Why You Need to Save More

Traditionally, households are encouraged to spend money because it will help economic growth. However, facts show that saving money is actually a proven way to help the economy, among many other benefits.

In a 2014 analysis, investment management firm Ned Davis Research compared seven decades of net national savings (the sum of all the savings by individuals and families, corporations and the government) to actual growth in the United States economy. The results showed that a “high” savings rate of 8.2 percent or better corresponded with an annual average gross domestic product rate of growth of 3.6 percent.

facts show that saving money is actually a proven way to help the economy, among many other benefits.“The more money people have in savings, the more money there is to invest, and the better the economy performs,” concluded Ned Davis, head of the research firm.

On the other side of the coin, a “low” savings rate of below 2.8 percent corresponded with GDP growth of only 2 percent, Money magazine reported.

Personal savings

Leaving government and corporations out of the picture, having savings readily available to you is a smart financial decision. In a recent survey from a private online financial institution, results showed that having more savings led to more happiness. While that fact may not be all that surprising, this one might be: The survey found that how much you save affects happiness more than does how much you earn. Furthermore, 84 percent of people said saving money makes them feel good — a higher percentage than those who said eating healthfully and enjoying work make them feel good.

According to the Transamerica Center for Retirement Studies and the Global Coalition on Aging, 59 percent of Americans dream of traveling during retirement and 69 percent say travel is an important goal toward which to save. However, just 12 percent have given “a lot” of attention to saving for it.

“Retirees were asked how they would have prepared differently for travel in their retirement. Of those with regrets, more than half wish they would have saved more,” said Catherine Collinson, president of the Transamerica Center for Retirement Studies, in a press release. “People of all ages need to plan and save to make their retirement dreams of traveling a reality.”

If you are less worried about the future and more focused on now, saving more is still important. Life is full of surprises — good and bad — and most of those end up costing you money. Saving more will give you a larger safety net for emergencies that arise. Right now, 44 percent of American households have less than three months’ worth of savings, according to the Corporation for Enterprise Development. What’s more, 56 percent of consumers with subprime credit scores say they would turn to a predatory loan to cover a financial emergency, which would only prolong financial insecurity.

Ensure your happiness, now and in the future, along with the financial security of both the entire nation and your own, by saving more today.

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