Question

Explain short-term and long-term financial benefits of saving money on items that are purchased frequently.

Answer 1

Explain short-term and long-term financial benefits of saving money on items that are purchased frequently

The main purpose of saving money is to meet future financial needs or goals. Future financial need can be understood as a need which must be fulfilled in the future but the amount of expenditure or the nature of expenditure is uncertain today e.g. meeting medical expenses in the future. Whereas future financial goal can be understood as the goal which should be fulfilled in the future where the amount of expenditure and the nature of expenditure is certain today e.g. fees for higher education, buying a home, car, etc.

Generally, we found that what we purchase frequently that linked with our basic needs such as food, cloth, furniture, etc. Chopping off purchases of those items for savings money generally not possible, however spending on such things can be reduced if we planned properly. These savings will help us in achieving our short and long term financial needs or goals.

Short-term financial benefits:

• Having a small amount of saving in short-run leads to the limitation of debt. When a person having money he/she never go for borrow the same because the general human tendency is to avoid debts which makes him financially independent.
• A small amount of saving helps to finance a vacation which has an impact on long-run for having peace of mind.
• Small saving can be invested in your health expenses like regular medical check-up which generally people avoiding nowadays but it has benefit like avoiding unexpected medical bills in the long run.
• Small savings can be invested in acquiring knowledge such as taking classes of language, personality development, certification courses, etc. for enhancing your value which leads to earning more.
• A small amount of saving helps at the time of providing down payment for the assets purchased by financing from financial institutions like the purchase of car etc.

Long-term financial benefits:

• The biggest benefit of saving money, in the long run, is it gives safety against sudden job loss. It helps in stabilizing your financial need until you find a new job or it helps in starting your own business.
• It helps in an emergency like meeting unexpected medical bills.
• Since the cost of higher educations is increasing day by day, saving money will help to meet such expenses.
• It added a substantial amount to the retirement fund. Because relying on pension to meet all the basic needs is not always possible.
• Nowadays wedding takes away a large amount of your saving hence more you save less you lose.