A lot of money management lessons and experts acknowledge that savings are an important starting point towards having a secondary income. Savings in this regard point towards the money that is saved every time an individual gets any form of cash be it salary, gifts or tax refunds. The savings you create over a long period of time or even a shorter one could prove to be as important as having another stream of income. These savings always help you especially in meeting unexpected expenses and realizing future goals.
Affording Large Purchases
One of the greatest advantages of having personal savings is that they enable you make some large purchases like houses, cars, meeting college fees etc. saving gradually greatly builds your savings value and this enables you to inch closer to affording that great dream that you have. In this scenario your savings act as an extra source of income as you can take them plus the cash at hand you have and fully pay for that big goal you have been working towards achieving.
Savings enable you to make these huge purchases without the option of taking a loan or debt to finance the purchase. In a normal case, if one does not have enough money to buy something they have the option of taking out a loan in order to get enough resources to pay for the purchases. If you have savings in your bank account or in any financial institution, you could use them instead of taking a loan which will plunge you into more debts.
If you were to put your savings in an interest earning account, you will have created another source of secondary income for you and the family. However, in order to earn a substantial interest from your savings, there are some factors that you ought to consider. The interest rate is one of the most important factors to consider first if you want to earn more. It is important to remember that the higher the interest rate will be then the higher your money will grow. The other factor to consider is the time that you will keep your savings deposited in your account. The longer the money will stay in the savings account, the more the interest you will earn making your income to be higher as time goes by.
The third factor to consider is the way the bank you use pays its interest. Compounding interest is the way most banks pay their interest meaning that you will be earning an interest not only on the initial amount you have saved but also on the interest you earn per year. This is a sure way of earning some extra income from your savings adding more advantages of having savings in the first place. When looking for a bank to place your savings in, ensure that the bank has a higher Annual Percentage Yield (APY) as it will mean that your savings will earn you more returns per year.
Putting Your Savings in an Investment
When a person decides to have some savings on the side, they are not only said to be saving but also investing in real sense. It is possible to put your savings in a form of investment that you will not touch for a long period of time like maybe 10 years. It is not a must that you put such savings in a bank account rather you can invest them in a more benefit-earning investment option. It is possible to risk these savings on the stock market or pensions which are better performing and guaranteed to give you more returns in the end. They can also be invested for the long term that is you can opt to keep the savings there until when you retire. When you liquidate your savings you will make a good sum of money in returns as the savings will have grown by leaps and bounds.