When one closes a document without saving the computer offers a reminder: Would you like to save your work?" If only we had this pop up every time we were about to spend money....
The saying goes, "Don't spend all your money in the same place". This cannot be more true because portfolio diversity is indeed necessary in order that all your eggs won't be in the same basket. However, perhaps we should slightly twist the aforementioned saying for an even more basic lesson: "Don't spend all your money in the first place!" Saving is the necessary perquisite for investing. Even the massive corporations of the world have amassed wealth in their hoards. Let us review a few of the reasons why saving is so important:
1. Emergency Fund. You just never know when you will not only need liquid cash on hand. Sudden medical expenses, a job layoff, imminent house repairs, and accidents are just some of the infinite number of occurrences which may demand immediate attention and spending.
2. Retirement. Some of us think we are too young to think about it and others don't think they have the time to think about it. However, the only way that ones retirement goals and aspirations could be met is if one starts planning and saving in advance. This is important to bear in mind now more than ever with the average life expectancy increasing as well as the benefits of social security decreasing.
3. Children. We cannot see the future (and those who claim they could have never won the lottery). We must save for future generations - children and grandchildren so that no matter what the economy may bring we could help regarding education, health, and basic needs.
Note: There are two types of savings: (a) keeping cash on hand (b) investing in low-risk investments. Each has its pros and cons. Each has its place in preparing for some of the above challenges.
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