A friend of mine is blessed with two elementary-aged daughters. He and his wife provide them each a $7.00 weekly allowance with the following parameters: $2.00 is okay to spend, $4.00 should be saved, and $1.00 is to be giving away to a charity. These fortunate children are learning a basic principle for achievi
ng financial success – assign specific work to each of your dollars and stick to your plan.
But are there other uses for money? Money is an exchange tool, and although “spending, saving, and giving” cover the main categories of money use, we can dig a bit deeper.
Spending includes purchasing goods and services we need to survive as well as things that make us more comfortable – things we want. Chances are children don’t spend any of their money on things they need, their parents should be doing that for them. Instead, children buy the desires of their heart – things they want. The desires of our adult hearts are things like security and comfort for our family, financial freedom in retirement, getting out of debt, high-fashion clothing, showing our love and appreciation to others, to name a few. Your desires, and corresponding spending, will never completely mirror anyone else’s, not even those of your spouse. That’s why the use of money in relationships is so powerful.
Saving money is a responsible, productive activity focused on planned goals for the near future. To assure dollars will be readily available when needed, savings are kept in a safe place, such as a bank account, where they won’t be lost or stolen. Saving money in an emergency fund can help pay for life’s unexpected turns such as a job loss, a car breakdown, a medical need.
Can “saving” money be taken too far? Yes, obtained and holding ever increasing sums of money with no intention of ever using it is counter-productive and reflects personal insecurities – fear and mistrust. Hoarding money is not saving and it’s not investing.
Many financial professionals separate “investing” into a separate category because invested money isn’t for a specific near-term goal and it isn’t designed to be completely safe. Investments often take the form of stocks and bonds with the hope that over time, the total amount will grow. Although saving and investing both focuses on the future, there’s a greater chance that money will be lost when invested,
but there’s also a greater chance that money will grow due to paid interest, dividends, and capital gains. But, investing money isn’t limited to brokerage accounts. Funding an education to secure a position in a higher-paying career could also be considered an investment.
On to Giving. Because money is the universally accepted and most commonly used exchange tool, it’s the most popular charitable gift. Simple enough, but giving is just as complex as spending and saving, and investing. True giving is voluntary: free of coercion, guilt, or any hope of personal reward or recognition. Think about the money you give away. What motivates you to give? Are you truly giving it, or are you hoping for something in return?
No matter what you do with your money, it’s personal and powerful. Take time to reflect on your current use your money. There’s no better time to make thought-out, purposeful plans for your spending, saving, investing, and giving.
