I know a man who started saving for his daughter’s wedding when she was just a little girl. Long before she ever met the man she would marry her father was setting money aside for her special day, even when money was tight.
Over the years, he could have spent more on himself, buying a better brand of clothing or indulging in more expensive cars. Instead, motivated by his love for his daughter, he built up a savings account earmarked for her wedding.
When she eventually got married, I think it was deeply satisfying to him to be able to give his daughter the gift of a beautiful wedding. Of course, it was a great blessing to her as well, as it was to me since that man is my father-in-law!
Putting money in savings can seem incredibly boring—painful even, when you think of what you could spend that money on instead.
That’s why it’s important to be clear about why you’re saving. If saving money feels like a burden or responsibility, chances are you won’t. But when saving money is tied to your most valued relationships, chances are better you will.
Saving money helps you love people well
Some people truly do live on the financial edge. They can’t save. Paying the bills really is a paycheck-to-paycheck proposition.
But it’s been my experience that many others who don’t have enough in savings actually could save more. If that’s you, you’re probably not interested in a finger-wagging lecture. But maybe what would be helpful is seeing more clearly the connection between your finances and your most important relationships.
I once commissioned a national survey that asked people how stressed they felt and how much they had in savings. By far, the people who were the most stressed were those with the least in savings. Build a sufficient savings account and it’ll help dial down the stress in your life and your relationships.
Saving money helps you love God well
Whenever I get to the savings section of a financial workshop, I read the classic savings verse: “In the house of the wise are stores of choice food and oil, but a foolish man devours all he has” (Proverbs 21:20). There you have it. Maintain a reserve. It’s biblical. What else do you need to know?
For some, that is enough. Because they want to live as the Bible instructs, that verse motivates them to save.
For others, it sounds like one more item for their must-do list. Duty. Obligation. Burden. If that’s you, have you ever considered this? Following that counsel, as with following any counsel found in Scripture, is a way of loving God.
Jesus said, “If anyone loves me, he will obey my teaching” (John 14:23). In the Bible, obedience is intertwined with love. God loves us and His counsel is always for our good. Following it—in this case, maintaining a reserve—is one way we love Him back. Think about that next time you make a deposit in your savings account!
The three types of savings
I encourage you to save for three distinct purposes, preferably in three separate savings accounts.
An emergency fund. I agree with the conventional wisdom—three-to-six months’ worth of essential living expenses is the target. If you have relatively few breakable moving parts in your life—you’re single, rent an apartment, have a somewhat secure job or at least skills that are in demand—you may be okay with three months’ worth of expenses in savings. But if you’re married, have kids, and own a home, better to be on the six-month side of the spectrum.
A periodic bills and expenses fund. This money is for items you need to pay for at some point each year, but not every month. Examples include vacations, Christmas gifts, an annual life insurance premium, a semi-annual car insurance premium, and property taxes if you pay for them separately from your mortgage. Take the annual total of all such items, divide by 12, and automatically transfer that amount into savings each month.
A big-ticket item fund. Do you own a car? If you own a house, does it have a furnace? An air conditioner? A roof? All such items wear out eventually. And they all cost a lot of money. It’s a good idea to be setting aside money for them each month so you can pay for their replacement with cash. Oh, and do you have any children whose weddings you’d like to help pay for?
My recommendation is to save 10-15% of your monthly gross income. If you have debt (other than a reasonable mortgage), once you have one month’s worth of essential living expenses in an emergency fund, take the money you had been saving and redirect it toward debt repayment. Once your debts are wiped out, build a fully stocked emergency fund. Once that’s in place, redirect most the money (8% if you had been saving 10%, 10% if you had been saving 15%) toward investing. Use the other 2-5% to build a big-ticket item fund.
If all of this sounds a bit overwhelming, just start where you can. Simply opening a savings account would be a great first step. Setting up an automatic monthly transfer from checking to savings would be a great second step. Just get that process started and eventually you’ll have a healthy savings account.
How are you doing on the savings front? What motivates you to save? What holds you back?
Are you a member of a church? I’d greatly appreciate it if you’d tell the person in charge of small groups or stewardship about my small group study, Money, Purpose, Joy. Based on the idea that the purpose of money only becomes clear once you’re clear about the purpose of your life, this video-based study teaches the practical application of seven biblical financial principles. Ultimately, it equips people to use money as a powerful expression of who God made them to be.