Is Saving Money For Losers? [Or The Opposite?]

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One of the most basic and frequently repeated pieces of financial advice is to save money. Saving money can be seen as a major tenet of good financial sense. Your parents possibly made saving money for a rainy day a huge part of your upbringing. 

Despite knowing that saving money is necessary, many of us might fail to implement it successfully. Just knowing you should save certainly isn’t enough when it comes to managing money. You’ve got to put some work into it.

In the adult world, savings can be found in all sorts of forms, including checking deposits, stock purchases, bond holdings, cash, etc. 

The Motivation Behind Saving Money

Here’s an interesting bit about the motivation behind saving money.

An individual’s willingness to save is influenced by the following three factors:

  • Preferences for future spending over current consumption
  • Expectations for future income
  • And, to a lesser extent, the rate of interest

What this means, in a nutshell, is that the psychology involved behind saving follows many of the findings that resulted from the marshmallow experiment; that is, a lot of people who save successfully are found to have the ability to exercise delayed gratification better than those who are unable to motivate themselves to save.

How Do You Know You’re Saving Money Effectively?

An individual can measure their savings for a specific accounting period in two ways.

  • One method is to simply calculate income and subtract current outgoings, with the difference representing your savings. 
  • A second (more realistic) approach is to look at a balance sheet (which takes into account property and debts) at the start and end of a given period. You can then calculate the growth in net worth, which in turn indicates your actual savings.

Saving is critical to an individual’s economic success. If one’s wealth is to increase, some people must be willing to make some short or long-term sacrifices, namely spending less.

Sometimes though, an individual may need to invest in order to progress in a timely manner toward their financial goals. Well guess what, you still have to save for the capital that you are going to invest.

It’s quite clear that saving money does have its place for all of us.

Why then do some consider saving money as a standalone strategy to be a losing proposition? Aka for losers?

Why Some Believe Saving Money Is For Losers

Saving money is believed to be for losers by some people mainly because if you are a natural saver, you need to live frugally and simply. Most people would not consider you a loser if you are a saver, and those who do, would be the people who are spending every penny of their paychecks and more to keep up with the joneses. Some people value how they are perceived, and if you do not live up to their expectations of you due to how much money you make, you will be considered a loser in their eyes.

Is there a stigma against people who like to save money?

While there may be some instances where people who prioritize saving money are stigmatized, it is not a universal phenomenon. In fact, in many cultures and communities, saving money is seen as a positive and responsible behavior.

However, there are some circumstances where people who prioritize saving money may be stigmatized or misunderstood. For example, some people may assume that those who are frugal or live below their means are cheap or miserly. Others may view saving money as a sign of poverty or financial insecurity, rather than a proactive and strategic approach to managing one’s finances.

Additionally, there may be certain social settings or situations where saving money is seen as a hindrance to enjoying life, such as expensive vacations or nights out with friends. In these cases, people who prioritize saving money may feel pressured to conform to social expectations or feel excluded from certain activities.

Arguments Against Saving Money

Let’s take a look at some arguments against saving money as your only form of wealth management:

1. Your money will be eaten away by inflation

Savings and CD account interest rates are currently below the rate of inflation. Thus, you’re losing out on the value of your money month over month, even if you do manage to save well.

2. Any interest made on your savings is subject to additional taxes

Even if you keep up with inflation, you’ll still lose some money on it as interest income is taxed at a greater rate than long-term capital gains.

3. Many alternative investments pay higher returns

Capital gains are where the best investment returns are often found. When you invest in something like stocks or real estate, you could potentially gain much higher returns.

4. Straight-up investing allows you to profit from other people’s money (OPM)

Because there is an option to borrow most of the money you need, investing in stocks or real estate can utilize leverage on your returns. Let’s say you put down $20,000 and borrow the rest of the balance to buy a $200,000 home. In five years, if the property is worth $300,000, you’ve just made $100,000 using only $20,000. 

Why Some Believe Saving Is The Core Of Financial Success

Now that we’ve covered arguments against saving money as the main form of wealth management, let’s take a look at some counter-arguments.

1. Saving Money Helps You Attain Your Future Goals

If you don’t have a specific end goal in mind, it can be difficult to put money into a savings account. Why save for something when you can have what you want now?

One of the many reasons for saving money is that you’ll almost certainly find something you need even more in the future compared to now, even if you don’t know it. Take your child’s education for example. It may not be a big deal now, but in twenty or so years, I imagine it might be a huge consideration.

2. Saving Money Provides Financial Security

When your money is invested, whether it be in stocks, bonds, options, etc., you may not be able to withdraw any time you’d like. Or it may just be going through a temporary downturn, and you don’t want to realize any losses. Additionally, any capital gains will have to be taxed for the year as income should you choose to realize those gains.

Sometimes, it’s just not optimal to have your money completely invested. On the other hand, saving money, whether it be in a savings account, CD account, or wherever you choose to park your money, lets you take out the money in a time of need without the guilt of potentially realizing losses.

Having money set aside for emergencies and unexpected bills is essential. At the very least, it’ll help with your stress levels during unexpected circumstances.

3. Saving Money Means You Can Take Advantage Of Future Market Dips

Saving money allows you to develop cash reserves so that you can take calculated risks with less anxiety.

Investing at the moment may not always be the best idea. Coupled with the fact that you may need the money at any moment, sometimes it’s just best to keep a cash reserve at hand.

Should a market downturn occur, this gives you the best chance of making a calculated risk that’ll benefit you in the short or long term or both.

It provides a balance of being able to meet your short-term needs and being ready for an opportunity to buy any dip that may occur in the future.

Some Tips When It Comes To Saving Money

1. Protect Your Emergency Savings From Yourself

The human brain is a tricky thing.

Rationalizing and justifying your desire to take money out now and put it back in later is not a good idea. It just doesn’t work like that.

If your regular savings account is to save for what you might “want” down the line, think of your emergency savings as what you’ll “need in a pinch” should a situation arise.

It’s great if it can grow a bit, perhaps keep up with inflation, but it’s not the primary focus.

Don’t touch it unless you can say with 100% certainty that you’re “in a pinch.”

Some financial service providers waive charges and fees specifically for their savings accounts. Shop around and do your research. There are plenty of options out there.

And no, you don’t have to stick with Citibank just because you’ve been using them your entire life. 

Pro Tip:

Ironically, having only a single account for your savings can make things a lot more complicated. Sometimes, having multiple accounts to keep things separate and keep yourself accountable can just make life a whole lot simpler. When opening a new account:

  • Use a different bank
  • Don’t link your accounts

Utilizing the above pro tip will help remove any temptation of dipping into savings when you aren’t supposed to.

Having separate accounts is a useful way to train your mind to not use certain funds. Simply having your emergency fund anywhere near your regular savings account may lead to trouble.

2. Consider All Possible Emergency Scenarios

A financial safety net is intended to protect you and your family from losing your financial security or going off track with your long-term financial goals.

This is especially true in the event of an unforeseen occurrence, such as illness or grief.

An emergency fund can make all the difference between financial success and financial failure.

You won’t have to max out your credit card, dip into your retirement fund, or borrow money from a friend should your car break down or you lose your job.

All these things can lead to debt, but by avoiding that, you’re doing a huge favor for your future self.

Pro Tip:

  • Do NOT dip into your retirement savings. This could result in you being short of funds during your golden years. 
  • Do not think for a second that simply owning a savings account means that you’ve established a safety net. A true financial safety net is a comprehensive set of risk-reduction strategies.

You might have come across experts and financial consultants who recommend having enough emergency reserves to cover your living expenses for at least six months in case you lose your job, become ill and unable to work, etc.

Six months is an admirable goal when it comes to emergency savings. However, it can be hard for the average person or family to save for six months’ worth of expenses, especially when you’re currently struggling with your finances. You might experience some difficulties in doing so.

Regardless, you’ve got to find a way to do it. Do whatever you need to do to make it happen. Consider it your personal emergency to build up an emergency fund.

It’s that important.

Final Thoughts

It is crucial to save money. Everyone needs to save to varying degrees, especially at the beginning of their financial journey.

It provides you with financial security, flexibility, and protection should something unexpected happen. Plus, saving money can help alleviate a whole lot of stress since you’re doing what you know deep inside you should be doing anyway.

Share the wealth!