Why do financial advisors suggest saving at least 10% of each paycheck?

Saving at least 10% of each paycheck is primarily recommended to build wealth over time. This approach allows individuals to accumulate savings that can grow through interest or investment returns, leading to a more secure financial future. By consistently setting aside a portion of their income, people can take advantage of compound interest, meaning that the money earns interest on both the original amount and the accumulated interest over time. This growth can significantly increase savings and investments, setting the foundation for long-term financial goals such as buying a home, funding education, or preparing for retirement.

While the other options present valid financial goals—covering emergency expenses, investing in stocks, and paying off debts—saving for wealth building addresses the broader strategy of financial planning. Emergency expenses can be covered by an emergency fund, which may also involve sometimes saving more than 10% initially. Investing in stocks may become part of a wealth-building strategy but requires savings to initiate investments. Lastly, paying off debts is crucial for financial health but does not directly focus on the proactive aspect of building wealth. Thus, saving a portion of income consistently helps create a robust foundation for all these financial activities.