For example, the earlier you save for retirement, the more compound interest you’ll earn. And if you're buying a home? A larger down payment means a smaller mortgage, plus maybe a lower interest rate and no need to buy private mortgage insurance—a real win-win-win! (Bonus: At tax time you might qualify for the Savers Credit.)

Read on for more on reasons to save, along with suggestions for where to put your money.

When you're saving, there are some essential areas you should apply your money towards. These include:

• An emergency fund: Everyone needs a cash cushion. One 2016 study from the Urban Institute found that even as little as $250 greatly reduces the chances of missing payments or being evicted. Even if all you can afford is $5 a week, get started. Aim ultimately to stash at least three months’ worth of living expenses.
• Retirement: Social Security alone probably won’t cut it. Contribute to a 401(k) or other plan at least up to the employer match. Experts suggest saving at least 10 to 15 percent of pretax income.
• Down payments: Want to buy a car, home, etc.? A bigger down payment equals less interest paid.
• Education fund: Saving for college is a tremendous advantage, since the average student leaves college with more than $37,000 worth of debt, according to the Education Data Intiative.

Nine out of ten Americans say that nothing makes them feel happier or more confident than having control of their finances, according to the 2018 “Planning & Progress” study from Northwestern Mutual.

Think of it: You’ve set up retirement and emergency funds and can pay your bills and enjoy some frills on what’s left. There's no scrambling to pay for that unexpected car repair or lying awake worrying that you’ll have to work until you die.

Getting that control over your cash means you’re directing your life, rather than letting it just happen. That’s golden.

Choosing to save means choosing independence. You’ll be able not just to cover day-to-day and emergency expenses, but also entertainment, vacations, and other perks that make life so grand.

Saving money doesn’t mean depriving yourself. Making some careful, smart choices now means great returns later: a big down payment on a home, an education for your child, the chance to retire without fear.

Another benefit: flexibility. Suppose you get laid off. Having an emergency fund can let you hold out for the right job, rather than be forced to take the first one you can get.

Having cash in hand could also let you make some big life changes…

Having a baby. Becoming an entrepreneur. Backpacking around the world. Your dreams may vary, but they all have one thing in common: the need to balance passion with practicality. How will you pay for these goals?

By saving, of course. Turbo-charge the dream fund by finding ways to earn extra money.

Imagine building a business without also having to work a second full-time job, traveling without debt, or raising a child on your own timetable. You can make it happen! Saving for a short-term or long-range goal quickly becomes second nature, allowing you to create a life with meaning and purpose.