Best Gift You Could Give Your Kids? A $400 Savings Account

From The Atlantic this morning, most Americans can’t scratch together $400 if they had to according to the Federal Reserve:

Since 2013, the federal reserve board has conducted a survey to “monitor the financial and economic status of American consumers.” Most of the data in the latest survey, frankly, are less than earth-shattering: 49 percent of part-time workers would prefer to work more hours at their current wage; 29 percent of Americans expect to earn a higher income in the coming year; 43 percent of homeowners who have owned their home for at least a year believe its value has increased. But the answer to one question was astonishing. The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?

Well, I knew. I knew because I am in that 47 percent.

Which absolutely floors me, because that amount of money not being in a savings account somewhere is the maximum height of financial irresponsibility.

OK, so that’s a pretty serious judgment call.  So be it — it’s a total failure of one generation passing on the idea of financial planning to another.

My grandparents were assiduous savers.  “Pay yourself first” was the mantra of the Greatest Generation, and like a green grocer 10% of your net went into a savings account.

Folks just don’t do that anymore.

Now I can hear the objections loud and clear: the economy isn’t the same, folks are “really hurting” (TM) right now, wages are stagnant, folks are just getting by, etc.

But let’s be honest — everyone can save $10 a week, right?  Sure you can.

So here’s what I want you to do if you don’t have $400 socked away right now:

1.  Download the Acorns app.  Put it on your phone that cost $400.
2.  Get it set up today.  Right now.
3.  Take whatever money you were going to spend this week on extras and put it in.
4.  Seriously.
5.  No, you don’t need to get that AM coffee.
6.  No, you really don’t need to eat at McDonalds for lunch.
7.   Yes, you should make it hurt.  
8.  Tally that number up and deposit it into your Acorns account.
9.  Take half that number, round it up, and make it a recurring weekly deposit.
10.  Let Acorns to the rest.

The point of saving is a lot like the point of fasting — you’re denying your appetites to master yourself.  Even if that number is $0, what Acorns will do is round up your purchases  to the nearest dollar.  You won’t even miss it — trust me.

Eventually, you’ll get to that $400 mark.  It might take three months.  Maybe six — but you’ll have it.

Of course, there’s the flip side to all of this… and there’s a ring of truth to it.  Sometimes, folks just need a little push.  $400 to an upper middle class family in northern Virginia isn’t the same lift as $400 to someone Southside.

That’s where mom and dad come in.

For our household, we inculcate savings as a marker of being “grown up” and one of the older kids.  Each one gets a joint savings account the moment they save up $50 in an old cigar box.  Between the kids there’s a bit of a race to see who can save the most; a sort of one-upsmanship over the older kids, if it can be achieved.  That means every dozen eggs that are sold are saved, every odd job is saved, every lawn mowed is saved, ever “let’s hide Dad’s keys and see if he puts another $20 bounty on them” is saved.

It works.

One of the best gifts my grandmother ever taught me was paying myself first — and the idea of saving enough to pay for an auto deductible (typically $1,000 for a young guy like me), a health emergency, or down payment on a new car.  That fundamental idea of a cash reserve helps when you’re saving three to six months to survive being out of work… or in a sunnier case, saving that 20% to buy a new home at a far lower rate than the 0% down payment loans of yesteryear.

Besides, savings feels good.  Same as having a full pantry at home.  I marvel at it, because it interprets into one word: security.  In an insecure age, is there no small wonder why folks are fretting when 47% of Americans aren’t just living paycheck to paycheck, but couldn’t survive a deductible if they had to?

Get that $400, folks.  Doesn’t have to be all at once, but the moment you start thinking of yourself (and your family) as a business?  The better off your future is going to be.