The Value Of SavingAugust 31, 2020
Do you know the value of saving?
Many of us are accustomed to the piggy bank as a symbol of savings during our childhood. It was given to us as an encouragement to save in our early years when our parents or guardians would drop a few coins in with the intention for us to add more. The proceeds of this act would later be used for that special occasion such as the purchase of birthday, Christmas, or other gifts or towards opening that first bank account. Grandmas and grandpas are well known for putting away money for a “rainy day” in places that are oftentimes forgotten, only to be discovered accidentally. These cultural methods of saving usually come in handy in cases of emergency. These seldom result in the type of savings that we wish to have for ourselves, especially due to risks. Saving in a piggy bank or under a mattress, (while well intentioned) can expose our money to risks such as fire, or inflation which can erode the value of a dollar over time if that dollar is not earning interest in a secure environment. If we are to save ourselves from living a life of poverty, then we no doubt need to set aside enough for the proverbial rainy day. There is a scripture that states, “there is treasure to be desired and oil in the dwelling of the wise; but a foolish man spendeth it up” (Proverbs 21:20)(1). The Bible clearly points out the wisdom to be found in the habit of saving. Savings should be planned, organised, consistent, and purposeful. Too many of our savings practices are haphazard and short-term. These practices do not generate or create the type of wealth that is necessary to set us along the road to riches. We must have new and more effective ways to save in order to fulfil the dreams we have for ourselves and our children who are our future.
In order to create a better culture of savings and investments, we should start with our children. From birth, indeed until death, every person should put aside a little with long-term goals in mind. Far too many of us reach adulthood with nothing but the clothes on our backs. Far too many of us are totally dependent on our parents well into our twenties and thirties merely because we ignored what our parents tried to cultivate in us or we were never taught the value of saving and investing for adulthood, the critical stage of human development.
Instead of giving our children lavish birthday parties with lots of goodies, give them a bank account with an established banking institution. In an effort towards fostering good saving habits, we should also teach them the basic principles of financial management and accounting. It is a terrible mistake to wait until we become adults to think of opening an account with a bank, credit union or building society. It should however be noted that it is never too late to start saving once there is enough time allocated to reach the goal. Start the children from birth by opening an account, giving them the opportunity to utilise the value of time and money in order to reap a bountiful harvest in their adult years. It might be useful to know that even the very wealthy know the importance of teaching children the value of saving because it is understood that this concept can significantly impact the children’s future. I came across a rather helpful article, which nicely illustrated the value of saving early and consistently over time. The author further explained in the article that a friend of his sent each of his sons a piggy bank with CAD$3.46 inside, along with a laminated sheet showing the estimated future value of the funds based on a daily investment of the same amount. What was noteworthy was the significant value at various milestones. For instance, his son was 7- years old when he started and by the time he turns 18, he will accumulate CAD$18,778.51, which can be used towards educational pursuits if it remains invested, then by the time he gets to 25 years he would have saved CAD$34,541.00, which can be used as a down payment on a house and at age 65 he will save CAD $284,109.66 for normal retirement (2). This is all assuming a conservative rate of return of four percent. What is important to understand here is that the future value of savings is significantly more the younger the child is, so if we can start saving from the birth of a child and continue without interruptions, then the likelihood of not having enough for certain milestones is greatly reduced.
Important things to Consider when Saving for Educational Purposes
I would also like to add that there are various savings vehicles a parent can choose from in order to save for specific milestones in a child’s life, such as setting up an educational savings plan. Certain countries may have a Registered Educational Savings Plan to assist parents in planning for the future. This type of plan can be set up at various financial institutions. Information on this type of plan is readily available by contacting any financial institution or through seeking out a Financial Advisor who can provide guidance on implementing a plan or other alternatives.
“The choices we make today will have an impact on our children’s future, so, choose wisely!”
1. The Holy Bible (King James Version), The book of Proverbs 21:20
2. Yih, Jim.“Teaching kids to save with a piggy bank”. Retire Happy.