Many people are unaware that they have Piggy Bank Syndrome. Could you have it?
The Piggy Bank Syndrome prevents a person from ever investing their money. These people keep LARGE sums of money in their bank accounts or worse… in their underwear drawer.
This problem will drain your future wealth before you even get the chance to notice. Piggy Bank Syndrome will make your wealth stagnant and could prevent you from ever retiring.
The Piggy Bank Syndrome
As a child, you may have gotten an allowance or been gifted money. Then, you probably either put that money in a piggy bank or spent the money.
If you’ve never developed financial literacy, that same routine is probably still practiced now as an adult. The difference is that now instead of putting the money in a piggy bank, you transfer it into your bank account.
Most bank accounts are just like childhood piggy banks. They are just waiting to be dumped out, counted, and spent.
Seeing that money sitting in an account can make people feel secure, rich, and/or financially savvy. However, this could not be further from the truth.
The problem with hoarding your money in a bank account (or other REALLY secret places… like your dresser) is that your money is stagnant. Your money is doing nothing but waiting for you to spend it.
Additionally, that money is doing nothing to fight inflation. So technically, if your money isn’t working to make more money, it is losing value every day.
While it feels nice to look at your bank account and see a big number, this is the wrong way to manage and think about money.
Looking at the Numbers
Take a look back at your childhood and the money you earned. We will start at the age of 10 when the good checks start coming in from your family for birthdays and holidays. Let’s see how much money you could accumulate over an 8 year period.
Let’s say that every year you received two checks, one for your birthday and one for your celebrated holiday. Each check was for $50, which gave you $100 a year. Here is the breakdown:
$100/year x 8 years = $800
This is the amount that you would have if you took your money and let it sit in a savings or checking account over an 8 year period.
You may be thinking that $800 is not very money, so why not spend it on fun things during your childhood.
What would happen if you were taught at a young age how to invest your money? How much money would you have with this same amount after 18 years in the stock market?
If you had your money invested with an average of a 7% return rate, you would have over $1200. All from collecting birthday and holiday money!
If you would keep that money in an investment account until you are 65 year old without putting in any more money, your $1197 could become $28,782 with compound interest.
This is some serious money that you gathered just from your birthdays and holidays as a kid.
Someone with the Piggy Bank Syndrome would have $800 while someone who has financial literacy and a plan would have $29,382.
Now try it for yourself with our compound interest calculator:
Click here to get access to the free resource library so you can get your compound interest calculator. This calculator has even more features to enhance your investment results. Plus you will get access to many other free items to help you on your journey towards financial independence.
So, you may be asking yourself, how do I cure myself or a loved one from this piggy bank syndrome?
The Piggy Bank Syndrome Cure
There are three steps that you will need to take to cure yourself from the piggy bank syndrome you are suffering from:
1. Develop financial literacy
Education is a very important part of life at any given point and time. However, one piece of education that is not taught or programmed into us is financial education. This type of education will program your brain to stop looking at the money in your checking account as something of great worth and start to train your brain to look at money as the moderator between you and the asset that will make you more money.
2. Get a Budget
You need to get your budget in order. Do not just start withdrawing money left and right and throwing it into investments. You need to become intimate with where your money is going every month. Cut out things you do not need to spend money on (i.e copious amount of times going out to eat).
You can download the Ultimate Budgeting Guide and How-to Video from the free resource library and start to get your money in order today.
3. Break Your Piggy Bank With a Hammer
I know you have seen it when a person takes a hammer to their piggy bank to get the money out. Well, this concept is the same with your checking account. There are times you see something that you want you, so may swipe your debit card, withdraw cash, or use a credit card, which will need to be paid back from your checking account.
Look back to the numbers earlier in the article. If you just keep the $200 per year in your piggy bank for 18 years you will only have $3600. However, if you would have invested the money at the typical 7% annual return rate you would have more than $12,000.
Ask yourself if your life would be better with more money or less money. The only catch is to make more money you need a little patience, education and a financial plan.
It’s Time to Take Action
Just follow this three step process to cure your piggy bank syndrome and start to make more money for yourself and your family.
- Get a Financial Education
- Get a Budget
- Break your piggy bank with a hammer
The process can be challenging. However, when you start to see the transformation in the wealth you are building, the piggy bank syndrome will be broken.
Remember it is important to put your money into the right investment vehicles and be patient. If you want to learn more about investment vehicles for you money check out this article
Through a little effort and hard work, you can cure your desire to spend or hoard your money in things that do not help you and begin to accumulate wealth. This will allow you can get back the one thing that you can not get more off TIME.
P.S. If you want to start to train your kids to become financially literiate subscribe to Family and FI and get your copy of The Ultimate Money Playbook For Kids.