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Health & Fitness

The Piggy Bank Strategy

Any seemingly gargantuan task seems easier to contemplate when reduced to baby steps. If you wished to climb a 12,000-foot mountain, and could do it a day at a time, you would only have to climb 33 feet a day to reach your summit.

If you want to take a really nice trip in ten years for a special occasion, to accumulate $15,000 you have to save $3.93 per day. If you drop that into a piggy bank and then once a year put $1,434 in a savings account at a puny 1% interest rate after-tax, you will have your trip money.

 For Christmas my daughter gave me a gift with a tag that read, “To my financial planner dad who likes to travel.” It’s a large white ceramic piggy bank sporting map outlines of the continents. As travel often is high on a client’s bucket list, a piggy bank reminds us of the virtue of saving consistently to reach a goal.

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 As a child, I was given a piggy bank to teach me that if I wanted something I should save money to buy it.  We associate piggy banks with children, but in many countries, the little containers are popular with adults. According to mint.com, in China a piggy bank is considered a good luck charm. Europeans see a piggy bank as a harbinger of good fortune and wealth. Around the world, a gift of a piggy bank on New Year’s Day is said to bring good luck and financial success. Ah, yes, but you have to put something in it! Why a pig as a symbol of saving? Why not an elephant bank, which would be bigger and hold more coins?

 In the Middle Ages before modern banking and credit instruments, people saved money at home, a few coins at a time dropped into a jar or dish. Inexpensive pottery was made from a common orange-colored clay called “pygg” and coins were saved in pygg jars.

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 The Middle English word for pig was “pigge.” While “pygg,” referring to the clay, was pronounced as “pug” by the Saxons, ultimately the two words morphed into the same pronunciation, sounding the “i” as in pig or piggy. As the word became less associated with the orange clay and more so the animal, a clever potter ultimately fashioned a pygg jar in the shape of a pig, delighting children and adults. The “piggy bank” was born.

 

Originally, you had to smash the bank to get to the money, injecting a note of seriousness and discipline into savings. As piggy banks came to be made of porcelain, metal, and plastic, a large cork was inserted into the underbelly so one could extract money.

 While piggy banks teach children the wisdom of thrift, adults often need to relearn childhood lessons. The best time to save money is when you have it. Excess debt can be ruinous. Think about the things in life that require significant capital—private school or college educations; bat or bar mitzvahs; weddings; purchase of a home, cars and other big ticket items; starting a business; a worry free retirement in an age of lengthening life spans; medical and long term care; and, fun stuff like great trips. Comfortable, exotic, or adventure travel is not cheap!

 George S. Clason in 1926 published his classic book, The Richest Man in Babylon. How did Arkad, once a poor scribe, become one of the wealthiest men in fabled Babylon? By paying himself first. Clason recommended that when you earn money, peel off the top 10%, put it aside, save and invest wisely. Of course, today the IRS will take a bite out of your financial apple before you get yours, so prudent tax strategies must be combined with saving.

 Wealth starts with a goal, discipline, and saving a dollar at a time. Call it the piggy bank strategy. Simple!

 Lewis Walker is President of Walker Capital Management LLC. and Walker Capital Advisory Services, Inc., a Registered Investment Advisor (R.I.A.) Securities and certain advisory services offered through The Strategic Financial Alliance, Inc. (SFA).  Lewis Walker is a registered representative of SFA which is otherwise unaffiliated with the Walker Capital Companies. ▪ 3930 East Jones Bridge Road ▪ Suite 150 ▪ Peachtree Corners, GA 30092  ▪ 770-441-2603 ▪ lewisw@theinvestmentcoach.com

 

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