Obviously, there are lots of good reasons to save money. We all know that we should have emergency funds, specific savings accounts for big expenses, retirement savings, etc. Additionally, we recognize the benefits of saving on the cost of both large and small items. However, everything in life has balance. Nothing is all good or all bad. But can saving money be bad for you? Yes, sometimes. Let’s talk about this shadow side of saving.
How Can Saving Money Be Bad?
There are three key areas in which saving money might end up being a bad thing:
- Psychological relationship with money and savings
- Financial mistakes related to saving money
- The error of saving on costs at the expense of quality
We’ll look at all three areas to better understand how saving has its drawbacks.
Can Saving Money By Bad For You Emotionally?
We all have our own unique money psychology. Money is a tool, but it’s also a relationship. As a result, we can have a dysfunctional relationship with our finances. This comes from many sources including our family’s financial beliefs and those of the culture we live in.
Money has several aspects. Earning, saving, and spending are the three big ones. You can have a dysfunctional relationship with any or all of these aspects of spending. As a result, any of them can end up bad for you if you haven’t worked on this part of your life.
Ways Money-Saving Can Be Mentally Bad
So, how can saving money be bad for you emotionally or psychologically? Here are a few key examples:
- You save at the expense of your own comfort or enjoyment. In other words, you deprive yourself in order to save. This can be as extreme as truly not taking care of yourself (forgoing medical appointments due to cost for example.) It might also be less extreme but still detrimental as your choices go against self-care over time.
- Worrying about saving money causes you stress. If you have a lot of stress and anxiety about money, then you need to work on your financial relationship. You don’t want to suffer the mental and physical health effects of constant stress. If challenging yourself to save a certain amount is causing you stress, it’s not worth it.
- Saving money affects your relationships. The way that you approach savings might differ from that of your family and friends. It’s okay to be different in this way. However, sometimes the differences can cause ruptures in your relationships. If you save money at the expense of not seeing your friends, then you’re losing out on key relationships. If you let saving money become a source of rupture in your partnership, then the risks may not be worth the savings.
Are There Financial Reasons Not to Save Money?
Let’s say that you’ve worked on all of the psychological/emotional reasons that saving money can be bad. You’ve developed a healthy relationship with money. It’s not affecting your relationships with others. Great. Then saving must be good now, right? Maybe. But maybe not.
Putting money into a savings account sounds financially responsible. However, it’s not always the financially smart thing to do. Here are a few examples:
- Over-saving in a basic bank account limits the opportunity for financial wealth. You should certainly have some money in an easily-accessible savings account. That’s your emergency fund. However, if you’re hoarding more than that in a basic checking account, then you’re making a financial mistake. That money should go into higher-yield savings and investments that actually make you money.
- Moreover, with inflation, you lose money over time if you’ve saved it as cash. The dollar you save today is still a dollar tomorrow, yet it’s unlikely to buy you the same amount as today’s dollar.
- Saving can be a failure to invest in yourself. If you choose not to get a college education or advanced training because you want to put that money into savings, then you might miss out on opportunities. If you don’t start a small business because you don’t want to risk your savings, then you might miss out on doing work that you love. Why are you saving? Would spending give you the chance to potentially earn more later?
- It might cost you at tax time. The Money Pixie points out that there are various tax breaks for spending money, but you don’t get any for saving money. If you earn interest on savings, it’s taxed. If you save money by not owning a home, you miss out on homeowner’s tax breaks. It’s not always financially savvy to save a lot.
The Cost of Saving On Big and Small Items
There are two ways of saving money. So far, we’ve talked about putting money into savings accounts. However, there’s also the idea of saving on specific items. In other words, lowering your spending costs on big and small items to save money (whether or not you put that savings into a bank account.) This, too, can have drawbacks. Here are the biggest ones:
- Lower cost items may also be lower quality. You should purchase long-lasting, durable items that you love. You’ll enjoy them more, they’ll be easier to work with, and you’re also less likely to need to pay quickly to replace them when they’re broken. Spending a little more now can save you later. This doesn’t mean that you have to be buy the most expensive item, just that you might not want the cheapest one either.
- You lose time over-researching every product. Do you want the $100 item or the one that’s $110? You’d like to save the $10 but you aren’t sure if it’s worth it. Therefore, you spend three hours reading reviews, trying to decide, worrying that you’re making the wrong decision.
- Similarly, you spend hours driving around to get the cheapest gas or doing comparison shopping online to find the grocery store that sells your favorite snack at the lowest price. If you’re wasting time, you’re wasting money, even if you’re doing it to “save money.”
What is your relationship with saving? Can saving money be bad for you personally? Share your thoughts in the comments.
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