One common regret of middle aged investors is that they did not start saving earlier. If only we weren't so careless with our money when we were younger!
Well I learned about saving fairly early on. The problem is, I wasn't really saving. I was just "saving up." Ever since I made that realization, I've started to grow my retirement nest egg and my savings are starting to accumulate nicely.
My early lessons in saving were always geared towards "saving up" for something that I wanted to buy. My parents often suggested this route as an alternative to them just giving me money. The idea was that I would put away a little bit at a time until I had "saved up" enough to buy the object of my desires.
I did this successfully several times. I distinctly remember saving up $100 to buy a Nintendo and a couple of games. Looking back, I'm not so sure that was money well spent! Except for the fact that I now have that experience under my belt and I've learned from it.
I knew I should be saving my money and I was. I'd save a little bit here and there and put it in the bank. However, well into my twenties, whenever I had "saved up" a certain amount of money, I started looking around for something to buy. I thought that money saved was for spending. I was "saving up" when I should have been saving.
Saving, as opposed to "saving up," is when you accumulate money and then you don't spend it. Instead, you invest it. Savings should be untouchable. Savings take advantage of investment growth and compounding. Savings work for you.
When you are saving, you are building up an asset. You are building your net worth. Your savings are a big part of the answer to the question: What do I have to show for all the hours I've spent working?
Don't do it! If you are ever short on cash, the last place you should look is at your savings. Savings are not for spending. If you start spending your savings, you'll be undoing all your past hard work. You'll be stunting your savings' ability to generate income and to grow.
Instead, you should have a separate account for your "saving up" activities or any emergency spending requirements.
Even though I started saving my money fairly early on, it wasn't until much later that I came to appreciate the difference between saving and simply "saving up."
How about you? Have you got the difference straight? When did you first realize the difference? Leave a comment if you'd like to share your experiences.