ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Good Personal Financial Management: The Real Benefits Of Saving

Updated on April 18, 2013

Why Having Savings Can Make A Big Difference

Having money put aside in case of emergencies can give an extraordinary sense of wellbeing created from having peace of mind. Not having to worry where the money would come from in the event of a crisis can make the difference between staying awake at night worrying or sleeping like a baby. This is why it is so important to save a decent lump sum of money and have it to hand when needed. Initially, saving can feel like an uphill struggle but once you start seeing your savings growing, it can get addictive. The incentive to increase your savings can start to out weigh the temptations of spending.

Saving is not investing.

Don't make the mistake of mixing savings and investments up as the same thing. Saving is a way of creating stability in your daily life by having financial security from money put aside to deal with life's events or emergencies. Investing is about putting money into a financial vehicle that will create money for a future event. With investing there is usually a risk involved, with saving, your money should be secure and you should get at least what you have put in, and hopefully with a decent sized amount of interest. The risks involved with investing can be rewarded with higher returns but there is no guarantee. Saying that, if you save wisely, choosing to keep your money in an account with a good rate of interest, you can still make a decent return in the long term.

Save
Save | Source
Saving
Saving | Source

Do you currently save?

See results

Your money working for you.

So not only is your savings giving you financial security and peace of mind it can also be working for you by creating more money through the interest. In addition, your savings will benefit from what's known as compound interest. Albert Einstein regarded compound interest as the eight wonder of the world and said 'the most powerful force in the universe is compound interest'. He may have been exaggerating a bit but it does have a remarkable effect on your savings. In essence, compounding the interest means that not only do you earn interest on the money you put into savings but also on top of interest already earned. The longer you save the greater the effect compounding has so it's never too early to start putting the money away.

Compound interest.

To work out approximately how much you can make by compounding, the rule of 72 can be used. (This works for rates of less than 20%). The rule of 72 shows you how long in years it would take to double your money as a result of compounding at a particular rate of interest by simply dividing the interest rate into 72.

Example: Double your money at 4% 72 divided by 4 = 18 years

Alternatively, the same rule can be applied to work out what interest rate you would require to double your savings in a particular amount of years.

Example: Double your money in 5 years 72 divided by 5 = 14.4%

The Real Benefits.

The real benefit of savings are having financial security and making your hard earned money work for you. Achieving this can be achieved through good personal financial management, making saving a priority over spending.

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: "https://hubpages.com/privacy-policy#gdpr"

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)