The Echo students have been exploring this idea: our relationship with money is closely linked to our relationship with God. The truth is this: we have problems with money that have spiritual roots. This week we talked about two important things you can do with money: Saving and Investing.
This may seem a silly thing to talk to teenagers about, who may believe savng money is something they’ll just take care of later, when they’re older and have a steady income. However, if we can help them learn good principles about saving now, they’ll be prepared to build wealth like crazy once a real income starts rolling in and have the character and skills to do something great with it. Besides, aren’t there some things teens need money for now? What about saving for a car, your own computer, or college, or a mission trip next summer?
The practice of saving gives you peace of mind in emergencies and the ability to make smart purchases. By faithfully learning God’s principles for saving money, you’ll be prepared to handle whatever opportunity or surprise He brings your way. No matter how old you are or how much money you make, being broke severely limits your ability to serve other people and take care of yourself. To avoid this trap, we need to understand Scripture’s wisdom on why and how to save money.
Proverbs 21:20 – While the wise man saves and plans for the future, the foolish man lives for the moment, spending and wasting every dime he gets his hands on. This is what we talked out:
FIRST, Saving is not hoarding. Luke 12:16-21 – tells a parable about a man that was hoarding things for himself, but was not “rich toward God.” Hoarding is about selfishness and excess. It is about the pursuit of more. Hoarding is a closed fist, it is holding on to your money and possessions with inordinate affection. The heart that clings to and trusts in money is not aligned to the Kingdom of God. Sometimes people confuse hoarding with saving, and because they fear this attitude or have been taught wrongly, they act like accumulating any wealth is sinful. They spend or give away everything as soon as they get, sometimes talking as if that is a lifestyle that honors God because you trust in God alone and not your savings. I have a hard time believing that this attitude of irresponsibility is a reflection of deep trust in God, it seems reckless and unwise. The same people are those that end up needing help in a crisis, while the ones who save and invest wisely are the ones able to actually give help. Remember, our goal with money is to be blessed by God to be a blessing to others. It’s hard to do this if you are always broke! Saving is about security and availability to the plan of God. It is a way to protect your goals and give you peace of mind.
Second, We save to prepare for the future we cannot expect. We save because the future is uncertain! When you save and invest, you need to keep your mind not only on this world, but also on God’s Kingdom. You have the ability to avert crisis or to help others through crisis when you have managed God’s resources responsibly. This is the theme of several stories in scripture: the blessing or favor of God spills over on others from God’s people. Joseph averts the crisis of the regional famine through revelation, wisdom, and good planning. Nehemiah loans money at no interest to the rebuilding of Jerusalem’s walls. And there are others – examples where people who were blessed by God were a channel for the blessing of God to flow to others. Look at how Joseph did this in Genesis 41:34-36. With savings, it is about knowing that emergencies and calamities happen, so we need some security against it. It is about positioning yourself in such a way that you will always be prepared to do what God’s Kingdom requires of you, and that you won’t have the excuse of being under-resourced.
Third, We save to plan for the future we do expect. Saving is about thinking long term. We are not very good at this! We tend to live in the moment and sometimes in doing so, we rob the future. Saving is the opposite of debt. Larry Burkett said once: “Saving is making provision for tomorrow, but debt is presumption upon tomorrow.” We have a “play now, pay later” attitude that our culture encourages steadily, but sometimes we are not prepared to pay the cost we incur. Opportunities come: a mission trip, a special project, a need in a friend’s life, an act of mercy – and sometimes we cannot respond because we have lived with so little margin up to that moment. The American way is not the way of the Kingdom of God in this regard. Our culture encourages us to live right up to the level of our means, and sometimes even beyond it. Margin is a concept that could dramatically change our stories. The Kingdom of God would demand that we live well below our means, with margin, so that we can give and save significantly. It would employ simplicity and humility to keep us from running after stuff or the temptation to “keep up with the Jones’s.” With this concept, thinking about the future, time matters.
• Pay yourself first. This is a principle of smart financial planning. It says basically that we not to be trusted! If we wait until the end of the month and save whatever is left over, we will have spent it on things that really don’t matter to us. If you save right away, that temptation is removed. Every time you get $10, give one of them to God’s work FIRST. Then, immediately put one of them in savings. This makes sure that you prioritize what matters most. ALWAYS SAVE some of every dollar that comes to you! This makes the choice to save responsibly easier, because you make that choice right away. Otherwise, you are standing there looking at the new paintball gun and saving just doesn’t seem very fun!
• Start Early! Many teens think something like: “I am just a teenager, I can’t save now.” I think they control more money than they know, but they spend it and so quickly they don’t recognize the amount. One survey showed that American teen spending exceeded $169 billion in one year. While their income may be limited, they do have a greater amount of one resource now than you will ever have: time! Even small amounts of money can grow SUBSTANTIALLY over time. Because of something called “compounding,” investments generate more earnings as they increase in value. Albert Einstein was so impressed by compounding; he called it “the most powerful force in the universe.” Compounding depends on two things: time and the rate of return. This is where the difference between saving and investing really becomes important. Saving is normally for short term goals (I am setting aside money to buy a computer) and you use a savings account for that. Investing is about LONG term goals (like college or to buy a house or retire) and this is where you take a bit more risk to get a better interest rate. Buying shares of a stock is an example of an investment. You have time now, and you need to take advantage of it! Even if you start with just a small amount, get into the habit of saving now because you are giving yourself the gift of a better future. The amount doesn’t matter nearly as much as the habit, and the amount matters less and less the earlier you start! The earlier you start, the more powerful savings becomes. Look at the difference between Ben and Arthur in this chart made famous by Dave Ramsey’s Financial Peace University. When you are dealing with investment interest rate of 12% (some would say that is unrealistically high), time matters BIG. Ben started early, and Arthur never could catch him even though he invested far more.
Many people criticize the example of Ben and Arthur because of the unrealistic rate of return. Even with more modest numbers, like 7% instead of 12%, starting early is astonishingly effective. Imagine you start investing $2000 every year when you are 18. You put it into a mutual fund making 7%, and you do this for 10 years. Ten years later, you have a baby and you stop feeding the investment because you have to buy diapers or something. Your sister, who sees that you always seem to have money and she is always broke, decides to do the same, but she doesn’t start until she is 31. She puts $2000 a year into the same mutual fund that you used, and does it for the next 35 years. So, you have invested a total of $20,000, and your sister will have invested $70,000. Who will have more money at age 65? Believe it or not, you will. She will never be able to catch you because of the compound interest over time! You will have $361,418, and she will have $276,474. That is a difference of $84,944! That is the power of time! If you kept investing and didn’t stop, you would have $706,000 by age 65!