It is important that you make sure to save a strategic amount of money each month for the future. The reasons for doing this are numerous and will vary with each individual. How much you put away into savings on a monthly basis will depend on your particular financial circumstances and personal goals. Your savings plan should be customized to fit your individual needs.
Probably the most common goal that prompts people to put away money every month into savings is a desire to eventually retire. Of course, the quality of your retirement life will mostly be a function of the resources you have available, including how much cash you have saved. Although many may be content to have their quality of life in retirement decrease somewhat compared to pre-retirement, there is generally a limit as to how low of quality you would find acceptable.
Savings can help you if you happen to find yourself in a desperate situation that requires large amounts of cash. Some of these circumstances can include a natural disaster, your home burning down, death of a family member or loved one or a sudden loss of employment.
Preparing for death
The one inevitable thing in life that you can always depend on is that death will eventually occur. You may want to prepare financially by saving to make sure your loved ones and family are taken care of after you are gone. This can be particularly important if you are a caretaker for minor children, elderly parents, or a disabled adult.
Children’s college tuition
Higher education is not cheap nowadays. Not only is there the ever-increasing cost of tuition, but there are also other expenses related to college that you will need to deal with. This can include expensive textbooks and other learning materials that will need to be purchased. Also, you may have to pay for room and board, food, clothing, and other living expenses if your college student child ends up living away from home in order to go to the college he or she wants. Therefore, parents should start saving for their children’s college expenses as soon as possible.
How much of my monthly income should go to savings?
Generally, most financial experts suggest around 20 percent of your income should be put into your savings account. However, it really does depend upon your specific financial situation. For those who earn less income, it may not be feasible to dedicate that amount to savings since much more of their income is being utilized for necessary living expenses. If 20 percent is too much, then maybe you can aim for 5 or 10 percent.
Another way to think about savings is to set a specific dollar amount you wish to save. Most financial experts will generally say around $1,000 per month is ideal for most people. Again, this can be different depending upon your particular circumstances and personal goals.
It may be preferable to consult directly with a family financial planning expert to help you decide which savings strategy is the best for you.