Basics for savings

One of the most common questions regarding personal savings is the sense behind collecting interest rates on a regular basis. During these harsh times, will and determination can become weaker, since most of the people struggle how to balance their time and money. A logical question appears, can personal savings be profitable?

Let's start with the basics. Why should you save money at all? Most common reasons revolve around daily individual needs. Someone wants to buy a new washing mashine, another person wants that branded expensive coat which fits so well, third person plans to visit distant China for the next vacation, fourth person would like to buy a new car, for others it can be just an additional revenue stream. There is a large number of reason why people save money and all of them are equally good.

The biggest advantage of personal savings is the fact it teaches people to manage their money. In order to get the highest interest rate with the least amount of risk possible, you need to plan ahead. Choosing a desired timeframe, currency and the savings amount are just some of the variables.

The more money you save, the more things you'll be able to afford later on. During the crisis many people found their personal savings a great means of easing their daily loan worries.

The biggest shortcoming of personal savings is time required for the amount to reach your desired goal. Compound interest works perfectly over a longer time periods. Unfortunately, many people do not have the discipline and rather spend their money on random consumption products they don't really need.

Simply put, the majority doesn't have nor the knowledge, nor the will to take advantage for the financial planning of their own future. During the crises, this effect usually becomes stronger as the state of national economy becomes worse.

That is the reason why so many are caught off guard when faced with an unpredictable expense such as health or insurance bills. Once the negative event created costs, the only way to pay them is via credit. Loans are the preferred solution. The thing most people fail to realise is that loans also use compound interest effect - but against you.

People who already posses a rather large amount of money can even live of their interest alone, not having to work at all. But for beginners, the trick is to grow your savings while resisting temptation to spend it on trivial things. To summarize, personal savings can be very profitable for anyone with enough will and time to carefully plan their financial future.