I have this strange little memory from when I was about six years old…
I was sitting at the counter at my grandma’s house when I noticed she had taken a few dollars out of her purse. She reached up into the cabinet above the sink, pulled down an old coffee can, and threw the dollar bills in there. When I stretched up to peek inside, it was pretty obvious that the old tin was full of cash – dollar bills, fives, tens, and more.
That old tin can over the sink functioned as her savings account. It’s where she kept extra money. Whenever she had a few extra dollars, she’d toss them into that can, and when she needed some cash in a pinch, she knew right where to go.
It’s kind of funny to see the same kind of logic repeated again with my father. Instead of just keeping a can full of dollar bills, though, he would save up bits of cash until he could get a single large bill, then fold it into fourths and hide it somewhere deep inside his billfold. Then, when some sort of emergency happened, he’d pull out his billfold and clean it out, often coming up with hundreds of dollars in cash in the process.
When I was younger, I adopted much the same habit. Instead of adopting a steady plan of saving money, my “emergency fund” largely consisted of a few $50 and $100 bills squirreled away in my wallet somewhere.
These tales are obviously all interrelated – and they point towards a few obvious truths worth mentioning.
First, many of our personal finance ideas and habits are inherited from our guardians. I watched my father learn his habit of hiding away money from his parents, and I now see how I adopted this same exact idea from my father, too.
We learn so much from our parents: how to walk, how to speak, how to eat politely at the table. It’s not surprising that we learn and imitate more minor behaviors like our money management choices, either.
Of course, not all lessons are necessarily good ones. It can undoubtedly be useful to have a bit of cash on hand in your home, but to use a coffee can stowed away in your cupboard as your primary savings account? That not only ensures you won’t be earning any interest on the money, but it puts that cash at risk of being stolen or being destroyed in a fire.
The best course is to look realistically at our own habits and separate the good from the bad. In this case, the idea of saving your spare dollars is a good one – they build up over time, eventually becoming a nice, sturdy emergency fund or a down payment.
The bad part is the risk – there are far better options for the money. Even a savings account at your local brick-and-mortar bank is a better choice than the coffee can under the sink. An online savings account is even better (I use ING Direct, but there are many great online banks) – you can earn a much higher return without the brick-and-mortor overhead. Build up sufficient money and you can buy some CDs, begin investing in stocks, or put it away for retirement.
My grandma had her heart in the right place when she put away dollars in that tin can. I hope I can continue that same strategy – just with some updated tactics.