Did you know that October 12 is National Savings Day? If you didn’t, don’t worry about it — National Savings Day is a relatively new creation, spurred by Capital One. While you may or may not be a Capital One customer (we don’t have feelings about it either way!), we do commend the company for encouraging Americans to save more money.
And with interest rates finally back to historically normal levels — though they may seem high compared to the previous 15 years or so — the money you put in a savings account or other foundational bank account is finally accruing some serious interest.
Saving money has some clear and obvious benefits. We probably don’t even need to get into the details; but we will anyway! If you’re a young American with the opportunity to save some money, most financial professionals would likely recommend that you do so. To drive that point home, here are some of the most pressing benefits of saving money for young adults.
1. More time for your money to grow
Saving at a young age is particularly important because it means you have more time to let your money grow. Your money, when it’s in a savings account, for example, accrues interest. That means the bank effectively pays you to keep your money in an account. And the longer your money is in a savings account, the more time it has to accrue interest and grow.
We like to harp on the importance of compound interest here at Money Vehicle, especially when it comes to discussing the importance of saving money for young adults. Compounding refers to your money’s interest gaining interest — it puts your savings on rocket boosters, in a way. In short: Save early, save often, and let your money grow!
2. Allow you to avoid debt
Another important thing for young adults to keep in mind in regard to their savings is that having a pile of money in the bank can help you avoid going into debt. How? By functioning as a rainy day fund or emergency savings fund, you’ll be able to tap into your savings if you need to (though, you should try your best to leave it alone, if possible!).
Establishing an emergency fund is one of the first things you should do when getting your finances in order. It’ll help you avoid using credit cards and spiraling into debt. It’s also one of the first steps toward getting out of living paycheck-to-paycheck.
3. Develop financial discipline
Finally, making a habit of contributing to your savings account will help instill a sense of financial discipline. Being disciplined with your money is difficult — just look around at all the people you know who struggle with money! But developing financial discipline can start with some simple habits, like ensuring that you’re saving or investing money for the future. Again, that doesn’t mean it’s going to be easy, but even saving a little bit from every paycheck will help solidify your habits.
Just because National Savings Day is one day doesn’t mean that you should forgo smart saving habits all year round, however. Keep the above in mind, and do your best to save as much as possible.
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And check out our white paper: “Strategies for Increasing Financial Literacy Rates Among High School and College Students”
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