This question is a subtype of “Why should I save any money, anyway?”
There are two basic answers. One is the utility function, as has been mentioned. The same dollar amount has different value for someone rich and for someone poor. If you expect that at some point in the future you will become more poor than you are now (because your income stream dries up), it makes sense to transfer some money from the rich now-you to the poor future-you. That transfer is known as saving.
Answer two is risk management. Future in uncertain, generally speaking you would like to be able to handle a variety of unfortunate events. Money really helps with that. If you have no savings, you have no tools to deal with what economists would call “negative shocks” and that is likely to send you down a financial death spiral. Speaking technically, the costs of not having a reserve of cash on hand to deal with emergencies can be very high.
There is a variety of other answers (e.g. future might provide much better utility for your dollar so you want to save up for that better utility), but I think that the two above are the main ones.
(e.g. future might provide much better utility for your dollar so you want to save up for that better utility)
This is one of my main reasons for saving a lot and I’m surprised nobody else has mentioned it. If technological progress continues, it seems likely there will be all kinds of cool toys and useful procedures (e.g., cognitive enhancement or life extension) that one could buy in the future, not to mention investment and charitable opportunities, and I’d hate to be left out because I had already spent my money on a bigger house or flashier cars and clothes.
Do you anticipate technological progress flattening out at some point? Or, perhaps more relevantly, do you anticipate anticipating a lower rate of technological progress than you currently do?
If not, it seems some additional factors should be taken into account here.
Even if you do anticipate flattening, some of the potential perks on the horizon are of such large +EV that a small chance of them is worth apportioning non-trivial resources towards.
There is the other side of the coin. If the dollar collapses like Peter Schiff predicts it would make sense to buy valuable stuff now(house, land for planting food, guns & ammo) as long as the dollar is still worth something.
This question is a subtype of “Why should I save any money, anyway?”
There are two basic answers. One is the utility function, as has been mentioned. The same dollar amount has different value for someone rich and for someone poor. If you expect that at some point in the future you will become more poor than you are now (because your income stream dries up), it makes sense to transfer some money from the rich now-you to the poor future-you. That transfer is known as saving.
Answer two is risk management. Future in uncertain, generally speaking you would like to be able to handle a variety of unfortunate events. Money really helps with that. If you have no savings, you have no tools to deal with what economists would call “negative shocks” and that is likely to send you down a financial death spiral. Speaking technically, the costs of not having a reserve of cash on hand to deal with emergencies can be very high.
There is a variety of other answers (e.g. future might provide much better utility for your dollar so you want to save up for that better utility), but I think that the two above are the main ones.
This is one of my main reasons for saving a lot and I’m surprised nobody else has mentioned it. If technological progress continues, it seems likely there will be all kinds of cool toys and useful procedures (e.g., cognitive enhancement or life extension) that one could buy in the future, not to mention investment and charitable opportunities, and I’d hate to be left out because I had already spent my money on a bigger house or flashier cars and clothes.
Do you anticipate technological progress flattening out at some point? Or, perhaps more relevantly, do you anticipate anticipating a lower rate of technological progress than you currently do?
If not, it seems some additional factors should be taken into account here.
Even if you do anticipate flattening, some of the potential perks on the horizon are of such large +EV that a small chance of them is worth apportioning non-trivial resources towards.
There is the other side of the coin. If the dollar collapses like Peter Schiff predicts it would make sense to buy valuable stuff now(house, land for planting food, guns & ammo) as long as the dollar is still worth something.