Saving for a better future is one of the most popular and repeated financial advices anyone has gotten, yet it is a difficult one for people to adhere to especially because bulk of what Nigerians earn is spent on food, transport, housing, among others due to the economic hardship in present times.
Warren Buffet, a popular investor and CEO Berkshire Hathaway, tip on saving is, “Do not save what is left after spending but spend what is left after saving.”
Saving before spending works like this: If you earn N50,000 and you want to save N5000 which is a very difficult decision in times like this, you put aside the N5,000 first before you spend on anything else. Then you can also begin to see the N45,000 as all you earned.
This singular habit can help you to be more effective with your savings. This way you are most likely not going to overspend because you have money for just your needs.
The rule is to remove your savings first and think of the rest as all you have for that month, just like the example stated above N45,000 is all you have earned that month.
The following are some of the reasons you should save for a better future now despite the high cost of living and soaring inflation rate.
Saving offers freedom
Setting an amount aside regularly for a purpose or sometimes without a purpose gives you flexibility and choice in life.
It allows you to do what you want to do without financial constraints such as leaving an unhealthy job because of salary, or a bad marriage, it saves you from being tied down to unfavourable circumstances.
For instance having enough money saved up can give you the luxury of time off work for a period of time because you have enough to maintain your expenses during that period, it also gives you the chance to retire early.
There are different reasons for saving, some for retirement, for a luxury item, for tuition, but in this case it’s to have cash to use how and when you want it.
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Savings gives room for calculated risk
Savings can allow you to take on calculated risk such as investments. If you have enough cash reserve, you’ll be more willing to try different investments which may yield great returns in the future.
Accumulation of wealth
saving, investing, cutting down expenses and multiple streams of income are ways to build wealth. Little drops of water make a mighty ocean.
The saver who kept N5000 out of N50,000 will save N310,000 in a period of one year minus the accrued interest from high yield savings account, this might not seem like much but this is what a person who earns N50,000 will be able to save in a year. Saving small amounts compounds to substantial wealth over time
In an economy with a volatile currency as naira, saving in foreign currencies can help you preserve the value of your money and accumulate wealth.
Savings gives security
Savings assure you of a better life for your future and that of your kids. It means financial security.
Olumide Adesina, financial market analyst and personal finance expert summarised reasons why it is important to save money.
He said ‘‘It is essential to save money in order to accumulate wealth and have a stable financial future. Saving money allows you to escape life’s uncertainties and live a decent life as well.’’
‘‘Saving money for unforeseen costs, such as medical bills, a major auto repair, living expenses in the event of a layoff, and more is easier when you pay yourself first by saving.
The optimal safety net is three to twelve months of living expenses which is called the emergency fund.’’
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