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Six ways saving could change your life

Saving can be the cornerstone of financial stability. Good saving habits can help you achieve long-term goals and provide peace of mind. Here are six things to consider when starting your savings journey.

5 minute read

Saving. It’s one of those constant pieces of advice everyone always gives and receives, but it’s one a lot of people either put off for later, feel they don’t have the time or money to spare for it, or simply push it aside and ignore it.

While the idea of saving money is often seen as a very boring topic, saving is incredibly important and can greatly benefit your life – both financially and mentally.

What saving can give you

Saving is often viewed as a future goal, but the sooner you start, the sooner you’ll see the benefits. Not only will it teach you great habits, and help you reach goals like buying fun new items or amazing holidays, but you’ll also feel more secure in the day-to-day, knowing you have cash on hand if you need it.

The boost to your mental wellbeing could be tangible, possibly helping you sleep better and providing a sense of security, knowing future-you may be better prepared to face unforeseen challenges ahead.

So, let’s dive in and see the six ways saving could change your life.

1. Saving can help you build good habits

A classic trap people fall into is thinking they don’t have enough to start saving. By putting a little away on a regular basis you can begin to develop the habit of saving. And as the amount you’ve saved builds, you’ll get a rewarding sense of satisfaction watching it grow.

You can start building this habit by setting up an automatic payment, sending part of your income to your savings account. This ‘pay yourself first’ mentality will make it more likely you’ll reach your goals, as that money is already allocated and out of your main spending account. Once you see your savings grow, you may look for ways to increase the amount you can put aside, helping it grow even faster.

2. Setting a savings goal gives you something to strive for

Setting a goal and having a visual reference for it can help keep you focused. Whether it’s a new phone, a laptop, a car, a holiday, or a house, if you know what you’re aiming for and why, you’ll be more driven to reach it. BNZ Rapid Save accounts were built with this in mind. Here are two ideas on how you can stay on top of your goals visually:

1. When you set up your savings account, you can add a picture of the item you're saving for and give it a nickname – this should keep your goal front and centre.
2. You can add a savings goal amount that appears as a progress bar in the BNZ app and Internet Banking, so you can see how far you’ve come and how far you’ve got left to go.

Knowing how long it will take you to reach your goal can also help motivate you. Using a Savings Goal Calculator can help you visualise when you’ll likely reach your goal, based on how much you save and how long you’re saving.

3. Saving can help your mental health

The saying goes that ‘money won’t make you happy’, but it turns out there’s a strong link between money and mental health. Nearly 70% of New Zealanders[1] have said they’ve been worried about their financial situation at some point.

Feeling you have control of your money and a plan to reach your financial goals can help relieve stress about money, and give you peace of mind in case of an emergency or unexpected expense.

4. An emergency fund can safeguard you in the future

Having money available to cover the unexpected – like an injury, lost item, or urgent maintenance on something, like your house or car, can be a game-changer for when things don’t go as planned.

Ideally, it’s great to have at least three months worth of expenses set aside in an easily accessible emergency fund. But just like any goal, you need to start somewhere – set yourself a target of saving $1,000. Once you reach that, set it to $2,000, and so on, until you reach your goal of having three months (or more) of expenses which you can access if and when you need to.

Setting this much aside can seem daunting, but the sense of satisfaction and security you’ll have when you manage it will be worth it. And having cash on hand will reduce the need to put emergency expenses on a credit card or take out a loan, avoiding potential interest payments.

If you need to dip into it, that’s fine – that’s what it’s there for. Once you’ve handled the emergency, simply start saving back up to your target amount.

5. Saving can teach you to be savvy

Savings accounts can come with features designed to encourage you to keep saving. Knowing the features of your specific savings account can help you maximise the benefits of your savings and reduce unwanted fees.

For example, some accounts require you to limit the withdrawals you make each month, encouraging you to keep the money in the account. One method it may use to discourage withdrawals is a fee for if you make more than one a month. For accounts like this, it’s good to be aware of any withdrawal fees or interest impacts, so you can plan accordingly.

For interest-earning accounts, it’s also good to understand how much interest you are earning on your money and whether there are any criteria you need to meet to get the full interest amount each month.

6. The sooner you save, the sooner compound interest starts

As you start to save, interest will eventually be paid into your savings account, depending on the type of account and the conditions that go with it. Once that money arrives in your account, your account balance will be higher, increasing the amount of money you’re earning interest on. This means you’ll earn more interest during the next interest period, increasing the money in your account, meaning you’ll earn more interest, and so on.

The graph above demonstrates the benefit of compound interest. As time goes by, your savings will grow faster and faster, as long as the balance is increasing. So, the sooner you start to save, the sooner your compound interest curve will start trending up and up.

Future-you will be very happy

While saving may not be seen as an exciting or glamourous topic, it’s easy to see how these six points could have a very positive impact on your life.

On top of the financial freedom saving could offer you in the future, it also provides an assuring blanket of security in the now. Being able to look at your account and see you have a healthy amount stashed away (which is only growing, thanks to compound interest), ready to cover the unexpected, can help reduce feelings of anxiety and stress.

The more you learn about saving now, and how to make it work for you, the more your future-self will thank you. It can also heavily reduce the amount you’ll need to worry about in the future, hopefully putting you in a stronger position, both financially and mentally.

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This article is solely for information purposes and is not intended to be advice with respect to any matter discussed in it. If you need help, please contact BNZ or your professional adviser. Neither BNZ nor any person involved in the material accepts any liability for any direct or indirect loss or damage arising out of the use of, or reliance on, all or any part of the content.

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[1] https://retirement.govt.nz/news/latest-news/financial-stress-impacts-mental-wellbeing/