Monthly Finance Message:

The Benefits of Saving Money

February 2009

Barbara O'Neill, Ph.D., CFP®
Extension Specialist in Financial Resource Management
Rutgers Cooperative Extension

One of the best ways to take charge of your finances in today's uncertain economy is to accumulate a healthy savings account. Nobody wants to feel the stress of knowing that they are only a paycheck or two away from financial disaster because they lack money to fall back on when "stuff happens." Specific examples include job loss, disability, a car breakdown, a sick child or pet, and other types of financial emergencies. Saving provides a financial "backstop" for life's uncertainties and increases feelings of security and peace of mind. Once an adequate emergency fund is established, savings can also provide the "seed money" for higher-yielding investments such as stocks, bonds, and mutual funds.

There is also evidence from a recent study by the Northwestern Mutual insurance company that savings is linked to increased happiness. Actually, what the study found was that people who are "planners" and do future-oriented things such as setting goals and taking steps (e.g., saving money) to achieve those goals feel happier, and better about their lives, than those who don't make plans. On a related note, the Consumer Federation of America found a strong relationship between having spending and saving plans and maintaining emergency funds. Particularly for low-income individuals, those with a spending plan with goals were far more likely to have saved money for emergencies than were those without a plan.

Economists and psychologists attribute findings like these to the sense of control that people have when they plan ahead and know what they need to do to get from where they are now to where they want to be. It is well established by research that people who feel a sense of control over life events are often happier, cope better, and are more resilient in times of stress than others. Conversely, people are especially unhappy in situations where they perceive themselves to have a lack of control. It is, therefore, no surprise that commuting ranks high on the list of things that make people most unhappy. Commuters never know from day to day what traffic gridlock, accidents, and weather-related hassles they'll encounter.

Encouraging people to develop and implement a personal saving plan is the central focus of the America Saves program. The motto of America Saves is "Build Wealth, Not Debt." 2009 also marks the third year of America Saves Week, an annual event that focuses attention on the benefits of saving. Throughout the country, there will be information and events designed to promote saving and to help individual savers develop a personal action plan. The dates for America Saves Week 2009 are February 22 to March 1.

America Saves is an example of a "social marketing campaign." This means that the messages associated with this program are designed to change people's behavior rather than to sell them a product or service, as is typical with most marketing messages. Just like the "Buckle Up for Safety" campaign several decades ago that got many people in the habit of wearing seat belts, America Saves seeks to get more Americans into the savings habit to improve their future financial security and that of the country.

The America Saves Week Web site has a wealth of resources to help you get started on the path to financial security. Included are monthly savings messages written by financial experts, success stories from individual savers, a savings knowledge quiz, and tools to assess your financial progress. You can also register online as an American Saver and receive regular newsletters from the non-profit Consumer Federation of America, the organization that runs the America Saves program.

So how do you get started as a saver or ramp up your current level of savings? Go for the goal! It's a whole lot easier to save for something specific than to save for savings sake. Here's an example. To calculate how much you need to save to achieve a goal, divide the amount you need to save or invest by the time (e.g., number of months) you have left to save. If, for example, you want to save $5,000 by next year, you'll need to put aside $416.67 ($5,000 divided by 12) a month, or $96.15 ($5,000 divided by 52) a week. Download a goal-setting worksheet with spaces to calculate the savings required for short-, medium-, and long-term goals.


  1. Rutgers
  2. Executive Dean of Agriculture and Natural Resources
  3. School of Environmental and Biological Sciences