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When and Why to Save

When you save, you win.

Having money puts you more in control in almost every area of life, and when you have that control, you make smarter decisions and have less stress and more peace and contentment. All because you had the discipline to stock money away.

There are three big reasons to save money.

Emergency Fund

The emergency fund is the first thing you save for. It makes you ready for those times when life hits you upside the head. You don't flip out or panic. You can deal with an emergency and be done with it.

Money equals flexibility. If you have savings and then experience a car wreck, a busted heater or A/C unit, or a job layoff, money works for all three. It causes you to relax because you have cash saved up for Murphy visits. It's like being in a fender bender and having your seat belt on—you don't get hurt because you had something in place to protect you.


When given the option to make a big purchase, most people buy now and pay later (that brings credit card fees, interest rates, overdraft charges, etc.). The right way to do it is to—drum roll—save for it! If you want to buy a $500 couch and can save $100 a month, then do that for five months and make the buy. This is actually a good test. You find out how much you want an item when you know you must wait for it.

You'll have a lot less stress in life when you use this method of purchasing, because once you've bought, the deal is done. You can enjoy whatever it is you bought and not worry about paying for it, because you already have. Whether it's a car, Christmas or something else, save up first.


This one is the most jaw-dropping because of the numbers involved. If you invest $100 a month for 40 years (a normal working lifetime), you'll have $1,176,000 saved up for retirement. Most of us blow $100 just eating out each month, so think about how much you'll have if you get out of debt, have an emergency fund, and then invest 15% of what you make.

Let's say you earn $40,000 a year. In Baby Step 4, you'd invest $6,000 of that each year. If you invest $6,000 for 35 years (age 30 to 65) at 12%, it will turn into more than $3.2 million!

When you save, the process itself makes the money work for you. You don't spend on interest, you don't go into overdraft, you discipline yourself, and you have a big reward coming when you finish.

Try it. You'll like the results.

What are your short- and long-term savings goals? Let us know by leaving a comment below.

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Ramsey Solutions

About the author


Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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