Financial Literacy Lessons – Principle of the Piggy Bank

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How many of you had a piggy bank when you were growing up?  I had one of the classic ceramic piggy banks that you had to break at some point to get out the money.  I always remember how excited I got every time I dropped coins into  the piggy bank through the small slot of top of the piggy bank.   I would pick up the piggy bank to feel the weight of all of the coins and shake it to hear all of my money in the bank.  It was an incredible day when I got to break open my piggy bank and see all  the coins spill out on the table.  My eyes lit up with amazement at all of the money that had accumulated.  I could not wait to take my hard earned money that I had saved and spend it.   It was an incredible feeling to walk into the store with all of my money and pay cash to buy that cool toy I had been dreaming about for months.

Now that I am an adult, I have had a change jar for years where I deposit my loose change at the end of every day.   I am still amazed at how fast and how much money accumulates in my modern day piggy bank.   In today’s high tech world, I take my change to the coin counter at the grocery store.   I pour in the coins and watch the total build up until all of my coins are counted.  I am sure you have a change jar or spot where you deposit your change every day.

These memories from my childhood got me thinking about The Principles of the Piggy Bank.   What can we learn from our childhood lessons on money that we can apply to our financial lives today?   Here are some key points that can dramatically impact your personal finances.

 Set-up a Piggy Bank Account – The piggy bank works for kids because it is lockable. It cannot be easily accessed.  Therefore, the money is saved and not spent.   It is essential that you set up a savings account that is separate from your normal bank account.   Do not get a debit card / ATM card or any other way to easily access your piggy bank account.

 How bad do you want it? – Do you remember how obsessed you were over the latest toy as a kid?  That obsession was your motivation to put as many coins as possible into your piggy bank so you could save up the money you needed as fast as possible.  You need to rekindle that same motivation today for saving money, reducing expenses, paying off debt and achieving your financial goals.  Crystal clear goals will inspire you to take action and remain committed to achieving your goals.

Change (Coins) Happens. –  Everyday we accumulate change from all of our cash purchases.    We typically never think about spending our change because it is too small to spend.  Once we set our change aside we never think about spending it.  We need to apply this principle to our monthly income.  We need to set aside a portion of our monthly income every month in our piggy bank account.  We need to look for ways to save money each and every day so we can take the dollars we save each day and deposit them into our piggy bank account.    The power of small financial changes can dramatically impact our personal finances.

  Time – As kids we did not fill our piggy bank over night.   We worked hard, saved a portion of our allowance, etc. to fill our piggy banks as fast as possible.  We need to understand that it is going to take some time to fill our piggy bank accounts.   The key to remaining committed is the same today as it was when we were kids.   We need to stay focused on the prize or the goal we set for ourselves just like we remained committed and focused on filling our piggy banks as kids.

 Compound Interest A Grown-Ups Secret Weapon – As kids we saved our coins in a piggy bank.  We never earned one penny of interest.  We had to save every penny.  However, as grown-ups we can set up our piggy bank account using a variety of savings and investment accounts that earn interest.  It is the power compound interest than can dramatically multiply the results of our piggy bank account over time.  I will devote a separate post to explaining and illustrating the compound interest.  It is a simple financial concept that can have a dramatic impact in our lives.   There is a money quote that states “Those who understand interest earn it, and those who don’t understand interest pay it.

Cash is King –  One of the most important lessons to be learned from the Principle of the Piggy Bank is the discipline of saving and paying cash as opposed to using a credit card or getting a loan.  This single point has the ability to transform your life and your finances if you are willing to commit to only paying cash and living debt free.   Millions of Americans have consumed their futures as a result of their spending habits.  However, it is never too late to take control of our personal finances.  It may be as simple as implementing our childhood lessons we learned from our piggy bank into our adult lives.  It may also be an excellent opportunity to use a piggy bank to teach our children the principles of the piggy bank. Simple lessons that can have a profound impact on our lives.

I hope you have benefited from this post on Financial Literacy.  If so, leave a comment.  In addition, please forward this to anyone you think might benefit from this short financial literacy lesson.

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