There are several sound reasons to start saving at a young age. Saving may not be as exciting as spending, but seeing your balance mount up can be quite a thrill too. So even though having a good time may seem more important than putting money away, don't neglect feeding your savings account. When you have kids, it's wise to encourage them to get into the savings habit as well. So here are some really smart reasons to start saving as early as possible …
1. Compound Interest
One of the best reasons to start saving young is that your savings have longer to grow through compound interest. This is how it works. Say you start with $100. In year 1, you earn interest on that $100. But in year 2, you earn interest on the original $100, plus on the interest you earned in the first year. And so it carries on. Therefore the earlier you start saving, the more years it has to grow.
2. Good Habit
Saving your money is a good habit to get into. The younger you are, the more accustomed you will become to saving rather than spending. Saving will soon become second nature, and you'll learn to enjoy seeing your money grow in your account.
3. Avoid Debt
Getting into the savings habit younger in life means that you may be less likely to get into debt when you're older. Not only will you appreciate the concept of saving, but you'll have money put by to pay for things that you need or want - thus avoiding debt and interest payments.
4. Future Security
Having savings helps ensure your future security, as you will be able to cope with life changes and unexpected problems. There is a greater chance of security when you begin your savings plan at a young age (think of that compound interest). This may not mean much to your kids, but teach them about the importance of saving and they'll eventually realise the advantages it brings.
5. More Options
When you start saving young and build up your nest egg, you will have many more options open to you in the future. Do you want to return to study, buy a bigger house, or take time off to travel the world? Money gives you a lot of opportunities, so always value the savings habit. One day, you'll be so glad you put your money in a savings account instead of frittering it away.
There's no denying that for many of us, spending money is a real thrill. But it's also surprisingly enjoyable looking at a healthy balance on your savings account. Learn to appreciate watching your savings grow, and pass that sense of enjoyment on to your kids as well.
Saving from an early age really is the smart thing to do. Some people think it's not worth saving and that they might as well spend everything. They're wrong. Who's happier - the person who has frittered away all their money and can't afford to do something they want, or the person who can focus their funds on something that really matters?
Although it's better to start saving at a young age, it's never too late to begin. With interest rates so low, you may think it's not worth saving anything. Yet it's better to save than spend. You can't get back money you've spent! Children often pick up their financial attitudes from their parents, so teach yours to be smart with money. What financial lessons did your parents teach you, and are you like them or the complete opposite?