I don’t save money, so what?!

by Kristina Tahnyak on February 24, 2014 · 8 comments

Good morning Dinks.  It seems like everywhere we go people tell us to save money.  But why?  You are probably wondering what is going on right now, a personal finance blogger telling us not to save money.  To be clear that’s not what I’m saying, well not exactly.

So take a moment and think about it, why do you save money?  I am not talking about diversifying your retirement portfolio, buying mutual funds and trading stocks because that’s investing.  I am talking about saving money, you know cold hard cash.  All I’m saying is don’t save money just because, save your money for a reason.

Why are you saving?

Maybe you are saving money because you have a goal, like somewhere you want to go or something you want to buy.  Maybe you save money every month because you just don’t need all of your income to live or maybe you save money because you feel like you are supposed to.

The truth is I hate saving money, but I do it because I need to save up to buy all the things I want.  Saving money is boring and it takes forever for the money to grow.  Yes I could always live on less and save more, but I don’t want to.  I prefer to save money for the short term because I prefer to do other things with my money like travelling and enjoying my life.  So before you put more cash into your savings account here are a few things to think about.

3 things you need to know about saving money:

1. Your money won’t grow.  Saving money is not the same as investing money.  Saving money is hoarding cash and I don’t like it because it doesn’t grow my money.  I save for the short term and only keep a little bit of money that rolls over every year in cash because I hate earning a low interest rate.  I prefer to invest my money in mutual funds and watch it grow.

2. You can always get a better rate.  Saving cash money in a savings account is painful because your money doesn’t grow, but it doesn’t have to be excruciating.  Shopping around to find the best rate on a high interest savings account will help you feel better about keeping money in cash – just in case it hurts you as much as it does me.  Our friends at Go Banking Rates recently released an article featuring the top five savings accounts.  Check it out and see how your interest rate adds up.

3. Saving money should ALWAYS be for the short term.  Every month I see financial bloggers posting their net worth and almost every month their emergency fund of cash grows bigger and bigger.  This is a huge mistake.  Keeping money in cash should always be for short term goals aka within a year.

My emergency savings fund is investment in a short term bond fund.  It gives me a higher rate of return than a savings account and I can always access the money within 24 hours.  I do keep a small sum of money ($500) in cash in a savings account for any type of emergency that can’t wait 24 hours.   The rest of my cash is saved and spent throughout the year on travelling and expensive household necessities such as furniture.

Photo by taxcredits

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{ 7 comments… read them below or add one }

1 Brock @cleverdude February 24, 2014 at 8:12 am

Well, if you invest for retirement (which I assume you do), then technically you do save money. :)

2 Thomas W. February 24, 2014 at 10:06 pm

I am sorry but this is pure stupid. I save so I do not rely on social securoty when time comes. Have fund with your trips and not saving. See you at Wall Mart where you will greet at the age of 65….

3 James February 24, 2014 at 10:19 pm

Okay…but what do you do in case you need cash?

4 The First Million is the Hardest February 24, 2014 at 10:56 pm

I keep a lot less in cash than most people would recommend, but I still keep enough in a savings account to cover any short-term emergency I might run into. I don’t want to worry about selling shares of a fund or whatever just for some cash. If I lose a job or something long term pops up, that’s a whole different story.

5 radioredrafts February 24, 2014 at 11:07 pm

That’s right, billions of dollars are spent every year telling consumers to SAVE money. @_@

6 Kristina February 25, 2014 at 9:41 pm

I keep only a minimum amount of cash on hand that was saved. The rest of my “savings” are invested for short, medium and long term goals. I am not telling because not to save money, I’m tell them to invest wisely instead of keep cash which doesn’t earn interest. And investing is fun, I love it. Hoarding cash is boring.

@James I keep a bit of cash on hand in case of an emergency and I have access to other money within 24 hours. Thankfully I have been fortunate enough to never have an emergency where I needed more than $500 cash within 24 hours.

7 Matt March 7, 2014 at 1:02 pm

Interesting – I’ve been thinking about the same thing and wondering if I really need to keep 6+ months of expenses tied up in cash. I could certainly deploy that capital much more effectively and grow my money by investing rather than sitting on that much cash.

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