From a young age, often starting in school, we hear about the benefits of saving a portion of our paycheck. Saving is positioned as the alternative to spending—for example, a high schooler may have to save 10 percent of the income from their summer job at the request of their parents, who are trying to instill good habits in this student while they’re young.

But being financially responsible means more than just saving the minimum amount each month instead of spending it. Having true money wisdom means constantly improving your financial literacy. It means understanding how your actions in the present will affect your financial health in the near and far future. It means making the most of every cent you earn.

Money wisdom, in other words, is about more than just savings. Here are three other areas to consider in personal finance.

Build a Separate Emergency Fund

According to one survey, 63 percent of Americans have no emergency savings to cover unexpected costs over $500. This means that those who suffer an expensive medical procedure, a pricey vehicle breakdown or loss of employment may have no savings to fall back on. Here’s how respondents said they would deal with such an emergency:

  • Reduce spending elsewhere to raise the money (23 percent)
  • Borrow from friends or family (15 percent)
  • Use credit cards to cover immediate expenses (15 percent)

Emergencies happen. The only factor you can control is how you prepare for the day when something inevitably goes wrong. This is why it’s important to build up an emergency fund separate from your general savings. It should contain at least three months’ worth of living expenses, though ideally will reach the point where it’s enough to support you for six months to one year if disaster strikes.

It’s also important to resist the temptation to dip into this account for anything besides true emergencies. Even if it sits untouched for months or even years, it’s an important protection to have in the background of your overall financial life.

Set Future Money Goals Now

Saving is good—but what’s motivating you to do so besides a sense that you should? It’s important to make saving part of your overall financial strategy, one motivated by life goals. Whether you aim to own your own house, start a college fund for your child, or retire early, these goals serve as the light at the end of the tunnel to keep you actively moving toward whatever financial success looks like for you personally.

Here’s a piece of apt advice from Andrew Housser, co-founder of Freedom Debt Relief and current CEO of Freedom Financial Asset Management: Ask yourself where you want to be in one, three and five years. Then make sure your actions align with turning these goals into reality.

Make Your Money Work for You

Putting your money in a savings account is smart, up until a certain point. If you really want to watch your money grow, you ought to invest wisely. The key is to go after long-term investments that results in compound returns.

Modest Money illustrates an example: Two brothers save $5,000 per year, one in a savings account and one in an investment with a 10 percent average return. After 30 years, the brother who saves will have $150,000. The brother who invested his money will have over $800,000! Of course, this isn’t to say that saving money is a bad idea. But rather to illustrate that savings plus investment goes a lot further.

Savings are a great start, but true masters of money must do a lot more to achieve their dreams.

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