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Why do I need to save?

Why do I need to save

This page tells you about some of the main reasons why you might want to save. It also helps you to think about whether you need to save by looking at some of  the alternatives  and helping you weigh up your options.

For most people it’s a good idea to have some money put aside for a rainy day.

Putting some money away regularly is the best way of saving up for expensive things, like a holiday, car, or a wedding. It can also be a good way of making sure you have money to pay for emergencies such as needing to replace an expensive household item.

You can use credit cards or take out a loan to pay for things like these, but this will cost you money and in some cases could lead to debt problems if you don’t manage the repayments properly.

You can also save money for the long-term, such as retirement. It can be difficult to think about doing this, especially when you’re young and retirement seems a long way off. If you’ve got money to spare, it’s tempting to spend it on things you want to buy and do now.

But it’s a good idea to think about whether you’ll have enough to live on when you are older and no longer earning money. Think about the kind of lifestyle you want and how you are going to pay for it. You may need to sacrifice some spending now, in order to be able to have a comfortable retirement and lead the kind of life you want to in the future. The most common way to save for retirement is with a pension, but you can also invest your money in other ways to save for the future.

For more information about pensions, see Pensions.

When you’ve worked out whether you want to save and what you want to save money for, look at our page Can I afford to save and how much. Then look at What’s the best way to save to get help with the best of saving for your circumstances.

Here are some of the most common reasons why you might want to save money.

Rainy-day funds

You might need money to help you pay for an urgent repair to your home like a boiler replacement, or if you need to replace an essential household item such as a washing machine or cooker.

Funds for treats

You might want to have some money put aside to pay for treats such as a holiday, an expensive piece of furniture or Christmas.

Financial protection

You might want to have a fund of money available in case you run into financial difficulties because you lose your job, become seriously ill or disabled or have an accident.

Future spending

You might want to save up for something specific in the future such as a wedding, a new car or your retirement.

For more information about saving for your retirement, go to the moneymade clear website at:

Alternatives to saving

There are other ways of paying for some of the things you might want to save for. You might want to consider whether any of these would be a better option for you than saving. These include:

There are pros and cons to each of these alternatives which you’ll need to weigh up when deciding what’s best for you.


There are lots of different types of insurance which you can take out to protect you in case of unexpected financial difficulty.

The advantage to having insurance is that it can generally pay out as soon as you’ve bought the policy, although there are some exceptions. It can take a while to build up savings and you might not have enough to cover what you need if something unexpected happens.

Types of insurance include:

  • Household contents insurance which covers you against loss or damage to the things you own
  • Buildings insurance which covers you against damage to your home
  • Maintenance insurance which covers  you for plumbing and heating repairs
  • Payment protection insurance which helps you keep up loan repayments if you lose your job, get ill or have an accident
  • Warranties which you can take out to pay for the break-down of electrical equipment
  • Critical illness insurance which pays out if you’re diagnosed with certain conditions such as a heart attack, stroke, certain types of cancer, multiple sclerosis or losing a limb
  • Mortgage payment protection which pays your mortgage for a certain period of time if you stop earning because of redundancy, accident or illness
  • Income protection insurance which replaces part of your income if you’re unable to work for a long period of time because of illness or disability.

Disadvantages of insurance

Insurance policies often have lots of conditions built in which mean they might not pay  out when you need them to. For example, a critical illness insurance policy probably won’t cover all types and stages of cancer.

Some types of insurance have a waiting time before you can make a claim, or might only pay out for a limited period of time. Mortgage payment protection will only start to pay your repayments one month after your income stops and will only pay out for up or 12 months.

Some types of insurance offer poor value for money, such as warranties to cover the breakdown of household appliances.

You might find some types of insurance too expensive.

To find out more about the pros and cons of insurance, go to the Moneymadeclear website.

State benefits

If your main reason for saving is to protect you against losing your job or becoming too ill or disabled to work, you might want to think about whether you would be able to get any state benefits in those circumstances.

Examples of benefits you might be able to get include Jobseeker’s Allowance, Employment and Support Allowance or Disability Living Allowance.

When you get certain benefits, you can also get your rent paid by Housing Benefit or help towards paying the interest on your mortgage. You may also be able to get a grant through the Social Fund for one-off expenses such as funeral costs, having a baby or furnishing a new home.

If you’re able to get benefits, this might affect the amount you decide to save. If you’re on a low income, you might want to think about whether the amount you could save would provide any more money than you could get through benefits.

However, you should be careful about relying on benefits to protect against financial hardship. This is because:

  • you can’t be sure you will be entitled to get benefits at the time you need them
  • benefits are fairly low, and might not pay you enough to cover the costs you face
  • the amount of money available for Social Fund grants is limited and might have run out by the time you need it
  • in some cases, you have to wait before you can get help. For example, most people under 60 have to wait for 13 weeks before they can get help towards their mortgage costs.

For more information about benefits, see our Benefits section.

For more information about help towards your mortgage payments when you’re on benefits, see Help with your mortgage costs if you’re out of work.

Borrowing money

If your main reason for saving is to pay for treats or something specific such as a car or an expensive piece of furniture, you might want to borrow the money instead of saving for it. However, borrowing money can be an expensive way to pay for something, because you will have to pay interest on your loan.

If you can’t afford to save, this might be the only way to buy what you need. However, you need to think very carefully about borrowing as an alternative to saving up for something, as it’s almost always cheaper to save money than to borrow it.

Other reasons why you might want to borrow rather than save for something include:

  • you can’t wait to save up for something because you need it now and  it would take you too long to save what you need. However, you should try and work out whether you really do need the item now or whether you could wait for it
  • the price of what you need is likely to go up. The saving you make by buying it now might outweigh the cost of borrowing. This might apply to something in a sale. On the other hand, if the price is likely to go down, you might be better off saving up for it. This usually applies  to computers and other electrical goods such as TVs
  • you realise you’ll pay over the odds by borrowing to pay for something now but you feel the cost is worth it and you know you’ll be able to repay the money within a reasonable period of time.

For more information about the pros and cons of  paying for something by borrowing rather than saving, see the Moneysavingexpert website.

For more information about borrowing, see Borrowing money.

Selling things you own

You could think about selling something you own to pay for something instead of saving up for it. You might want to do this to pay for something you need now, or for something you might need in the future. One example of this is an equity release scheme which is a way of using the value of your home to raise money. You can find out more about equity release from a leaflet produced by the Financial Services Authority (FSA). Go to

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