Reassuring reasons to save money

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Women expressing happiness she saved money

Saving money is important if you don’t want to struggle when it comes to paying off priority bills. In this article, I detail some of the benefits of putting money aside for rainy days that you will see can improve your money situation. You can also check out my other post on saving money here.

Use sinking funds to pay for regular or irregular spending

A sinking fund is a financial tool that many people use to save for future expenditures. So the goal is to save money over time to save towards a specific purchase or a specific cost, like the expense of Christmas.

You would put money into a sinking fund every payday to help spread out the costs of upcoming expenses. They are a great way to spread out the cost of regular or irregular spending such as Christmas, birthdays and car repairs.

To set up a sinking fund you can use cash or set up online accounts or pots to keep the money in. Then every pay period you can put aside some money into your sinking fund. You can also set up a standing order with your bank and label it as a Sinking Fund. This means that you need to decide beforehand how much money you are willing to transfer to this account every month. Or you can use the example below to calculate how much money to put aside.

For example, if Christmas costs you £1,000 every year, and you are paid weekly, divide £1,000 by 52 to get £19.23. You would then save £19.23 every week (every pay period) into your Christmas sinking fund.

This means that come November and December you don’t have to suddenly find £1,000 for Christmas – one of the great benefits of savings in sinking funds.

You can use sinking funds for all sorts of things, like:

  • Christmas
  • Birthdays
  • Holidays
  • Attending weddings
  • Car repairs
  • Car insurance
  • Car tax
  • Home repairs
  • Home updates

And many more.

Paying less

The ability to be able to pay off some bills upfront can save you money?

For example, if you can afford to pay your car insurance upfront for the year you will pay less than paying in monthly instalments?

This applies to many bills, as well as things like your mobile phone. It can often be cheaper to buy your mobile phone outright with your savings and have a SIM-only contract than having a contract that includes paying for the handset every month.

Sickness or time off work

A lot of us are living payday to payday, meaning that any unexpected time off work or having to rely on statutory sick pay could have a big impact on our finances.

By having savings behind us we can focus on recovery from our illness or caring for family and friends without worrying about losing income.

Emergencies

Most emergencies that crop up can cost money, from an expensive car bill to needing to carry out a home repair, emergencies can add an unexpected expense.

By saving money into your emergency fund you will have money set aside for these unexpected expenses that crop up.

Without an emergency fund in place, you might find yourself unable to pay for repairs, bills or debt repayments. You might also need to take out additional credit to cover the expenses your encounter.

Whilst it is ideal to have three to six months of expenses in your emergency fund, this isn’t achievable for most of us. Even having just £100 in your emergency fund can make a big difference.

Saving for a house deposit

Whilst getting on the housing ladder might seem like a distant dream, it is one of the great benefits of saving money.

You will typically need at least a 5% deposit on the house purchase price saved as a deposit, although it is more common to see 10% or even 20% required.

That means for every £100,000 the house you want to buy costs, you could need to save £5,000 – £20,000 towards the deposit.

By putting money away regularly into a savings account you will be able to work towards the goal of homeownership.

Paying for a big life event

One of the great benefits of saving money is that you are able to pay for a big life event like a wedding.

Whilst you can get married for under £1,000 you might be dreaming of a bigger day that could set you back tens of thousands of pounds. 

A lot of happy couples end up postponing their wedding date because of the cost of weddings, however, if you save up money for your wedding day then you can plan the day of your dreams without starting married life together in debt.

Have any of these benefits of saving money surprised you? Let me know in the comments section.

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