Why Do We Need to Save Money?

The saying could not be truer when it comes to the management of financial commitments towards ones family. To bring congruency between our life’s earnings and life span, we need to do some financial planning. We may earn lots of money during our working years, but it may not be enough to maintain our living post retirement and hence we need to preserve and augment this wealth. The wealth we have earned and saved depreciates in several ways and the biggest monster being inflation. The value of money keeps declining year after year without doing anything. The second biggest risk to your savings is the falling interest rates. The lending rates have shot up tremendously, whereas the deposit rates are sliding day by day. The third biggest danger to your savings is the desire to spend. During our earning period, money flow is quite good and we don’t think of saving adequately. We are too busy enjoying our prosperity, going on shopping sprees, dining out, trying to provide all comforts to our family etc rather than planning our finances.

The worst scenario for any person is when an unexpected illness strikes. I am indeed presenting a gloomy picture and exaggerating a little more, but this is just to shake you up to take a serious look at your financial planning. At every stage of our life, financial planning should take foremost importance to fulfill the various needs of our life cycle like expenses for getting married, acquiring comforts and luxuries like buying a house or car, providing quality education to children and finally medical emergencies if we are leading a stressful life. The outlay list is never ending and we need a fixed amount of money at every stage of our life to meet our financial requirements.

The biggest challenge that all of us face is to live within our means and set aside a certain portion to meet future requirements. Saving money for the future is a very important means to lead a contended life and makes us realize our responsibilities well before they make their need felt. Based on your financial goal and individual needs, the savings or investment option can be decided. The various investment options need to be understood thoroughly in the wake of risk and returns associated with each one of them. As an old saying goes “Save for the rainy day”, your savings should always have a time horizon of short-term, medium-term and long-term investments. At the end of the day, your savings should not let you to prune back and think of settling for a lesser standard of living that you are not used to. Think about it.