Stop Pinching Pennies

Our first lesson in money as a child might just be the behavior that holds us back as adults.

 

  1. Parent gives kid a piggy bank.
  2. Parent tells kid to earn money by doing chores.
  3. Parent tells kid to plop their hard-earned money into the piggy bank and SAVE, SAVE, SAVE.

Here is whERE I disagree with this strategy:

  1. Parent tells kid to save-up in order to buy something special (usually ice cream).
  2. Kid waits and waits and finally spends the hard earned money.

            THE END

 

Wait what just happened? All that effort and we are back to where we started. An empty piggy.

Ready for round two? Repeat, repeat, repeat. But each time, we up the goal. Ice cream, video game, bicycle, playhouse, phone, car, and so on. Until we die.

Earn. Save. Spend. (As little as possible).

"The Penny Pinching Mentality"

This money mindset was bothersome to me. Is there not a better approach?

I will lay out a different pathwhich will help us achieve our goal AND pad our piggy bank for the next goal.

 

  1. Parent gives kid a piggy bank.
  2. Parent tells kid to earn money by doing chores.
  3. Parent tells kid to plop their hard-earned money into the piggy bank and SAVE, SAVE, SAVE.

TRY THIS INSTEAD:

  1. Find an opportunity: Neighbor Johnny wants to open a lemonade stand but needs money to buy lemons and sugar.
  2. Kid loans Johnny $5 from his piggy bank with the understanding that Johnny pays him back—plus $2 in interest.
  3. Kid does no additional work, but now has $2 more (40% return).
  4. Buy something special, but you still have money in the piggy bank.
  5. Repeat.

With this approach we didn’t have to scrimp and buy the smallest scoop in order to keep money in our bank. We created more money by using the money we already had. Eventually, we can buy a 6 scoop Sundae with all the toppings and not have spending-money-guilt.

 

The point being—money is not meant to simply be earned and then spent. If you change your mindset to view money as a tool to make more money, you will be amazed how quickly you can turn a small amount of money into a substantial stash of cash.

 

Some examples of using money as a tool:

 

  • Invest in stocks. $100 today could be $115 next year. This may not seem like much but multiply over a few decades and you’ll be set. Dividends anyone?
  • Put money into investments so you don’t pay as much in tax.
  • Buy a house in a desirable location.
  • Loan money with an agreed ROI (Return on Investment)
  • Buy collectible items and wait for them to gain value
  • Buy better quality products. Yes they cost more up-front, but you won’t need to buy another one, or two, or three.
  • Plus many, many more

If I could give my kids one piece of financial advice: VIEW MONEY AS A TOOL, not something to be immediately spent.

Think about your money situation…

Do you EARN more than you SPEND?

 

NO: Homework-time. Work on cutting expenses, negotiating higher-pay, and work towards that gap between income and expenses. You will get there.

 

YES: Great! How much of that extra cash can you put to work for you? If it’s only $20 to start—that’s OK! Start the habit and your money will grow.

 

Return to blog >>

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top