Saving with a Purpose

Background

I’ve worked in finance for over 10 years. I’ve heard the same mantra a thousand times. “Pay Yourself First (PYF)!”

The concept made sense. But I noticed something. People got the rigid framework, and most still failed at it.

One of three things happened. One: they heard about PYF and did nothing, living paycheck to paycheck. Two: it worked perfectly. They put money aside, drew on it during emergencies, and replenished it. Three: they set up the savings account, funded it, then watched the balance dwindle to zero.

That third pattern is the most common. PYF became a temporary holding account for their checking. People got paid, moved 10% gross to savings as instructed, then life happened within two weeks. Car expenses. Unexpected bills. A bad day at work. School fees. Lunch with friends. Even Red Box. The savings paid for it.

PYF is fine. It sets the stage. But it lacks focus.

A year ago I started teaching financial literacy. One evening I asked my students a simple question. “Anyone excited to go on a vacation this year?”

They answered without missing a beat. “Vacations are like dreams, only for the rich.”

I kept probing. The truth got painful fast. Most were living paycheck to paycheck. Something had to change.

Intent

I started working on a new framework with their feedback. Three objectives: build healthy savings patterns, build savings accounts with a purpose, and help dreams come true.

I went back to the classroom with this opener. “We all work hard for our money. So why not have our money work hard towards a purpose?”

They told me in unison. “Life happens!”

Yes. But does life happen so much you forget the five lattes a week? The ten vending machine visits? Eating out more than cooking at home? Silence. They knew. The charade was up.

“What if there was a specific purpose you were excited to work towards?” No response. All intrigued.

PYF does not work because technology and self-service made savings too easy to drain. One phone call. One click. One tap on a smartphone. The balance goes to zero.

Saving with Purpose requires one thing PYF skips. Accountability.

You are an adult. You have commitments to your house payment, car payment, cell phone bill. Why not make a commitment to your mental happiness?

Pick a reasonable bi-weekly amount that works for your budget. Maybe $75 per paycheck. Maybe more. Be honest. Be critical. You are only cheating your own happiness.

After a long silence, students started writing numbers in their workbooks. From there I introduced the framework.

Framework

You have to take convenience away to actively save.

Open a separate account at another financial institution. No physical access. No debit card. No ATM card. No app to transfer funds out. You walk up to the teller line and ask for a withdrawal.

Inside that account, set up three sub-shares (most credit unions offer this). Name each one for a meaningful goal or dream. The name ties the account to the purpose.

Each account should ladder to a bigger goal. I built mine on three timelines: three months, six months, and one year.

Now comes the hard part. Taking ownership.