When it comes to putting money into our savings we might not automatically think about the benefits of saving money. However, there’s lots to consider. Here are some of the best benefits to saving money:
You can cover emergencies
From an expensive car bill to needing to carry out a home repair, emergencies can add an unexpected expense. But by saving money into your emergency fund you will have money set aside for these unexpected expenses that crop up.
Without an emergency fund in place, you might find yourself unable to pay for repairs, bills, or debt repayments. You might also need to take out additional credit to cover the expenses your encounter.
It is ideal to have three-to-six months of expenses in your emergency fund, but this isn’t achievable for all of us. Even having just £100 in your emergency fund can make a big difference.
Sickness or time off work
A lot of us are living payday to payday, meaning that any unexpected time off work or having to rely on statutory sick pay could have a big impact on our finances.
By having savings behind us we can focus on recovery from our illness, or caring for family and friends, without worrying about losing income.
Paying for a big life event
One of the great benefits of saving money is that you are able to pay for a big life event like a wedding, or a civil partnership celebration. Whilst you can get married for under £1,000 you might be dreaming of a bigger day that could set you back tens of thousands of pounds.
A lot of happy couples end up postponing their wedding date because of the cost of weddings. However, if you save up money for your wedding day, then you can plan the day of your dreams, without starting married life together in debt.
Saving for a house deposit
Whilst getting on the housing ladder might seem like a distant dream, it is one of the great benefits of saving money.
You will typically need at least a 5% deposit on the house purchase price saved as a deposit, although it is more common to see 10% or even 20% required. That means for every £100,000 the house you want to buy costs, you could need to save between £5,000 and £20,000 towards the deposit.
By putting money away regularly into a savings account you will be able to work towards a goal of home ownership.
Letting your money work for you
Whilst interest rates on savings accounts might be quite low at the moment, there is still some money to be made from the interest on your savings.
You can’t expect to see as much growth as you might get from investing. However, by putting your money into a savings account that pays interest your money can work for you, racking up some extra cash.
Using sinking funds to pay for regular or irregular spending
Sinking funds are a great way to spread out the cost of regular or irregular spending, such as Christmas, birthdays and car repairs.
To set up a sinking fund you can use cash or set up online accounts, or pots to keep the money in. Then every pay period. you can put aside some money into your sinking fund.
For example, if Christmas costs you £1,000 every year and you are paid weekly, divide £1,000 by 52 to get £19.23. You would then save £19.23 every week (every pay period) into your Christmas sinking fund. This means that come November and December you don’t have to suddenly find £1,000 for Christmas. That’s one of the great benefits of savings in sinking funds.
You can use sinking funds for all sorts of things, including:
- Attending weddings
- Car repairs
- Other car costs (like tax and insurance)
- Home repairs
- Home updates
And many more.
Have you noticed that if you can afford to pay some bills upfront, you can actually save money?
For example, if you can afford to pay your car insurance upfront for the year, you will pay less overall. This applies to many bills, including things like your mobile phone. When comparing mobile phone contracts, you usually find that it’s cheaper to buy your mobile phone outright with your savings and have a SIM only contract, rather than having a contract that includes paying for the handset every month.
Have any of these benefits of saving money surprised you?