Imagine that it is a long, long time ago. Let’s roll the clock back to the early part of the last century. At that time, material wealth wasn’t nearly as great as it is today. There simply was not as much stuff available as there is now. Yet people did well. In fact, they saved a large portion of their income for a rainy day, anywhere from 10 to 20 percent of that income. They knew that they had to make it on their own, with perhaps a little bit of help from the community. That made this rainy day fund important.
We’ve lost touch with the idea of saving. Now we use credit cards like money, but they’re not saved money at all and they shouldn’t feel that way. They’re actually debt. This comes back to us when it’s time to pay the bill: yes, that piece of plastic is a debt machine, not a money machine. However, it’s easy to forget that in the moment. Credit cards are very convenient, but we need to frame them in a way that works for our long term financial health.
By saving instead of spending, and by saving a certain percentage of our income every month, we can become financially secure and healthy. Tomorrow we’ll look at ways to find money to save. Today, we think about some ways you can use that saved income.
You can put it into savings accounts. These accounts are for short-term savings and they allow you to save now and spend later for big ticket items, renovations, trips, and large events like weddings or Christmas. These are not truly long term savings, but they do help you meet short term financial goals without breaking the bank in a particular month.
You can create an emergency fund. This fund is for emergency repairs, medical bills and the like that would eat up your monthly budget. By saving a little each month, you can have the security that you are covered for these emergencies should they happen.
You can save for retirement. You can put money into a formal retirement savings account or into mutual funds. Your future self will thank you for this financial security.
You can save for your child’s education or for other mid-term goals. Perhaps you’ve always wanted to go on a large, special trip. You can save for this!
If you had money to save, where would you put it?