NerdWallet: 4 Reasons to Start Saving Today (and One Reason Not To)

 NerdWallet, a financial decision-making website dedicated to helping consumers understand financial basics provides us with a list of four fundamental reasons to start saving now, and one reason not to save money.

We are humans; we always put things off to the last minute, but saving should not fall low on your priority list as it can come back to haunt you.

1. Compounding

The earlier you save, the more you’ll have thanks to compounding. Consider this: if you put away $1,000 at age 20, assuming a conservative 4% annual growth rate, you’ll have nearly $6,000 by age 65.

2. Habits are hard to form but easy to keep

It might be a challenge to get into the routine of saving but once you do, it becomes automatic. An option is to tell your bank to make automatic transfers from your paycheck into your savings account and watch your savings grow!

3. You will adapt

We all struggle to differentiate between our needs and our wants, and convince ourselves that we absolutely need that dress or that new pair of shoes. Once you set a budget and stick to it, you will adapt quickly and become conscious of your spending habits.

4. People make mistakes

No matter how prepared you are ahead of time, accidents happen, and emergencies can come when you least expect them. Avoid the unexpected, “How will I pay for this?” by setting aside a fund especially for these situations.

And one reason not to save

There is one case where we’re told that retirement doesn’t make sense. Emergency funds should be made to help you through 3-4 months of unemployment, but past that, if you have high-interest debt, you should pay off that debt before beginning to save for longer-term needs. Paying off debt now, however, and minimizing your finance charges means you’ll have more money to save later on.