Your Pot of Gold

Oh, how nice it would be if a beautiful rainbow actually led to a pot of gold… or even better, a pot of cash. If you needed some extra cash you could hope for rain and all or your problems would be solved! Instead of relying on the existence of leprechauns and the hope for rain to solve your financial woes, create your own pot of gold by developing savings!

Savings is the portion of current income that is not spent on consumption. Basically, savings is money set aside for use in the future. Since no one knows what will happen in the future, it is very important to consider the needs of your future-self and set aside money for unexpected expenses. Let’s use an example:

You are looking forward to the beginning of ski season. When opening day arrives, you are cruising down the mountain when out of nowhere a child crosses your path. You make the decision to sacrifice your own body in order to avoid hurting the child. Ouch. After one long trip to the emergency room, you have a broken collarbone and a $1500 doctor bill. But you’re a poor college student! Where are you going to find an extra $1500?! Mom and dad? Nope, they don’t approve of your skiing habit (and really, shouldn’t you pay your own bills anyway?!). The pot of cash? Unfortunately, you don’t have any savings (or a rainbow).

This is a perfect example of when savings can be used to pay for an emergency. Emergencies and unexpected events that cost money happen to all of us. Your computer may crash, your car may need new brakes, or you may have to move unexpectedly. If savings isn’t available in these situations, you will most likely have a hard time paying for the unexpected event AND continuing to pay your normal bills.

In addition to emergencies and unexpected events, savings can also be used to purchase expensive items (that cost more than your average monthly spending) without having to use credit. Maybe you would like to make a down payment on a car or go to Cancun for spring break next year. Savings can help you accomplish these and other short-term financial goals.

Savings is the key to developing financial security. It can save you financially in an emergency, help you avoid credit use, and decrease financial stress. Savings is like your personal pot of gold that can be used in times of need.