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. Investing

    Retirees: 7 Lessons from 2008 for the Next Crisis

    When the last big market crisis hit, many retirees ran to the sidelines. Next time, there are better ways to manage your portfolio.
  2. Products and Investments

    There's a Reason They're Called Junk Bonds

    The closing of Third Avenue Managemet's Focused Credit Fund is a warning to investors and advisors. Beware the junk.
  3. Economics

    Industries That Thrive On Recession

    Recessions are not equally hard on everyone. In fact, there are some industries that even flourish amid the adversity.
  4. Stock Analysis

    Tribune Media: An Activist Investment Analysis (TRCO)

    Learn more about the breakup of Tribune Company, once a powerful newspaper and broadcasting giant, and the role of activist investor Cliff Robbins.
  5. Stock Analysis

    Air Products and Chemicals: An Activist Investment Analysis (APD)

    Learn about the productive, and uncommonly friendly, activist investment made by Bill Ackman into Air Products and Chemicals.
  6. Fundamental Analysis

    Is a U.S. Industrial Recession on the Horizon in 2016?

    Find out why the industrial economy may be teetering on an industrial recession and what could prevent it from going over the cliff.
  7. Investing

    3 Small Steps to Maximize Your Investing Goals

    Instead of starting the New Year with ambitious resolutions, why not taking smaller manageable steps that can have a real impact.
  8. Investing

    7 Creative Ways to Save for an Early Retirement

    Take note of these out of the box steps you can take towards securing yourself an earlier, more comfortable retirement.
  9. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  10. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
  1. What is securitization?

    Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming ... Read Full Answer >>
  2. Can hedge funds trade penny stocks?

    Hedge funds can trade penny stocks. In fact, hedge funds can trade in just about any type of security, including medium- ... Read Full Answer >>
  3. Are hedge funds regulated by FINRA?

    Alternative investment vehicles such as hedge funds offer investors a wider range of possibilities due to certain exceptions ... Read Full Answer >>
  4. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  5. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  6. Can hedge fund returns be replicated?

    You can replicate hedge fund returns to a degree but not perfectly. Most replication strategies underperform hedge funds ... Read Full Answer >>
Trading Center