January 09, 2026【Epoch Times】
Your job is to pay your bills. That’s its primary mission – to earn enough money to cover rent, put food on the table, and keep the lights on at home.
Once you’ve met these basic obligations, the next step is other almost equally important expenses: a car, insurance, and entertainment.
As income increases, the first change that occurs is the quality improvement brought by these expenses. The apartment gets bigger. The food gets better. The car gets updated and shinier. Entertainment extends from movies and popcorn to a trip to Cancun.
At this stage, the question of how to spend money changes. Once you have the ability to make choices, one of the options is not to spend money – you can save it for a rainy day. Saving money, once a luxury of “having more,” turns into a necessity that any responsible adult must ensure.
Spending money is easy. There are shops and advisors everywhere eager to provide you with advice on how to spend money and where to spend it. In contrast, saving money is harder.
A survey by the Financial Industry Regulatory Authority (FINRA) found that in the past year, almost one in five Americans has spent more money than they have earned, with nearly half of people not having emergency savings. Among those with credit cards, 35% in some months last year only made minimum payments, leading to a continuous accumulation of high-cost debt. Most worryingly, slightly more than a third of people could correctly answer four out of five questions in a basic financial knowledge test.
The test asked some simple questions, such as the cumulative effect of interest rates, inflation, and mortgage rates.
The lack of financial education is shocking but perhaps not surprising. While most states now offer – and some even require – financial literacy courses for high school students, these courses often seem hollow. Talking about the relationship between interest rates and bond prices sounds more like an academic question to teenagers without income (or expenses), let alone savings. Long-term saving and investment strategies are not important to them when they’re still counting change just to buy a new video game.
However, by the time saving information becomes crucial and relevant, it is already too late. Adults have almost no way to access the financial literacy they need. As a result, many people do not know how to save money.
Yet, saving money is one of the most important things adults must do.
Saving money is not a luxury. Once you can pay your rent and support yourself and your family, it’s something everyone must do. A portion of every paycheck should be set aside and properly kept for five reasons.
The most important reason for saving money is to ensure you have a safety net. Expenses are inevitable. You will always have expenses. You always need to eat and have shelter.
But income is not guaranteed.
Your employer may lay you off. Your clients may end their cooperation. You can lose your job at any time. And you have to assume that such a situation can happen.
Unless you have a secure income from another independent source, you have to live under the assumption that your income could be interrupted at any time and not return for a long time.
According to data from the US Bureau of Labor Statistics, the median duration of unemployment from January to May 2021 ranged from 15.3 weeks to 19.8 weeks. In April 2021, fewer than a quarter of job seekers had been unemployed for less than five weeks. Over 55% of people had been unemployed for at least 15 weeks, and 43% for at least 27 weeks.
This means they have had no income for nearly half a year. In other words, nearly half of the unemployed in the US in 2021 were unemployed for at least one week longer than the maximum duration of unemployment benefits.
Undoubtedly, the COVID-19 pandemic made finding a job in 2021 more difficult than usual, but if you have no income, how long can you cope? Do you have confidence you will find a job before your benefits run out?
Saving money every month gives you a buffer for when your income suddenly stops. You don’t have to ask friends or family for help, or take the first job opportunity just to ensure you can afford rent.
In 2018, a report from the Federal Reserve showed that 40% of American adults couldn’t cover a $400 unexpected expense. They either had to borrow money, sell something, or couldn’t afford it at all.
This means that nearly half of American adults would face severe financial problems from a minor car accident, a vet bill, or a broken furnace. And these incidents happen every day.
The unexpected nature of these expenses isn’t about whether they will happen but when they will happen.
If you have an old car, it will eventually have issues. If you have pets, they will get sick or grow old. Homeowners know washing machines will eventually break down. Computers will slow down over time. Phones could be lost or stolen.
You can’t predict when these unexpected expenses will hit you, but you can anticipate they will at some point. When they do, you need to be prepared. You need to save enough money in advance so unexpected costs won’t knock you down. They may be painful, annoying, but they are a part of life.
Not everyone needs to buy their own house. Renting can increase liquidity: it’s easier to relocate for a higher-paying job elsewhere without having to sell a house.
Renting also shifts many building responsibilities to the property owner: leaky roofs and termite nests may bother you, but it’s someone else who must implement the solutions. Additionally, owning a home is not always a good investment. Homes have various expenses, and property prices do not always rise. The money you put into buying a house may perform better elsewhere.
However, owning your home has many advantages. You stop paying rent and keep most of the mortgage payments for yourself. You are not subject to a landlord who doesn’t necessarily have your best interests at heart. Most importantly, this property is yours. It’s your home.
But before you enter the real estate market, you must save money. The minimum down payment is about 3.5% of the house price, but realistically, you need to save at least 5% of the house price, and often more.
You should also consider paying a higher down payment. The higher the down payment, the less interest you need to pay to the bank.
If you plan to own your own home, you must save money – both to buy a better house and to buy this house for less money.
The money you save will help you weather hard times and ensure your well-being in emergencies. You also need to save for major expenses that require substantial down payments. However, at some point, you will want to stop earning money and focus all your energy on enjoying life. You will want to retire.
Saving for retirement must be a fundamental part of your saving plan. It may not feel like part of a saving plan because you’re not saving money for immediate use. In fact, most retirement plans levy taxes and penalties when you tap into the account early. But you are choosing not to spend money today, so that someday – when you need it more – you can spend this money.
The good news is saving for retirement is easier than other forms of saving. Various plans, from 401(k)s, pensions to individual retirement accounts (IRAs), can automate savings and even be tax-deferred. The key is to ensure you participate in at least one plan and take full advantage of the opportunities retirement savings offer. Sometimes, simply agreeing to save a bit more for the future can increase your actual compensation. If your employer offers matching contributions, you should accept all the contributions you are eligible for. If not, you are essentially giving up benefits that should stay in your hands.
The difference between wealthy people and others is: others work for money, and the rich let money work for them. They save money, invest, and let compounding work for them every month.
Suppose you set aside $100 from your first job. Every month, you save another $100 and put it into an investment plan with a 5% annual return. After 20 years, you will have saved a total of $24,000. The effect of compounding means your account will actually have $41,374. You save $100 each month, and this money earns you $870 annually. After 20 years, you will have more than $17,000 extra.
Achieving this compounding effect is not as easy today as it was in the past. Current interest rates are low. The annual interest rate in savings accounts at banks is lower than the inflation rate, so aside from safety, putting money there doesn’t make much sense. But you have other options, including bonds, stocks, real estate, and retirement funds.
Each option has its advantages and risks. When making a decision, you have to weigh these risks. But their common function is to ensure your money works for you, so you work less for money.
This guide is not an investment manual. We are not qualified to give investment advice, nor will we tell you where to put your money. What we can do is tell you how to save money and suggest places to put it once you have saved it.
Before investing your savings, you should seek professional advice.
We have divided this guide into two parts.
In the first part, we will discuss saving strategies.
Saving cash every month is not easy. It requires discipline, habits, a clear understanding of how much money you spend, and an understanding of the benefits of saving.
We will discuss how much money you should save and how to track your expenses to avoid saving too little. We will also address debt issues, as owing debt may run counter to saving. Some debts must be repaid before you start creating surplus.
We will also explain how to cut expenses to increase your savings and set goals to achieve your plan.
In the second part, we will discuss places that can make your savings grow. We will not provide an exhaustive list or attempt to tell you what places are best for you. Everyone’s priorities are different. However, we hope to showcase the various options available after saving money.
In the following articles, we will discuss how to save money, track expenses, where to place savings, and retirement funds.
The original article was published on the Due blog website and is republished with authorization on the English Epoch Times website.