Americans spend more—save less.

Unexpected expenses are not only bitter disappointments, but they can cause a painful realization if people do not have funds set aside to cover the expenses. Proverbs 22:7 says: “The rich rules over the poor and the borrower becomes the lender’s slave.” Even if emergency savings have been set aside, there is little escape from personal or family difficulties resulting from financial emergencies. But when there are crises or unexpected emergencies, much frustration can be avoided if an emergency savings account has been established to help absorb the ordeal of the crisis.

The Commerce Department recently announced that in 1999, with a negative 1.2 percent savings rate, the personal savings rate turned negative for the first time since 1933.¹ Compare this to a 1989 St. Louis Federal Reserve Bank study that found that the savings rate of Americans from 1950 to 1988 averaged more than 10 percent of their paychecks. They contribute this loss of savings primarily to the fact that from 1990 to 1997 personal tax liability soared 58 percent and personal spending rose 43 percent.²

In the past, when tax rates rose spending decreased. However, between 1990 and 1999, as taxes increased, spending did not decrease; instead, savings declined. So, in essence, between 1990 and 1999 Americans increased their spending by cashing out savings. In other words, currently, Americans are spending more than they are earning. ³

Savings is a Must

Every family should allocate a percentage of its income to savings. Savings allow families to purchase with cash and shop for the best buys, irrespective of the store. Without savings, if there were an emergency families would have to rely on credit and, ultimately, end up deeper in debt. Simply put, without an emergency savings borrowing would be a foregone conclusion, the use of credit would become a lifelong necessity, and debt a way of life.

Larry believes that everyone in our society living above the poverty level has the capability to save money, yet many fail to do so because they believe that the amount they can save is so small it is meaningless. However, no amount is insignificant. Even $5 per month will add up.⁴

Larry suggests that families work toward setting aside an amount equal to three to six months salary for emergency savings for those who have a steady income; and for those who have a fluctuating or seasonal income, six months salary is best. This does not mean that large amounts of money should be saved while failing to pay creditors, but a good habit to develop is to save a small amount on a regular basis.

This type of savings is not long-range savings for college or retirement; it is non-allocated short-term savings that is designed to help compensate for unexpected emergencies. About 5 percent of Net Spendable Income should be put aside in an emergency reserve savings, to take care of expenses that cannot be anticipated.

Saving or Hoarding?

Unfortunately, in today’s Christian society many teach that to have a savings account is actually hoarding, because it negates reliance upon God’s provision. But Larry believes that this teaching is contrary to the Word of God as presented in the parable of the ant in Proverbs 6:6-8; “Go to the ant, O sluggard, observe her ways and be wise, which, having no chief, officer or ruler, prepares her food in the summer and gathers her provision in the harvest.” Within their colony, ants have calculated almost exactly what they will need to get through the winter. They gather and store that amount in their anthill during the summer and autumn. ⁵

Saving is looking forward to a future need and putting aside whatever is necessary to meet that future need so that borrowing will not be necessary. Hoarding is putting money aside for no particular reason and that money will not be used even if it is needed. The difference between saving and hoarding is attitude, not the amount of money. Saving is good stewardship, a hedge against future needs. Hoarding is a lack of trust.⁶

Each family should make specific guidelines about how much they need to save. Then they must stick to those guidelines and not allow themselves to get caught up in the attitude of the world. God commands every believer, “Do not be conformed to this world, but be transformed by the renewing of your mind” (Romans 12:2). All believers should give evidence of their trust in God through the way they handle their resources.

Conclusion

“There is precious treasure and oil in the dwelling of the wise, but a foolish man swallows it up” (Proverbs 21:20). The common attitude presented in the Bible is to save on a regular basis, and it is important that Christians develop good habits to replace bad habits.

The discipline it takes to do that can be very difficult, but if you manage it emergency funds can give you some freedom to start again when you find yourselves trapped, trying to repair the irreparable.

Every family should allocate something for savings. A savings account can provide funds for emergencies and is a key element in good planning and financial freedom.

¹ www.ncpa.org/pd/economy/pd062999b.html

² www.ncpa.org/pd/economy/pd111298b.html

³ www.harcourtcollege.com/econ/stste.html (Link no longer valid)

⁴ Larry Burkett, The Complete Guide to Managing Your Money, Inspirational Press, 1996, p. 56

⁵ Larry Burkett, Answers to Your Family’s Financial Questions, Living Books, 1987, pp. 208-210