Saving money is a good way to prevent money worries in the future. By building a cash buffer you can rely on a safety net in difficult times. However, the practice is different. We Dutch people do save money, but as soon as we have saved a nice amount we start consuming it. It is important to start saving, especially for those on minimum incomes and other people who have difficulty making ends meet each month. The Dutch are very thrifty by nature. We are frugal and we put the money we have left safely in a savings account. A few dare to invest, until it becomes clear once again that stock prices can also fall instead of rise. At that point, the private investor switches back to saving. You can now find dozens of comparison sites on the internet that focus on comparing savings interest rates. Saving has the disadvantage that it yields relatively little money, but on the other hand it does offer security. People who strive for high returns will have to take more risks and therefore have a chance of a negative return. Unfortunately, not everyone is in a position to save. This group already has enough trouble making ends meet every month. Yet this group should also start saving?
Save, but from what?
Large groups of Dutch people are on the social minimum. They have to survive on the minimum wage or even just a percentage of it. Although it takes a lot of effort to make ends meet, it is very important to save some amount every month. Families who cannot save with their regular monthly income run into problems as soon as a financial setback occurs. This is because it is impossible to accommodate. Taking out a loan is usually possible as far as the lenders are concerned, but based on the monthly expenditure pattern it is impossible to repay the debt. The available money is used up every month, so there is no room to create additional costs.
Still freeing up money
Families who cannot save are still wise to take measures now before it is too late. It is better to start saving now than when it is already too late. Once debts have been incurred, it will be much more difficult to get your finances in order again. In that case, you will be faced with a high interest rate for a loan. So you have the choice of saving now with a (small) return, or freeing up money after debt has arisen to repay the loan at a high interest rate.
To cover unforeseen expenses, a loan must be taken out for 5,000. In this case I assume a revolving credit with an interest rate of 9 percent. The loan will cost you 450 in interest annually. Each month you must take into account a payment of repayment and interest of 2 percent of the main debt, so 100 per month. From this moment on, you will have to save a lot every month to have 100 available to pay off debts. If you had done this in the past, you would have first received interest on the savings amount and you would not have had to borrow less for unforeseen expenses.