The benefits of saving are undeniable. It's just that, getting used to being able to be disciplined in saving on a regular basis, is not as easy as turning the palm of the hand. In fact, many fail to follow these good financial habits.
The Indonesia Millennial Report survey released by the IDN Times in 2019 revealed that Indonesian millennials with an age range of 20 to 35 years, only set aside 10% of their income for savings. Half of the regular income of this group is used to finance routine monthly needs and entertainment expenses.
Getting used to being disciplined and regularly saving does require special efforts. If you already know what the main benefits of saving are and the right strategy for implementing it, the habit of saving will no longer be difficult to carry out on a regular basis.
The Forgotten Benefits of Saving
Saving is basically setting aside a portion of today's income to anticipate future needs, both unforeseen and unforeseen. A few decades ago, saving was synonymous with placing funds in a bank account. However, today this understanding is not always correct. If setting aside income is intended to anticipate future needs, then you need to make sure the funds saved are adequate for those needs. The problem is, there is an inflation factor that is often ignored.
Your fund of IDR 1 million today may be sufficient to buy food needs for 1 month, for example. However, in the next 10 or 20 years, will that amount of funds still be sufficient to finance the same needs? If it is assumed that the inflation rate or the average increase in the price of goods per year is 6% and the reference interest rate is 4%, then the Rp 1 million fund in the next 20 years will decrease in value to the current equivalent of Rp 683,203. Thus, saving in the proper sense is setting aside a portion of today's income to adequately anticipate future needs taking into account long-term inflation rates.
Therefore, it is also good to consider other instruments as "vehicles" of saving to offset the rate of inflation. For example, investment instruments such as mutual funds or stocks, as well as insurance bundled with a savings feature. Currently, there are many insurance products that are also equipped with savings features, both for children's education savings and old age savings features. So, you should not only limit yourself to saving in a bank, because the benefits of saving in a bank are different from insurance which has protection benefits and is equipped with investment.
Here are the benefits of saving that are important for you to note:
1. Emergency Fund Needs (emergency fund)
Save it for rainy days
The main benefit of saving, of course, is to help anticipate unexpected needs. In healthy finances, you need to have an adequate emergency fund. The amount is between 6-12 times the value of routine monthly expenses. So, if your regular expenses are around IDR 5 million per month, then try to have an emergency fund of at least IDR 30 million.
An emergency fund will help when unexpected needs arise, such as a leaking roof, a sick child who cannot be covered by insurance, or an anticipated loss of income due to layoffs. By saving some of your income for an emergency fund, you minimize the risk of getting stuck in a loan when a sudden need arises.
2. Expected Future Needs
Furthermore, the benefit of saving is to anticipate various unexpected needs in the future. An easy example is when it comes to basic needs such as housing needs. Everyone wants to have a dream home. However, in order to make it happen, you need to save so you can have enough funds to buy a house. This is an example of an unexpected need.
Examples of other unexpected needs are children's school funds, annual vacation funds, and Eid homecoming funds. There are unexpected needs that must be met in the short term, there are also new ones that need to be met in the long term.
For unexpected needs that will only emerge in the next 5 years, you need to save funds in investment instruments so that you can anticipate long-term inflation rates. That way, the funds saved are adequate to finance these needs in the future.
3. Financial Security
Having savings puts you one step further into the financial safety zone. This is obvious. Someone who has savings will be calmer in the face of various future events that require costs. Savings can be a source of funds to cover these sudden needs. Conversely, if you have no savings at all, your finances are at risk of being exposed to financial problems at any time.
For example, when suddenly there is a sudden need that must be closed immediately while there is no savings, chances are they will look at loans or debt to cover those needs. Because you need fast funds, you are forced to take high-interest loans. This is because fast loans almost certainly charge high interest rates.
4. Financial Goals Are More Likely to Be Realized
To achieve the dream of a financially prosperous life, there are many things that need to be fulfilled. Starting from adequate emergency funds, proper fulfillment of primary needs, having sufficient insurance protection, to preparing pension funds for a prosperous old age. In order for all of this to be realized, proper financial planning is needed so that the income generated today can enable these financial goals to be realized.
One of the important keys to realizing financial well-being is having good financial habits, one of which is saving regularly. Without the habit of saving, the financial goals you want to achieve will be difficult to achieve.
5. Healthier Managed Cashflow
Cash flow management aka healthy cashflow is a financial skill that needs to be mastered well if you want to achieve financial prosperity. It is important to remember, there will not be a healthy cash flow if you do not save regularly.
When you don't have savings, as soon as there is an urgent need that must be met on the spot, inevitably we will use the remaining income to cover it. In fact, the income should be used to finance other purposes, for example. Without the savings that you have prepared, financial cash flow will be more vulnerable to disruption.
The benefits of saving do not have to wait long for the benefits to be felt. By saving, finances can be managed healthier and your chances of realizing financial prosperity in the future will be greater. Still unsure about the purpose and benefits of saving? Come on, don't delay saving for a more prosperous future.