Saving

There are two big reasons why saving money is important. The first reason is that emergencies happen. You save for a rainy day because it’s just about guaranteed that every day can’t be sunny. Eventually you’ll need a lump sum on hand in a hurry — for a plane ticket to a family funeral, repairs to your computer, living expenses while you’re between jobs, or whatever else life throws your way.

This financial cushion is called your emergency fund, and it should be big enough to cover at least three to six months of living expenses. For instance, if you’re spending $1,200 a month, you should have at least $3,600, and possibly $7,200 if you can manage it, stashed away.

If you can pay for emergencies outright instead of having to carry them for an extended period on a credit card, it will cost you less in the long run.

The second reason you want to save money isn’t for a rainy day — it’s for a sunny day. It’s to help you achieve the things you want and work for in life. For instance, you may want to save for graduate school or other advanced schooling, a car, a down payment on a house, to start your own business, send your own children to college, or to take two weeks off to do some volunteer work. Eventually you want to retire, a big goal that you should start thinking about sooner rather than later.