- Objections to Saving
- The Biblical Wisdom of Saving
- Saving Produces Character
- Saving Prepares Us for Difficulties
- Saving Protects Against Materialism
- Saving Empowers Giving
- Types of Saving
- Short-term Savings
- Long-term Savings
- Debt Retirement as Saving
- Getting There: the 10-10-80 Plan
- Saving is for Everyone
- For Those with Means
- For Those with Lesser Means
- Wise Saving Brings Glory to God
Saving is largely out of vogue today. Previous generations set aside “rainy day” funds to cover unexpected expenses or saved up in order to make major purchases. But the easy availability of credit has made saving obsolete for many people. As a result, they eschew saving for one or more of several reasons.
Objections to Saving
First, our culture promotes consumption and instant gratification over saving. We’re taught to think in terms of what we “deserve” more than what we can afford. Marketers constantly pound us with messages encouraging us to buy their products with no thought for the financial cost. “If you have it, spend it; if you don’t have it, spend it anyway!” is the mentality they promote.
Second, spending has become easier than ever, and we’ve been conditioned to expect simple, quick processes. While the proliferation of online shopping sites makes comparison shopping easier than ever, we’re actually less inclined to compare prices from different sales outlets. “One-click” purchasing and other tools of convenience discourage consideration and promote quick action.
Third, our culture teaches us that debt is expected and unavoidable, so we’re steered away from worrying about how much we’re spending and how quickly. While debt may be a necessity in specific cases (such as a mortgage), we’re encouraged not to examine the overall mentality closely. If we can have it now by using credit, why save up and wait to purchase it?
Finally, anxiety over the uncertainty of the future can lead us to despair and kill our motivation for saving. The current economic uncertainties, coupled with the increasing popularity of cryptocurrency, raise the question, “What difference will it make if I save?”
Even those who are trying to do the right thing when it comes to finances sometimes struggle with the idea of saving. “Shouldn’t I just trust God to provide?” “I don’t want to hoard.”
Scripture speaks to these objections and gives us a framework for a Biblical, balanced view of saving in the context of overall stewardship. In this article, we’ll review key Scriptural teaching about saving and touch on different types and purposes of saving.
The Biblical Wisdom of Saving
We’ve said elsewhere that the Prudent Spender is first a Generous Giver, then a Wise Saver, and finally a Cautious Debtor. When you think about it, saving is foundational to stewardship in the sense that saving is what can protect us from debt and what can empower us to give more generously.
The Wise Saver does several things with discernment:
- Build: Wise savers build wealth by setting aside money rather than spending it all as soon as they get it (Proverbs 21:20).
- Preserve: Wise savers preserve their wealth by protecting it through vehicles like proper forms and amounts of insurance.
- Invest: Wise savers diversify their investments to create a flexible portfolio (Ecclesiastes 11:2)
The wise store up choice food and olive oil,
but fools gulp theirs down.Proverbs 21:20
Multiple proverbs encourage us to earn and save diligently. But this one may be the most succinct statement about the wisdom of saving. Storing up provisions is wise; using up all we have is foolish. It can’t get much simpler than that.
We’d expect that if saving really is wise, it would produce specific benefits. And we’d be right. Let’s consider a few Scriptural benefits of saving.
Saving Produces Character
For this very reason, make every effort to add to your faith goodness; and to goodness, knowledge; and to knowledge, self-control; and to self-control, perseverance; and to perseverance, godliness; and to godliness, mutual affection; and to mutual affection, love.2 Peter 1:5-7
Peter tells us that God has given us everything we need for life and godliness, and then goes on to list several characteristics that we should strive for. Saving supports a couple of these characteristics: self-control and perseverance. The one who puts off a desired purchase in order to save up for it develops perseverance in both earning and saving. Contrast this with the one who simply sees something and buys it. The first person develops the discipline of patience, learning to wait on God to provide. The second runs out ahead of God’s provision, often making impulse buys that cause later regret.
Saving also develops self-control, as it teaches us to say “no” to impulse buys and to prioritize our spending. When we buy something on credit rather than waiting for it, we weaken the “self-control muscle”. This has implications for multiple other areas of our life; self-control and perseverance are character traits, not just financial habits. Proverbs elsewhere warns us against laziness (Proverbs 10:4; 20:4); perseverance, self-control, and diligence are the opposite of laziness. This is one of many areas in which our stewardship can lead us into increasing levels of discipleship.
Saving also supports a mindset of gratitude. When we save up for something, we anticipate the purchase and we enjoy with gratitude what we purchased, as opposed to simply taking it for granted (as impulse spending and credit buying tends to encourage). A similar thing happens when we’ve saved up for an emergency. We pay for the emergency, grateful to God for his provision, instead of putting it on credit and worrying about how we will cover it.
Saving Prepares us for Difficulties
Endure hardship as discipline; God is treating you as his children.Hebrews 12:7
Jesus warns us that in this world we’ll have trouble (John 16:33). In his prayer for the disciples, he asked God not to take his people out of the world, but to protect them from the evil one (John 17:15). As long as we’re in the world, we will indeed face hardships. The Epistles are full of warnings to expect difficulties and of encouragements to persevere when experiencing trouble of many different kinds (see, for example, James 1:2-4). And our own experience teaches us to expect the unexpected, especially when it comes to finances.
Saving enables us to provide for ourselves and for others (1 Timothy 5:8; Ephesians 4:28), especially when difficult times come. When a famine struck the Middle East in the time of Joseph, Jacob twice sent his sons to buy grain from Egypt. He sustained his family with food during a time of famine because he had savings.
Should we save, or should we trust God to provide for us in difficult times? The answer is, Yes! God foretold this famine to Pharaoh, ruler of Egypt, and revealed the interpretation through Joseph. Seven years of plenty were coming, followed by seven years of famine. But the answer wasn’t simply to trust God that somehow he would provide during the famine. God had already provided by giving Pharaoh the dream. Now it was time to respond with wisdom. The end result was the saving of Egypt, of Joseph’s entire family, and of many people from other countries (Genesis 41:57).
We don’t need a dream or vision to know that financial difficulties will come! Whether from macro-economic developments or personal crises, we’ll face hardships we didn’t anticipate. James warns us against presuming on the future, because we don’t know what will happen (James 4:14). The unexpected medical issue, the sudden job loss, the surprise repair – we don’t know when something will occur or what that something might be, we only know that it will come! And when it does, God counsels us to be prepared.
Saving Protects against Materialism
The plans of the diligent lead to profit
as surely as haste leads to poverty.Proverbs 21:5
It’s possible to over-save; that’s called hoarding, and we’ll address that shortly. But this is not the problem that most of us face. Most of us under-save, because we over-spend. And we over-spend because we make hasty purchasing decisions about products that attract our attention.
Impulse buying feeds our materialistic tendencies. But these tendencies don’t lead us to financial freedom – instead, they lead us toward poverty. How many of us used credit to purchase something that we couldn’t really afford and then found ourselves scrambling to pay it off? How many of us have made ourselves “car-poor” or “house-poor” as a result of an unwise financial decision fed by our materialistic desires?
Saving protects us against materialism by leading us to postpone purchases until we have enough money to pay for them. In addition to building perseverance, self-control, and gratitude, saving gives us an opportunity for consideration. “The plans of the diligent lead to profit.” Saving requires planning and diligence. These are the opposite of the materialism that leads to quick decisions, hasty credit purchases, and eventual bondage to debt.
Jesus warns us that our lives don’t consist in the abundance of possessions (Luke 12:15). When we purchase on impulse, we’re acting as though our lives do indeed consist in an abundance of possessions. Saving allows us to take a step back and consider our decisions – leading us to better decisions and guiding us toward financial freedom.
Saving Empowers Giving
We can’t give what we don’t have! That seems obvious, and the link between saving and giving can be seen throughout Scripture. Consider just a few examples:
- Twice the leaders and people of Israel brought extraordinary offerings to support God’s work – the building of the tabernacle (Exodus 35:20-29) and later the construction of the Temple (1 Chronicles 29:6-9). These extraordinary offerings – which were beyond the normal sacrifices and offerings – required savings to be available.
- Throughout Jesus’ ministry, several women of means traveled with Jesus and supported him out of their savings (Luke 8:1-3).
- Mary anointed Jesus’ feet with a jar of perfume worth about a year’s wages (John 12:1-8) – wealth she had saved over the years.
- Believers in the early church habitually sold possessions and brought the proceeds to the apostles to distribute to those who had need (Acts 2:45; 4:33-35).
All of these were examples of “above and beyond” giving. In each case, God’s people had saved resources – probably not having a specific idea of what they would ultimately do with them. And when the need arose, they were able to respond because they had set aside money and holdings rather than consuming all they had.
And think of the results! Places where people sought and worshiped the Lord; sustenance for Jesus and the disciples; an example of generosity that has been celebrated through centuries; provision for the early church and the rapid spread of the Gospel. All this was made possible because people had applied Biblical wisdom and set aside savings.
Types of Saving
So you’re convinced. Saving is Biblical. It’s wise. It can put us in a position to bring great honor to God. But what does it actually look like? What kinds of savings do we need and how do we put those savings aside? How do we know if we’re saving enough?
Let’s look at two major categories of savings: short-term and long-term. We’ll break each one down briefly here. Future articles will address specific types of savings in more detail.
The first major category of savings is Short-term savings. Short-term savings can be thought of as a type of insurance, protecting us from unexpected occurrences and providing for our needs. There are three types of Short-term savings; in order of urgency and importance, they are:
- Emergency Savings
- 3-Month Net
- Replacement Savings
Short-term savings should be relatively liquid. The goal of short-term savings is not to multiply resources through high-yield investments. The goal is to have funds available to meet unexpected needs. Because these needs arise abruptly, the funds should be easily accessible.
In addition to being easily accessible, short-term savings should be kept separate from normal operating funds – in a separate bank account, or in CDs or a money market fund. Keeping these funds separate will help us avoid using them for other purposes.
As the name suggests, Emergency Savings help to meet our needs in response to unexpected situations. Having emergency savings protects us from going into debt to handle those occurrences, since we have money set aside to meet the needs.
Emergency savings should be the first savings goal – before retirement and other long-term savings, and before other short-term savings. If significant debt is also present, there may be a need to balance retiring that debt with setting aside emergency savings. But the primary goal is the emergency savings, since that’s the only way to keep from going further into debt if we encounter an unanticipated crisis.
A good goal for emergency savings is about two percent of annual gross income. This will be enough to cover most unexpected expenses (such as a car or appliance repair and most medical bills), but it is also an amount that can be set aside in a relatively short period of time.
Emergency savings should be considered a sprint and should be accumulated quickly. Sometimes, this will mean prioritizing saving over other activities. You may need to put off some purchases, hold off on accelerated debt repayment, or even sell some assets. The adjustments you make to set aside emergency savings don’t need to be sustainable; they’re very short-term. If you’re starting from zero, make a plan to get your emergency savings fully funded within a couple of months. This way, you’ll be protected from most surprises and won’t have to add to debt to cover them.
The 3-month net is so named for a couple of reasons. First, it’s recommended to be about 3 months’ worth of net income (after taxes). Second, it provides a safety net for larger unexpected items, such as loss of a job or a major house repair.
Because the 3-month net needs a significantly larger amount of money than emergency savings, setting aside the 3-month net is more of a distance race than a sprint. As a result, 3-month net should be worked into a sustainable spending plan. It needs to be prioritized alongside other key financial goals such as retiring debt and taking advantage of employer matching contributions to a retirement plan.
Things break down. Appliances. Cars. Lawn equipment. And eventually, it gets to the point where continuing to fix older items is no longer practical – it’s time to replace them. That’s where Replacement Savings comes in.
Like the 3-month net, funding replacement savings is a longer-term goal and needs to be worked into a sustainable spending plan that includes debt retirement and longer-term savings. On the low end, the goal would be to accumulate enough to replace your most expensive appliance. On the high end, the goal would be to replace a car (and, of course, that doesn’t mean you have to buy new!).
Summary of Short-term Savings
As we mentioned earlier, funds in short-term savings should be easily accessible. The point is not to earn high yields by taking risks with investments; short-term savings should be thought of as insurance against unplanned events.
To summarize the types of short-term savings:
|Savings Type||Goal||Getting there|
|Emergency Savings||2% of annual gross income||Accumulate quickly; make sacrifices as needed|
|3-month net||3 months’ worth of net income||Prioritize as part of a sustainable spending plan|
|Replacement Savings||Min: replace appliance Max: replace car||Prioritize as part of a sustainable spending plan|
To put a specific example to this, let’s suppose you make $60,000/year or $5,000/month and your overall withholding taxes (including federal, state, social security, etc.) amount to $12,000/year or $1,000/month. And let’s suppose it takes about $20,000 to replace a vehicle. Your short-term savings might look something like this:
|Emergency Savings||$60,000 * 2% = $1,200|
|3-month net||($5000 – $1000) * 3 = $12,000|
|Total Short-term Savings||$33,200|
We set aside long-term savings for major goals, including retirement, children’s college and/or weddings, a home purchase, etc. Since these are longer-term goals, the money in long-term savings doesn’t have to be as easily accessible; it’s more important to earn a good rate of return. Vehicles like IRAs and other investment accounts are typically a better place for long-term saving than savings accounts or CDs, for example.
In general, short-term savings should take precedence over long-term savings (and emergency savings should always take precedence). One special case is employer match of contributions to a sponsored 401(k) or other retirement plan. A key goal should be to maximize the employer contribution by contributing up to the maximum amount that the employer will match. After fully funding Emergency Savings, this should be the first goal of saving. Once the maximum match is reached, additional savings should go to the 3-month net.
Debt Retirement as Saving
At its simplest, your financial net worth is the difference between what you own (assets) and what you owe (liabilities). You can increase your net worth in two different ways: add to your assets, or pay down your liabilities. In terms of impact on your net worth, debt retirement is a form of saving.
But debt retirement has an additional advantage over most forms of saving: guaranteed return. Generally speaking, most credit cards charge a higher rate of interest than any investment can earn. (The exception here would be the above-mentioned case of employer match of retirement plan contributions.) As a result, accelerated debt retirement – particularly of high-interest credit cards – should have a high priority after funding emergency savings.
With this in mind, how do you prioritize the different types of saving? What comes first, and what comes next? Individual situations may vary somewhat, but here’s a good general guideline:
- Fully fund your emergency savings fund (2% of annual gross income)
- Maximize your employer match on retirement contributions
- Accelerate retirement of consumer debt, including credit cards, personal loans, car loans, etc.
- Fund your 3-month net
- Save enough replacement savings to replace a vehicle
- Fund long-term savings according to your needs
Getting There: The 10-10-80 Plan
Given the various needs for saving, how do we get to where we need to be? Many financial experts recommend starting with the 10-10-80 plan, which includes:
- 10% of gross income for giving
- 10% of gross income for saving
- 80% of gross income for everything else (including taxes)
Remember that debt retirement is considered a form of saving, since it has the same impact on net worth. For purposes of the 10-10-80 plan, debt retirement includes paying off credit cards, repaying personal and/or medical loans, and repayment of education loans. It does not include mortgage payments or car payments, both of which are considered part of the 80% “everything else” bucket.
If you’re not setting aside savings regularly today, this may seem like a stretch – and it is. But it’s a stretch worth getting to. If you have significant debt to retire or if you’re starting later in life, you may need to shoot for more than 10% of gross income for the various forms of saving. This may require some sacrifices in other areas for a period of time to enable you to catch up.
Saving is for Everyone
As we mentioned earlier, saving helps us to develop several important characteristics as disciples of Jesus, including perseverance, patience, self-control, and gratitude. We all need these characteristics, so saving is for everyone. Except in extreme cases, the priority of saving doesn’t depend on our income.
For those with significant means
Those who have significant means are, of course, more able to save than those with less income. It doesn’t follow that folks who earn more automatically save more, but the potential is there. For those with means, the danger can be in over-saving: hoarding by setting aside resources that aren’t really needed, as the rich fool did in Luke 12:16-20. We can avoid this extreme by wrestling with a couple key questions.
Am I saving with purpose?
We mentioned above several key purposes of savings, along with some recommendations for how much we might need in each category (for example, emergency savings of 2% of annual gross income; 3-month net consisting of 3 months of net income; replacement savings up to the amount needed to replace a vehicle). But there are other areas in which the amounts we need aren’t as easy to calculate, especially in the area of long-term savings.
For long-term savings, it can be helpful to enlist the aid of a trusted financial planner who advises based on Biblical principles. The exercise is to determine what the target for savings based on several key long-term goals, such as the age when we want to stop earning a paycheck, the lifestyle we want when we “retire”, and other goals like children’s education. Saving toward these specific goals is wise, but saving without a specific goal in mind leads to the danger of hoarding.
Finally, we saw earlier how saving empowers giving. Whether it’s extra cash in the glove compartment to give to a homeless person, a generosity fund set aside in a savings account for future giving, or a foundation set up for the purpose of dispersing charitable donations, saving can lead to opportunities for abundant generosity.
Am I trusting in savings for security?
Command those who are rich in this present world not to be arrogant nor to put their hope in wealth, which is so uncertain, but to put their hope in God, who richly provides us with everything for our enjoyment.1 Timothy 6:17
At the end of the day, our security must be in God, not in our savings. This doesn’t mean that we ignore the wisdom of saving, but it does mean that we don’t depend on saving to be our ultimate source of provision. If our own wealth were the only means we had to survive, hoarding would be our likely path. Who knows how much we might need in the future? Inflation, economic uncertainty, currency fluctuation (not to mention cryptocurrency!) – who can predict the impact that these might have on our savings?
So, we save with wisdom and we save with purpose – but we don’t save as a means to provide our own security. For that, we put our hope in God.
When is enough, enough?
Whoever loves money never has enough;
whoever loves wealth is never satisfied with their income.
This too is meaningless.Ecclesiastes 5:10
Ultimately, these questions boil down to this: When is enough, enough? When do we have enough to provide for foreseeable needs, enough set aside for extra generosity as God leads? And how do we prioritize between generosity today in the form of giving and generosity tomorrow in the form of setting aside a generosity fund?
And what are we willing to give up in order to save? Saving has opportunity costs. The most obvious one is time. We might work extra hours to save up for a specific reason, but working extra for our entire careers so that we can set aside more and more money “just in case” means that we’re sacrificing time with family, time for serving in our church and community, and even time for our own spiritual disciplines. These are decisions not to be made lightly.
There are no “one size fits all” answers to these questions. There is only a “one God fits all” place to go for the answers. We must wrestle with these questions before God, confessing our own sin in the forms of materialism, greed, and lack of faith. No one else can tell us when we have enough – only God can do that. (As a corollary, we can’t tell anyone else when they have enough!)
For those with lesser means
As we mentioned earlier, most of us aren’t in danger of over-saving. In fact, most of us under-save due to over-spending. And in some cases, we simply don’t earn enough to save significantly while meeting all our basic needs. If you find yourself in this position, here are a few suggestions for starting out:
- Start small and establish the discipline. Remember, saving helps build Biblical characteristics in us. So it’s an important discipline. Start small and be consistent.
- Make room in your spending plan. You may need to make some sacrifices in areas like entertainment and household items in order to free up some margin for saving. If you don’t have a spending plan, creating one is your first step; see our related article below for help.
- Start with emergency saving, and get there quickly. If you don’t have much margin in your income, this shouldn’t be an excuse to not save; instead, it should be a motivation to get your emergency savings funded quickly! Otherwise, the first unexpected expense you encounter could sink you further into debt – debt you’ll have a hard time repaying without marginal income.
- Remember: debt retirement is a form of saving. Once your emergency saving is established, prioritize paying off credit cards if you don’t have much margin. Getting these paid off will increase your margin and free up funds for additional saving.
- Above all, pray, and pray with gratitude! God grants peace that surpasses our understanding when we pray to him with thanksgiving (Philippians 4:6-7). Remember that it is God who meets our needs. He expects us to manage wisely the resources He provides, but ultimately He is our Provider. Pray for both His provision and His direction.
Wise Saving brings glory to God
At the end of the day, Biblical stewardship brings glory to God. As a part of stewardship, wise saving does this in several ways:
- Saving a portion of the income we earn shows that we value God’s provision; after all, He is the one who enables us to earn (Deuteronomy 8:17-18).
- Saving enables us to provide for ourselves and for others in difficult circumstances. Carrying each other’s burdens in this way is one aspect of fulfilling Christ’s command to love our neighbor as ourselves (Galatians 6:2).
- Saving helps build godly character in us and can help us guard against materialism.
- Saving empowers generosity.
Saving is one of those things that both reflects and calls for Biblical wisdom. It requires discipline, and helps to build in us Christlike character. Saving allows us to say “no” to our earthly desires for a time, and by doing that, helps us to focus on heavenly treasure (Colossians 3:1-2).
How much to save, how to save, where to invest – these are all questions that have no universal answers. As such, they call us to prayer – prayer both for God’s provision and for the Holy Spirit’s guidance in decisions. As a discipline, saving drives us to the Lord and opens our hearts to his direction.
At the end of the day, this is what stewardship is all about. Growing us in Biblical character and wisdom, drawing us near to God, protecting us from becoming “of the world”. Saving is about a lot more than growing numbers in banking and investment accounts. It’s about growing our heart for God.