Saving does not come naturally. It is a learned skill. If saving money were natural, we would not have credit cards or loan companies. We would all save our money to buy whatever we want without having to borrow from anyone. We would probably have fewer people suffering from insomnia, anxiety, or any other disorder that people go through because they are worried about having too much month and not enough money.

If you still do not believe me, watch your kids when they get money. Whenever our kids get any money for Christmas or their birthday, the first thing they want to do is spend it, not save it.

Marketing is always after us to get us to spend our money. They try to get us to believe that the next widget or gizmo we buy will make us feel better, and many of us fall for it. The secret is that this is a temporary fix. We feel better when we click to complete the purchase but soon after are back to feeling depressed, miserable, or worse; now we have to add buyers remorse.

We have all heard that we should have saved up from 6 to 8 months of income in case of financial hardship. Yet, 69% of Americans have less than $1,000 in savings, and 23% of Americans can’t afford to spend $100 in an Emergency! In my age group, 35 – 44, 40% do not have ANY savings!

The Importance of Saving Money cannot be stressed enough by myself or anyone else. Some of the top reasons to begin to save money immediately are:

Peace of Mind

If you know that you could live off of savings for 6 to 8 months without a job, you would probably be more relaxed, less anxious, and sleep better. How many times have you not been able to sleep because you were worried about how you would pay your bills?

More savings = less worry.

The more money you save, the more you realize you are in control of your future. Most experts agree that you should have 6 to 8 months of income saved. If you are starting from zero, you might want to read our piece about the Survival Budget. A Survival Budget will show you the bare minimum you need to have per month to cover necessary living expenses and is a more realistic goal.

When you start saving money, you have several options to keep this money and have it accessible when you need it. The easiest for most people is at the same bank where you get paid. Look to see how you can open a savings account at your current bank so that you can seamlessly transfer money between accounts. If you find yourself dipping into the savings account for purchases, you might need to open a savings account at a separate bank—this way, you are making it harder for you to access these funds for impulse buys.

As you grow your balance, you will be offered different savings account “types.” Study them carefully and look for any hidden fees. You do not want your savings to be eaten up by fees.

Savings accounts are probably the easiest for everyone to open. You can log into your financial institutions portal and open your savings account with a few clicks. In this way, your checking and savings accounts are linked, making it easier to move funds and build up your savings. This is a catch-22. It makes it easy to transfer funds to your savings account; it also makes it easy to “dip” into the savings account for impulse buys.

A Money Market account is another option as your savings account balance grows. These accounts usually require higher minimums to avoid fees. When interest rates are low, usually money market accounts and savings accounts are about the same. As interest rates get back to historical norms, this might be something to look into. One caveat about money market accounts is that they offer debit cards and checks, making it easier to access your funds. If you are the type, who would spend the money if you had a debit card, consider either shredding or destroying your checks. 

If you are presented with investment options, which you will as your balance grows, remember that you need to have this money invested in “Risk-Free” investments. This money should be accessible without any delay whenever you need it. I would NOT recommend investing this money in stocks or ETF’s because you might need to use this money during a financial crisis when the stock market is down 20% or more. 

When trying to figure out how much money to save, I would recommend reading our post about Budgeting. If you are starting from zero, go with the Survival Budget. A Survival Budget will give you the absolute minimum you need to have per month to pay your bills and keep a roof over your head.

When you have money saved, an interesting thing happens. You come across opportunities to invest money and participate in business ventures. If you have enough money saved to cover your expenses for 6 to 9 months, you can invest the rest in a business venture that you come across. Why not also make part of your money work for you?

Once you have enough money saved, you can begin to look at investing part of your income in the stock market. Remember, the trick to investing is not hitting a homerun investment all the time; instead, it is being disciplined enough to invest every month focused on the longer-term, letting your money grow through compounding. This story should inspire everyone – Former Abbot Secretary Leaves $7 Million.

Wealth is not about how much money you make but instead is about how much money you have saved and invested. Saving money is a crucial ingredient in building wealth. Many people falsely believe that if they make more money, then they will then begin to save. With the rich and famous, we can see that after earning millions, they end up filing for bankruptcy because they never learned how to save money. 

There is a difference between rich and wealthy. The rich person has to work on Monday while the wealthy person does not have to because their money is working for them. If you are fortunate enough to make a lot of money, but you do not know how to save a good part of the money, you are just broke at a higher level. 

If you are fortunate enough to have a high income and keep your expenses low while focused on saving and investing, you might be lucky enough to retire in 10 or 20 yrs. The choice is yours, and every day you put off saving and investing, all you are doing is making it harder for yourself.