Importance of Saving

One needs to save money for the following key reasons:

1. To support oneself during retirement when there is little/no income
2. To take care of big-ticket expense items like funding ones own or children's education
3. To take care of daily expenses of onself & dependends during unforseen events like job loss, death & disability

Investing provides for a way to grow the savings so one can take care of fairly large future expenses with a small amount of savings now. It is important to understand that this approach works mostly for items '1' & '2' above. For uncertain events like death & disability whose timing is never known in advance, a much better approach is to buy life & disability insurance. I have come across many smart people who underestimate the importance of a good insurance policy. One can buy a life insurance policy with daily premium less than the cost for a cup of coffee.

There are two more concepts: inflation & compounding that one needs to understand in the context of savings & investment. I will address these in the next post.

P.S. -> A cheap way to purchase life insurance policy in US is to buy it through your employer (if offered) or through online sites like quickquote.com or insure.com. I have found the brick & mortar insurance agents to be pushy & expensive plus they will also try to sell you other financial products. FYI, I don't receive any monetary incentives from these sites.