Business, Know your finances

Saving Early Pays Off

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By Reem Assad

Saving can help you achieve your financial goal. It may be a cliché phrase but it can’t be truer. From long-term goals like retirement to impulsive designer shopping sprees, planned saving will get you there without resorting to debt or deprivation.

In behavioral finance, “saving” is an activity that requires a set of traits: planning, patience, discipline and composure. In terms of spending, most Saudis combine both generosity and cleverness but careful planning is something that only few practice and live by. The good news is that saving is for everyone, regardless of his or her financial wealth, age or profession.

 
The Time To Start Saving Is Yesterday!

Time plays a great role in the accumulation and growth of wealth, and the earlier you start the easier and better off it gets. And while putting aside a portion of your salary and watching it grow isn’t easy for most people, let alone those with obligations and itch for fine living, these mathematical realities may help change your mind (and heart).

Let’s say you’re 20 years old right now. You want to have SR 2 million set aside for retirement at age 65 and, magically, there’s a fund out there that will return 7 percent a year. If you start investing at age 20, you’ll need to put aside about SR 510 a month to reach this goal. If you start at age 25, you’ll need to set aside about SR 725 a month to reach this goal (but you don’t have to save anything from ages 20 to 25). The computation goes on till you will need to set aside SR 5,600 a month from age 50 to 65 to reach the aforementioned goal. Note that inflation (rising prices) reduces the buying power of your money. Its annual rate ranges from 3-5 percent in Saudi Arabia.
 
The bottom line is that the longer you wait, the harder it gets to accumulate enough money for retirement and vice versa.

You Can Follow Reem Assad On Twitter: @nasi7atreem

Cover Photo Credit: financesonline.com

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