The South African Savings Institute (SASI) chose July as the National Savings Month to urge South Africans to create a savings account using alternative methods. Whether you’re budgeting, cutting expenses, or getting out of debt, the ultimate goal is to increase the amount of money you can put towards savings or investments. In this article, we explain why you should start contributing towards savings.
In short, you should have savings because it can help you:
1. Prepare for Emergencies
Some people call it an ‘emergency fund’, while others call it a ‘rainy day fund’. However, regardless of what you call it, what is actually important is why you should have savings.
One of the most important aspects of finance is preparing yourself financially for emergencies. Regardless of who you are, nobody is immune to emergencies, and therefore it is important for you to prepare for them.
This money should preferably be placed within a savings account so that it is not as easily accessible when you are out spending money. This means that should you ever find yourself in a financial emergency when you need to access your savings, your money will be there waiting for you.
2. Improve Your Financial Organization
While having savings is a good place to start, organizing your savings into various accounts should be a priority. Set each with a defined purpose. Defining each category makes maintaining the organization of your savings contributions easier.
For example, your emergency fund should only contain money that you’ve dedicated to paying for emergencies. Beyond that, you can have an automotive fund (to help you pay for car repairs or maintenance) or you could have a home fund (to help you save for home repairs or even a remodel).
3. Help You Avoid Debt
If you’re planning on having a fruitful financial future, it means that you need to avoid credit card debt, auto and payday loans.
Living completely debt-free requires you to save and pay cash for everything that you buy, no matter how big or small. And having savings is the first step towards this.
4. Protect Your Assets
If you have any financial assets, from the equity in your house to the money sitting in your retirement fund, the best thing to do is to let your investments grow. Something that you should avoid at all costs, is pulling money from them to pay for expenses. And that is exactly why you should have savings.
The more money you have in your savings the more your assets are protected from a financial emergency.
For example, in the unfortunate circumstance that you were to lose your job and don’t have savings piled up you might be forced to dip into your retirement fund or worse still, sell your house to pay for your living expenses. Having savings means, that if you were to find yourself in this situation, you have the funding to support you and your lifestyle while you search for another job.