Many Americans struggle to save money but it’s worth the effort since there are serious downsides to not stashing away cash. These can range from going into debt, facing financial hardship after losing your job, and not being able to achieve your aspirations, like homeownership.
To help you get motivated to put money in the bank, here are twelve dangers of not saving money. They may help you understand why it’s best to put away cash and motivate you to tuck some into a savings account. Not only will you be better prepared for the twists and turns of life, you’ll be better equipped to reach your financial and lifestyle goals.
The Importance of Saving Money
1. Going Into Debt
Without a savings cushion, any expense—from an unexpected car repair to paying for your child’s college education—can put you in debt. In addition, while credit cards and loans are convenient ways to afford more than your bank account, you pay more in the long run because of interest and loan fees.
Since debt often costs more than the actual expense, you can essentially save a considerable amount of money by plumping up your piggy bank.You can try easy ways to save, such as creating a simple budget or automating savings, to put aside a few dollars a month before you can spend it. These moves can ensure that you’ll be using savings instead of debt to pay for your upcoming expenses.
2. Having a Social Life Can Be Nonexistent
Your friends and family are likely on the list of things you enjoy most in life. Being able to afford a dinner out with loved ones can really boost your mood. Heading to a concert with friends can create memories that last a lifetime. But a full social calendar may put you in a sticky financial situation if you haven’t saved anything. From movie dates to happy hours to ball games, these expenses can add up.
No matter your income level, how much money you save each paycheck can make the difference between having a nonexistent social life and a happening one.
3. Life Being More Stressful
According to the Stress in America survey , 65% of respondents say money is a big stressor in their lives, which is the highest percentage since 2015. When you think about it, failing to save can make you feel stuck or overwhelmed. Your personal, financial, and professional life can suffer because a lack of savings has cut off your options.
Achieving your goals, financial and otherwise, may be a struggle without savings to propel you forward. The importance of saving money goes beyond paying an unexpected bill; it can affect your daily quality of life.
4. Not Having the Money for an Emergency
You’ll find many articles, resources, and financial professionals advising you to set aside an emergency fund. Life is expensive and doesn’t always go as planned. So, saving in advance helps you manage life’s unexpected costs.
For example, building an emergency fund might be a better choice than splurging if you get a raise. You’ll thank yourself later when, say, your furnace goes out or you wind up with a major medical bill. Typically, money experts recommend having at least three to six months’ worth of basic expenses salted away in an emergency or rainy day fund.
5. Not Being Able to Celebrate Events
Life is full of amazing milestones like getting married, having a baby, or graduating from college. Unfortunately, celebrating these life events with your family often takes substantial cash. Not being able to recognize these events the way you’d like to is another one of the many dangers of not saving money. The lack of a financial cushion could also lead you to skip, say, a friend’s destination wedding.
Although you could put your celebration on your credit card, you run the risk of going into debt. This will likely cost more over the long run since you have to pay for interest. In other words, you might still be paying it off for years to come.
6. Not Having a Viable Option if You Are Fired
No one plans on getting fired; however, it’s always possible to lose your job unexpectedly. Financial emergencies like this are an important reason to save. Saving can give you security during this kind of a crisis. If you don’t have some cash available, you might have to look into financially downsizing.
This underscores the importance of saving money from your salary when you are employed. You might consider having a small amount automatically transferred from your checking account into savings on payday.
As mentioned above, you should save at least three months of your expenses in an emergency fund. This way, you can have a solid safety net if you get laid off or are temporarily disabled and can’t work for an extended period.
7. Not Having an Inheritance for Your Children
If you’re a parent or plan to be one, you likely want to give your kids a leg up in life. An inheritance can help your children or heirs to build their nest eggs and meet life’s expenses without stress. Having both savings and an estate plan can be a lasting, life-changing gift to those who matter to you most. These assets can serve to eliminate the possibility of financial legal challenges for your family. That said, being unable to leave a legacy is a consequence of not saving money.
8.Not Being Able to Buy a Home
About three-quarters of Americans believe that homeownership is still a core component of the American Dream, according to one recent study . If you don’t save, the dream of homeownership may never become your relativity.
You traditionally need a 20% down payment to qualify for most conventional mortgages. Buying a home also usually involves other expenses, such as closing costs, repairs, moving costs, and more. Not having savings can make it almost impossible to afford the home of your dreams.
9. Not Being Able to Go on Vacation
Without savings, it’s challenging or even sometimes impossible to take time off for some rest. When you don’t set money aside, you can get sucked into the never-ending cycle of living paycheck-to-paycheck. Since you need to work to support yourself, vacations may become less frequent or disappear altogether.
While you may think you can put a vacation on credit, that can perpetuate the “can’t save” situation, because you’ll have debt to wrangle. You could wind up coming home from your getaway to face more bills…ones you may struggle to afford.
10. Not Having Much Financial Freedom
One of the most potent limiting factors in life can be a lack of savings. With a robust bank account to fall back on, you increase your options and flexibility. Moving to a city or state with more opportunity, taking a professional course or college classes, and starting a business can all be possibilities if you’ve saved money.
Of course money can’t solve every problem life throws at you. However, it is a powerful tool that allows you to access opportunities. Remembering this can help you get serious about saving money.
11. Not Being Able to Invest
Investing your money is a superpowered version of saving. For example, if you begin saving $100 at age 25, you will save $12,000 more by age 65 than someone who starts putting $100 away at age 35.
If you save or invest, you can capitalize on compound interest and/or compounding returns. This means your gains are reinvested, so your money can grow faster over time. Consider that an incentive to start saving as early as possible. For example, if you receive a 7% annual rate of return and begin contributing $100 toward saving at age 25, you will amass $120,000 more by age 65 than someone who began contributing at age 35.
If you are Investing your savings vs. keeping them in an insured bank or credit union, you may get higher returns, but this can also mean taking on risk. To balance those forces, educate yourself with an investing guide or seek professional advice.
12. Not Being Able to Help Others
When someone is in financial need, lending money can help them get back on their feet. Whether it’s through providing a micro-loan, donating to a charity, or contributing to a scholarship, you can make a difference in the lives of others no matter how much you give.
But, if you don’t have savings, you may not be able to afford a helping hand.
Why Saving Money Is Very Important
Since money touches almost every area of your life, saving it for what matters most can be essential. Reining in your spending habits can be hard, no doubt, but the payoff quite literally is being able to afford your needs and your goals.
Online Banking With SoFi
Affording an enjoyable, stress-free life doesn’t just happen; it requires saving. While this can be difficult in the moment (saying no to splurges, for instance), it can set you up for years of financial wellness. Whether you want to be able to celebrate big moments with friends, start your own business, own a home, or take a major vacation, saving money can help put you on the right path.
Here’s one way to save smarter: with a SoFi bank account. When you use our mobile banking app with direct deposit, you’ll earn a stellar APY and pay zero account fees. Those two moves can help your money grow faster.
Can I get by without saving money?
While it’s possible to get by without savings, there may come a day when you run into an unexpected expense that causes financial hardship. If you live paycheck to paycheck without an emergency fund, an unforeseen cost could set you back and make it challenging to recover.
Is debt inevitable if you do not save?
Without savings to fall back on, it’s quite possible to go into debt when unforeseen expenses arise. Contributing to a savings account, even a small amount monthly, can make unexpected costs more manageable so you can sidestep debt.
When is the best time to start saving?
It’s best to start saving now to give yourself time to build a cushion. Remember, everyone has to start somewhere. Even if you can only save $20 per month, your future self will likely thank you.
Photo credit: iStock/nicoletaionescu
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