Saving money is both important and difficult for millions of Americans. They want to be able to prepare for emergencies and retirement while also being able to purchase the things they want. As a result, people are looking for the perfect balance between spending and saving. These individuals should consider saving more than they think they need. This extra saving will make them more content, more prepared, and perhaps even wealthier than they may have been otherwise.

Peace of mind

Saving more money than an individual thinks they need can be helpful for their emotional and psychological health. There is a small chance that an individual will face a catastrophic expense that they previously had not expected. Certain bills could arise that cost five or ten times more than a family’s monthly income. Extra money saved will keep people from having to worry about those potential expenses. They will be able to sleep well at night and can later make large purchases knowing that they can withstand a potential onslaught of home repair costs or medical bills.

Inflation

Saving more than one needs is also helpful to combat inflation. According to Trout Associates, inflation often grows much faster than most people realize. They may lose a considerable portion of their buying power without even realizing they have lost anything. Two hundred dollars buys significantly less when the prices of all the goods that an individual regularly buys goes up on a regular basis. Saving more than one thinks they will need will greatly aid an individual when they start to rely on a fixed income that will not increase at the same rate as inflation. They will have a cushion that will help them pay their bills while also covering any additional expenses that may arise during a period of disability or retirement.

Greater interest payments

Saving extra money can be financially beneficial for an individual due to higher interest payments. These payments result from the fact that interest is calculated as a percentage of the entire amount. A higher initial amount means a higher payment every month or every quarter. The amount will also grow faster due to a more robust example of the law of compound interest. Debt consolidation experts such as Trout Associates note that starting out with a small increase in principal can lead to massive increases over a period of years. Individuals can later withdraw that money and either invest it or use it to pay off their bills.

Conclusion

Individuals should be saving money on a regular basis and should have their savings monitored. They can increase or decrease their amount saved at any time depending on their needs and circumstances. But these individuals need to find a way to save more than they think they need or more than most calculations suggest. Those savings should go into an online savings account or some other sort of account with a high yield. More savings will always be more beneficial than the stress and headache caused by those individuals who discover months too late that they have not saved enough.