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At some point in your life, you’ve probably heard someone say they don’t care about money; you may have even said that yourself. While this sentiment sounds nice in theory, the reality is — for better or worse — that you shouldn’t underestimate the importance of money.
Money can’t buy happiness, but it can buy security and safety for you and your loved ones. Human beings need money to pay for all the things that make your life possible, such as shelter, food, healthcare bills, and a good education. You don’t necessarily need to be Bill Gates or have a lot of money to pay for these things, but you will need some money until the day you die.
Because money is necessary for obtaining the goods and services you need to survive, an understanding of personal finance is essential. You need to be responsible with the money you earn and save enough for the future to ensure you will still have enough leftover when you can no longer trade your labor for money.
The sooner you start saving your money, the more likely it is that you’ll never face a lack of money or financial stress. In fact, if you save enough and invest wisely, you could even become financially free — which happens when you have enough money to live on for the rest of your life.
One reason so many people profess not to care about money is that the love of money has been described as “the root of all evil.”
It’s true, materialistic people can let an obsession with money drive them to do bad things for their own financial gain. But in reality, money is nothing more than a medium of exchange.
Money makes it easier to trade your labor for a diverse set of goods and services. The following are some things to consider when it comes to the value of money and why money is important.
The existence of money allows you to trade your labor for things that you value. There are many major benefits of money including the following:
Although money can’t buy happiness, freedom, security, and the power to pursue your dreams can go a long way towards making you happy. That’s why it’s so important to work hard, earn money, and learn how to save and invest it. When you start to invest your money, it starts to work for you and help you produce more — and eventually, you should have enough that you can retire.
Of course, there are some definite disadvantages of money too, including:
Most of these cons relate not to money itself, but to the way people interact with money and the attitudes people have about money. You can take a responsible approach towards acquiring and saving money without allowing it to cause you problems in your life.
Since money is something you will always need, it’s important that you make plans as early as possible to ensure you will always have enough.
Sometimes, you’ll need lots of money to accomplish major goals — like buying a home or paying for college. To make sure you have enough money to do these things, you should set clear financial goals and work towards achieving them.
You need to plan for the day when you can’t earn any more money through your labor because you become too old or sick to work. Saving money in tax-advantaged retirement accounts such as a 401(k) or IRA can be the best way to do that. If you save money in a tax-advantaged account, it costs you less to put the money aside since you aren’t being taxed on it. And, if you invest it, it can start earning good returns.
When your money is invested, the invested funds produce more money — called a return. The mechanism by which money earns more money — and the amount it earns — will vary depending upon the investment. When you buy bonds, for example, your investment earns money because your money is lent to someone (like a government or corporation) that pays you back with interest. When you invest in stock, your investment can earn money because you have a small ownership interest in a company, which may be growing and generating revenue.
If you save enough money, you can acquire things like a home or a college degree can that help you earn a good income. And, you can live off the returns your money earns so you won’t have to trade your labor anymore. In this case, you have the ultimate in flexibility because you can do what you want in life and your needs will still be met.
The sooner you begin saving money, the more your money can work for you — especially if you are taking advantage of compound interest. Compound interest occurs when you earn a return on invested funds, and you then earn a return on that return. It can help your money to grow quickly. If you invest when you’re young, compound interest over many years can turn a small investment into a substantial sum.
Working to make money may seem like a hassle, especially if your job is mundane and you don’t love what you do. Even so, money justifies your labor. Because you’re paid for your work, you receive something of value that allows you to live your life.
While the quest to earn money could be corrupting if you take it too far, having enough money can be quite liberating because it gives you the freedom to buy what you need and do what you like. Just remember, it’s up to you to save so you can use money to shape your future.
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