There are a number of reasons for my conviction about this, but here’s one simple and straightforward one that applies to every one of us who is not wealthy: you have absolutely no idea what life could throw your way, and it’s a very smart idea to be prepared.
One need only look at the people who faced the stress and financial uncertainty in the recent government shutdown to understand the value of saving for that proverbial rainy day. And it was not that long ago that people lost their homes in the recent Great Recession, which highlighted how the practice of taking on a mortgage smaller than the maximum we can afford on paper is actually a great idea. Socking away extra savings to ensure we have a safety net for hard times is an idea that never becomes outdated. Quite simply, living on less can provide great peace of mind.
But living simply on a budget and saving bring far more benefits than just providing a sense of security. Because, contrary to what many people think, budget living actually affords us the chance to spend when and where it matters to us, instead of frittering it away on things we don't need and won't remember. With nothing to show for it.
Saving and having some extra cash in the bank and in our investment accounts allow us to take advantage of unexpected opportunities that might come our way.
Here are some examples of what I'm talking about.
If you have savings, you are in a position to take advantage of investment opportunities that might present themselves, such as partnering with someone in a new business venture that could potentially pay huge returns.
Here's a case in point. The earliest investor in the hugely successful Subway sandwich chain was a family friend who loaned the 17-year-old founder $1000 to open his first shop in 1972.
That family friend had the faith in DeLuca's ability --- and the equivalent of about $6000 in today's dollars -- to make the investment.
His confidence proved very well-founded. That original investment paid off beyond anything most of us even can dream of.
This scenario might be a rare one indeed, but there are many times in life where smaller scale investment opportunities present themselves.
Maybe your child wants to start a business. Or a contractor friend asks you to partner with him on a house flip. Or you are fed up with your job and would love to go into business for yourself.
When we have savings, we can at least consider such options or proposals and make a decision about our involvement based on the financial returns.
But if we have no money, we have no such choices, and must simply walk away.
Several of my family members have experienced health crises over the past few years that have required surgery and convalescent periods lasting a week or more.
They did not need or ask for money from me. But the fact that we have comfortable savings has meant that I could be there to help out in person.
Our savings have permitted me to take time from work and spend the necessary money on travel to go to them. In fact, our financial situation enabled me to take unpaid time off to take act as nurse and caregiver.
I was so very glad to be able to provide them with support and the chance to be able to recover at home instead of in a healthcare facility. It also gave them enormous peace of mind to know that their pets and homestead animals were taken care of, too.
I could not have done that so easily -- or perhaps at all -- if we had not had the savings to make it possible.
Having savings gives us an independence we never would otherwise have to help family and friends.
Weddings, Unexpected Adventures, and Travel Opportunities
A few years ago, the son of my husband's oldest and best childhood chum got married in London, and we were delighted to be able to attend his wedding.
We also opted to take full advantage of the opportunity to extend our stay for a longer visit with these dear friends. And we then joined my sister- and brother-in-law on a lovely cruise through the Mediterranean.
It was a great time all around -- one that we were only able to enjoy because we had savings.
A similar opportunity came up when a niece had a destination wedding at a luxury ski resort here in the U.S.
And we were also in a position to cover their travel expenses, which we did to ensure that everyone could come -- even the poor graduate student in the mix and the ones who had to take the time unpaid because they had no accumulated vacation time at their new jobs.
The days surrounding both weddings were fun-filled from top to bottom, and we had an absolutely fabulous time catching up with extended family, and old friends, and meeting new ones.
We would not have those wonderful memories now if it weren't for savings in the bank that made both occasions possible for us.
Helping Those in Need
Most of us would like to support causes and charities that are near and dear to our hearts. Lord knows, there's no shortage of need in this world.
But, it's only after you have your own financial house in order and savings in the bank that you're in any kind of position to help others, either on a regular basis, or as the need arises.
We generally derive far more satisfaction from using our money for that kind of good than we ever do from frittering it away on stuff we don't need and can't even remember buying half the time.
This is yet another way that savings make a difference in a very real and meaningful way.
In order to accumulate some, you have to minimize expenditures, stop spending mindlessly, and live well beneath your means.
I encourage you to strive for a savings goals of 20% or more of your net (take-home) pay in addition to what you are setting aside in pre-tax retirement accounts.
It's something to aim for and make part of your everyday lifestyle and money philosophy.
You may not always meet that target, but with steady persistence, you will save enough, first as a safety net, and then eventually as a nest egg that will provide you with options and choices that you otherwise never would have had.
That's a goal worth reaching.