Barbara O’Neill, Ph.D., CFP®
Extension Specialist in Financial Resource Management
Rutgers Cooperative Extension
One of the best ways to take charge of your finances in today’s uncertain economy is to accumulate a healthy savings account. Nobody wants to feel the stress of knowing that they are only a paycheck or two away from financial disaster because they lack money to fall back on when “stuff happens.” Specific examples include job loss, disability, a car breakdown, a sick child or pet, and other types of financial emergencies. Saving provides a financial “backstop” for life’s uncertainties and increases feelings of security and peace of mind. Once an adequate emergency fund is established, savings can also provide the “seed money” for higher-yielding investments such as stocks, bonds, and mutual funds.
There is also evidence from a recent study by the Northwestern Mutual insurance company that savings is linked to increased happiness. Actually, what the study found was that people who are “planners” and do future-oriented things such as setting goals and taking steps (e.g., saving money) to achieve those goals feel happier, and better about their lives, than those who don’t make plans. On a related note, the Consumer Federation of America found a strong relationship between having spending and saving plans and maintaining emergency funds. Particularly for low-income individuals, those with a spending plan with goals were far more likely to have saved money for emergencies than were those without a plan.
Economists and psychologists attribute findings like these to the sense of control that people have when they plan ahead and know what they need to do to get from where they are now to where they want to be. It is well established by research that people who feel a sense of control over life events are often happier, cope better, and are more resilient in times of stress than others. Conversely, people are especially unhappy in situations where they perceive themselves to have a lack of control. It is, therefore, no surprise that commuting ranks high on the list of things that make people most unhappy. Commuters never know from day to day what traffic gridlock, accidents, and weather-related hassles they’ll encounter.
Encouraging people to develop and implement a personal saving plan is the central focus of the America Saves program. The motto of America Saves is “Build Wealth, Not Debt.” 2009 also marks the third year of America Saves Week, an annual event that focuses attention on the benefits of saving. Throughout the country, there will be information and events designed to promote saving and to help individual savers develop a personal action plan. The dates for America Saves Week 2009 are February 22 to March 1.
America Saves is an example of a “social marketing campaign.” This means that the messages associated with this program are designed to change people’s behavior rather than to sell them a product or service, as is typical with most marketing messages. Just like the “Buckle Up for Safety” campaign several decades ago that got many people in the habit of wearing seat belts, America Saves seeks to get more Americans into the savings habit to improve their future financial security and that of the country.
The America Saves Week Web site has a wealth of resources to help you get started on the path to financial security. Included are monthly savings messages written by financial experts, success stories from individual savers, a savings knowledge quiz, and tools to assess your financial progress. You can also register online as an American Saver and receive regular newsletters from the non-profit Consumer Federation of America, the organization that runs the America Saves program.
So how do you get started as a saver or ramp up your current level of savings? Go for the goal! It’s a whole lot easier to save for something specific than to save for savings sake. Here’s an example. To calculate how much you need to save to achieve a goal, divide the amount you need to save or invest by the time (e.g., number of months) you have left to save. If, for example, you want to save $5,000 by next year, you’ll need to put aside $416.67 ($5,000 divided by 12) a month, or $96.15 ($5,000 divided by 52) a week. Download a goal-setting worksheet with spaces to calculate the savings required for short-, medium-, and long-term goals.
FAQs
Saving provides a financial “backstop” for life's uncertainties and increases feelings of security and peace of mind. Once an adequate emergency fund is established, savings can also provide the “seed money” for higher-yielding investments such as stocks, bonds, and mutual funds.
What is a benefit of saving money in EverFi? ›
Over time, your savings will compound, and you'll be able to reach your financial goals more easily. Additionally, it's important to track your spending and look for ways to cut back on unnecessary expenses so that you can save more.
What are the benefits of saving money? ›
Having adequate savings enables you to live a more fulfilled life. You are more likely to be less stressed about your future goals like retirement or unexpected expenses like healthcare. Savings allow you to be relieved and at ease, knowing you have sufficient funds to navigate different situations in life.
Why is saving money important for college students? ›
Saving makes college less expensive.
The student could take out a loan at 4.5% to be paid back in monthly payments of $207 for 10 years after he or she graduates. By the time the student retires that $20,000 debt, he or she will have spent $24,907.
What are the benefits of money? ›
Why Do We Need Money? Money can't buy happiness, but it can buy security and safety for you and your loved ones. Human beings need money to pay for all the things that make your life possible, such as shelter, food, healthcare bills, and a good education.
What are the pros and cons of saving money? ›
Savings account benefits include safety for your savings, interest earnings and easy access to your money. However, savings accounts may have drawbacks, such as variable interest rates, minimum balance requirements and fees.
What is the benefit of saving money on Quizlet? ›
You should save money for three basic reasons: emergency fund, purchases and wealth building. When it comes to saving money, the amount you save is determined by how much you have left at the end of the month once all of your spending is done.
Why use a savings account everfi answers? ›
Savings accounts pay interest on the money you deposit. Savings accounts limit the number of withdrawals that can be made each month. Savings accounts don't usually require a minimum balance. Savings accounts are best used to store money for longer-term goals.
What is the revenue everfi answer? ›
Revenue. The amount of money a business makes within a specific time period typically a month.
How does saving benefit everyone? ›
Saving is an important habit to get into for a number of reasons — it helps you cover future expenses, manage financial stress and plan for vacations, just to name a few. Understanding the different merits of saving might motivate you to save more. So, here are seven significant ways saving money can help you thrive.
Saving money creates stability in living with a less stressful life and the result of happiness. Most of the unexpected occurrences can be easily managed with this concept of saving. A person can make all the plans and goals in life happen and provide a sense of happiness and realization in life.
Why is money important for students? ›
Money is important to college students, but having money as one's chief aim in life is negatively correlated with subjective well-being. Money plays a significant role in a student's life as it influences their spending behavior and affects their ability to manage their finances effectively.
How important is it to save money? ›
Saving can give you freedom
A new car, a new home, a child's education… the possibilities are endless. Plus, it's critical to have some cash set aside for emergencies and unexpected expenses as they come up.
How does money affect students? ›
Students with fewer money worries perform better in college and are more likely to graduate, while financially stressed students have lower grades and are more likely to drop out.
How does college benefit you financially? ›
Enhanced career opportunities
According to the Public Policy Institute of California (PPIC), college graduates are less likely to be unemployed and more likely to have full-time jobs. In 2021, an estimated 85.3% of those with a bachelor's degree were employed, compared to 74.3% with a high school diploma.
What are the benefits of Rutgers Honors Program? ›
Honors College students receive support on every level, with dedicated academic advisors, academic and administrative staff, live-in faculty, and peer mentors in the Honors College building.
What kind of financial aid does Rutgers offer? ›
To help eligible students afford a Rutgers education, the university offers scholarships, grants, student employment, information about loans, and tuition payment plans.
Is Rutgers a good school for investment banking? ›
“The resources of Rutgers Business School will fortify Road to Wall Street and its ability to provide high-performing students with the knowledge, skills and connections necessary to get high-paying jobs with the world's leading investment banks.”
