A penny saved is a penny earned. - Benjamin Franklin
Chances are this saying, or something like it, has been pushed on you for most of your life. Some people ignore it, others live by it.

For those who didn't save their mone: Sorry, it looks like your mother may have been right. A recent online HSBC Direct survey suggests that active savers had an easier time weathering the recent financial storm. (For background reading, see Save Without Sacrifice.)

What's even more telling is just how much better off the savers were. Of respondents who were active savers, 46% said that they felt comfortable with their financial situation and had not been forced to cut back their expenses. By contrast, 37% of non-savers said they'd had to scale back on their spending as a result of the recession. Clearly some people are managing their money more effectively than others. If that isn't enough to convince you of the importance of saving, here are four more reasons:


  1. Less Risk
    The more you add to your net worth, the less risk you need to take with your money to accomplish the same goals. Consistent savers can take a more conservative approach to their investments, which results in fewer losses in market downturns. Those who save less or not at all either fail to achieve any financial goals or need to take on significant risk to do so. The increase in risk decreases their chances of success. (For more insight, see What's Your Net Worth Telling You?)

Consistent Lifestyle
The cushion of having savings and needing less income than you actually spend allows you to continue your lifestyle throughout most economic conditions. Because the option of not saving for a short period of time or spending some savings exists in savers and doesn't exist in non-savers, the lifestyles of consistent savers will be impacted less than those who don't save and therefore have fewer options.

Added Security The more you add to your net worth, the better you will feel about your financial situation. Consistent savers have less stress than those living closer to the edge and when unexpected events happen, they have the ability to move through them without major consequence. What may be more important is that savers know this and this provides a sense of security that no matter what happens, they will be alright. (Would you be able to weather financial disaster? Read Are You Living Too Close To The Edge? to find out.)Sense of Purpose Consistent savers have goals and work toward them. They know that they are financially better off saving to go on vacation than they are charging it on a credit card. They see saving as an ongoing part of their lives, rather than a means to an end. Reaping the benefits of this diligence tends to be a positive force for savers. This contrasts with the non-savers who, if they save at all, tend to do so out of fear rather than as a habit.

In the recession, savers were better prepared and were less impacted compared to non-savers. And because it's unlikely that this will be the last recession we see, if you aren't an active saver already, now might be the time to cultivate the habit.

Related Articles
  1. Insurance

    5 Ways to Lower Life Insurance Premiums

    Learn several effective methods for lowering life insurance premiums. These include quitting smoking and considering term life insurance.
  2. Budgeting

    The 7 Best Ways to Get Out of Debt

    Obtain information on how to put together and execute a plan to get out of debt, including the various steps and methods people use to become debt-free.
  3. Economics

    Is a Recession Coming?

    In the space of a week, the VIX Index, a measure of market volatility, spiked from 13, suggesting extreme complacency, to over 50, evidencing total panic.
  4. Active Trading Fundamentals

    This Is How 3 Investors Made a Billion Dollars

    Read about three major hedge fund managers who are worth at least $1 billion and who made large amounts of money on a single trade idea.
  5. Budgeting

    10 Ways to Save Money at the Farmers' Market

    Strategic shopping can help your budget as well as your health.
  6. Active Trading Fundamentals

    How Hedge Funds Front-Run Index Funds to Profit

    Understand what front running is, and learn how hedge funds use this investing strategy to profit from the anticipated stock buys of index funds.
  7. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  8. Savings

    6 Ways to Save Money on Back-to-School Stuff

    Those school-supply lists just keep getting longer each year. Here's how to shop smart.
  9. Economics

    A Look at Greece’s Messy Fiscal Policy

    Investigate the muddy fiscal policy, tax problems, and inability to institute austerity that created the Greek crises in 2010 and 2015.
  10. Home & Auto

    4 Areas to Consider Roofing Material Types

    Roofing your home is very important, that’s why you should choose a roof specifically designed to handle your area’s climate.
RELATED TERMS
  1. Internal Rate Of Return - IRR

    A metric used in capital budgeting measuring the profitability ...
  2. The New Deal

    A series of domestic programs designed to help the United States ...
  3. Linked Transfer Account

    Accounts held by an individual at a financial institution that ...
  4. Tactical Trading

    A style of investing for the relatively short term based on anticipated ...
  5. Maximum Drawdown (MDD)

    The maximum loss from a peak to a trough of a portfolio, before ...
  6. Gross Exposure

    The absolute level of a fund's investments.
RELATED FAQS
  1. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  2. How does the trust maker transfer funds into a revocable trust?

    Once a revocable trust is created, a trust maker transfers funds or property into the trust by including them in a list with ... Read Full Answer >>
  3. How does the risk of investing in the industrial sector compare to the broader market?

    There is increased risk when investing in the industrial sector compared to the broader market due to high debt loads and ... Read Full Answer >>
  4. What is the range of deductibles offered with various health insurance plans?

    A wide range of possible deductibles are available with health insurance plans, starting as low as a few hundred dollars ... Read Full Answer >>
  5. How can I hedge my portfolio to protect from a decline in the retail sector?

    The retail sector provides growth investors with a great opportunity for better-than-average gains during periods of market ... Read Full Answer >>
  6. What is the correlation between term structure of interest rates and recessions?

    There is no question that interest rates have enormous macroeconomic importance. Many economists and analysts believe the ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!