The Quiet need

In the previous newsletter, we covered the first of four things you can do with money once you’ve earned it: Giving.  This newsletter, we continue the topic with the next use for money: Saving.

Many of us find saving an easy area to neglect because it isn’t clamoring for attention.  By contrast, bills require our attention.  Other expenses like groceries and clothing require our attention.  Debt repayment (which we’ll discuss next month) requires our attention.  But Saving is the “quiet one”.  Commercials don’t bombard us with enticements to save.  Billboards don’t promote the importance of saving.  We’ve been conditioned to think of saving as simply a reduction in spending (“Save 20%!”) rather than the setting aside of funds for later use.

Counsel on saving

Scripture teaches the wisdom of saving (Proverbs 6:8; 21:20), while also warning against the extreme of hoarding (Luke 12:16-21).  Wise saving is part of an obedient response to God’s provision; hoarding discounts God’s provision and assumes that we are on our own.

One popular paradigm for saving is what some refer to as a 10-10-80 plan.  The first ten percent of income goes to God; the second ten percent goes to saving, and the remaining 80% forms the basis of the spending plan.  This pattern helps set a good context; but let’s look a little deeper at the different kinds of saving.

Emergency Savings

We put aside Emergency Savings to cover unexpected expenses.  An unplanned medical bill or unforeseen expenses related to caring for a loved one are good examples.  Emergencies, though not usually predictable, are inevitable – so it makes sense to be prepared.  An Emergency Savings fund can enable a person to handle these unforeseen occurrences without going into debt.

A good rule of thumb is to have enough emergency savings to cover 3-6 months of living expenses.  This is usually enough to cover, for example, an unexpected job loss.  For those not in a position to reach this level of savings, a minimum of $1000 in an emergency fund can provide a good start.  This is enough to replace most appliances on an urgent basis.  Even while getting out of debt, it’s wise to begin to build up this emergency savings fund as a hedge against the potential of incurring additional debt to cover emergencies.

Replacement Savings

Replacement Savings enable us to replace items that wear out over a long period of time, such as appliances.  While emergencies cannot be predicted, we know that eventually we’ll need to replace appliances, furniture, etc. Having savings set aside to replace these items when needed is another hedge against debt.

One example of replacement savings is setting aside money to purchase a car when the current car is no longer reliable.  If you’re currently making car payments, continue to make these payments (to a savings account of some kind) after the car is paid off.  This will enable accumulation of funds to replace the car without going into debt.

Long-term Savings

Long-term Savings help provide for distant financial needs, such as college tuition for children, retirement, etc.  We can tend to neglect long-term savings due to lack of urgency, but these savings are an essential part of an overall saving plan.  Having sufficient long-term savings can help protect the next generation from a debt load due to college tuition, and can also provide for medical care and other expenses associated with later life.

Saving vs. Hoarding

How can we tell when we’ve crossed the line between saving and hoarding?  There’s no definitive cutoff number, but here are some indicators of hoarding:

  • Saving significantly exceeds the need for funds.
  • The priority of saving prevents helping others.
  • Emphasis on saving crowds out giving.

Trusting in money for our security and relying solely on our own provision leads to hoarding. Scripture counsels us to trust God to provide and to consider ourselves as stewards of what he has provided.