Everyone hears it daily: save your money for a rainy day, save for emergencies, save, save, save. But the question is, why do we need to save? Let's answer that question with another question. Do you want to lie awake at night worrying about how you will pay for your children's education, how long you will be able to pay the bills if you are unemployed, or even how you will pay for that roof replacement?
It's about peace of mind and financial freedom. Not having to worry about how you will pay for things.
A recent study reveals that about 25% of people have no savings, while 39% have less than a month saved up. That's 64% that will be in major financial trouble if they are unemployed. Saving even a little every month is a start to building a good saving habit and gives you peace of mind in an emergency requiring a sudden cash outlay.
Saving habits can be inherited from our parents through their habit transference. Their habits become our habits; unfortunately, they are habits of bad saving and instant gratification.
There are various scenarios where emergency savings would come in handy.
Your insurance usually does not cover wear and tear on your vehicle. A major repair, such as a gearbox change, could set you back thousands. Will you have the disposable income to pay for it, or will you have to take out credit at a high-interest rate?
Losing financial independence is one of the worst-case scenarios for any individual to find themselves in. Will you be able to survive and pay your bills if you find yourself unemployed? How long will your savings last? Unemployment at the start of 2023 was 6.7% in the EU, 3.4% in the US, 3.8% in the UK, 3.6% in Australia, 8.62% in Chile, 11.4% in Colombia, 29.95% in South Africa, 20.81% in Botswana, 5.3% in China, India at 7.8%, and a global average of 4.8%.
Health insurance might not cover all medical conditions. What happens if you cannot work for several months due to illness or become disabled and need extensive treatment?
Nobody wishes ill on anyone, but what would happen if floods damaged your home or a roof needed replacing? Insurance doesn't always cover acts of nature or age. Again, taking out high-interest rate credit to cover these expenses.
There might be a time when you would need to travel abroad or take your family for a family funeral or emergency.
Any other urgent situation that may arise or be considered unforeseen. No one knows the future, so it is best to show foresight and be prepared so you can handle financial difficulties.
Times are tough, and saving is getting more and more difficult. Common excuses (we call them excuses because it is an easy way out not to save) are:
Saving has always been a challenge for most. There always seems to be some unforeseen monthly expense, and it's easy to get demotivated. But, discipline is needed to save and commit to it monthly. Even a small amount monthly is a start and may require a little belt-tightening, like fewer coffees every morning from the corner coffee shop or less online shopping.
We take a page from the successful savers' book on how they do it. They are motivated to be financially independent and keep their eye on the end target. They form good savings habits to make it easier. A regular routine helps.
Above all else, good savers learn to live below their means. This means spending less than they earn, having spare money available for emergencies and being financially independent. Open a new, separate bank account for your savings goals; this will limit access, and you won't be tempted to use it. Some accounts even offer a decent interest rate to help your money grow further.
A rainy-day fund gives you peace of mind and financial security, so you don't have to worry about future emergency expenses or be left with taking out credit.
Your financial advisor can help set up an achievable savings plan.
Please note, the above is for educational purposes only and does not constitute advice. You should always contact your deVere advisor for a personal consultation.
* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.
deVere Acuma’s Public Relations Department deals with all areas of the media and external communications including international, national, regional, local, trade, consumer, print, broadcast, social and online. The Department aims to provide a helpful service to journalists, broadcasters and editors, amongst others, and reply to all media enquiries, including urgent enquiries out of hours, within agreed deadlines. Our press office does not have access to client details and will not be able to assist with individual client enquiries. Please contact deVere Acuma’s Head of Media and Public Relations for deVere Group on [email protected] or call +971 2071220925