Joseph B. Wirthlin advised, “The wise understand the importance of saving today for a rainy day tomorrow.”
The secret to financial success is to spend what you have left after saving, instead of saving what you have left after you spend. –Anonymous
Financial experts and Church leaders have always stressed the importance of saving and living on less than you earn.
Three steps to follow after receiving a paycheck or allowance:
Pay a full tithing of 10 percent to the Lord
Pay 10 percent to yourself and put it in a savings account
Pay 10 percent to another savings account for mission or education
The Lord has asked all of His children to pay a full tithing, which is 10 percent of their total income. This includes allowance or earned money from babysitting or doing odd jobs. The Church uses tithing to build chapels and temples, and help the poor. So by paying your tithing, you’re helping Heavenly Father build His kingdom here on earth.
Additional Quotes from LDS Leaders
“In this dispensation, the Lord has established the law of tithing as the law of revenue of His Church. Without it, we could not carry out the eternal purposes of the Lord. It is also a law by which we show our loyalty to the Lord and prove ourselves worthy for privileges, ordinances, and blessings.” – Earl C. Tingey, “The Law of Tithing,” Ensign, May 2002.
The amount of tithing we pay is the most perfect and equitable arrangement of which I know. It is one-tenth of our increase. All, from the poorest to the richest, pay the same percentage. – Earl C. Tingey, “The Law of Tithing,” Ensign, May 2002.
There are a several types of savings accounts. The main ones include the following:
- Regular Savings Account at a Financial Institution
- Certificate of Deposit (CD)
- 401k or Other Employer Sponsored Retirement Plan
- Individual Retirement Account (IRA)
Regular Savings Account
Most financial institutions invite their members or customers to open a savings account at a modest interest rate. Money in these accounts can be withdrawn at anytime without penalty. A regular savings account is a good place to keep money that you may need for emergencies.
Certificates of Deposit (CD)
A CD is a contract between you and the financial institution. You agree to deposit an amount of money and not touch it for a fixed period of time. This contract guarantees to pay you a higher interest rate than you would receive in a regular savings account. This is an incentive for you to leave the money untouched for the determined amount of time.
Technically, you can withdraw money from a CD before the period of time expires, however you will likely pay a penalty or lose part of the interest the account originally accrued.
401k or Other Employer Sponsored Retirement Plan
A 401k is a retirement plan offered by companies that allows employees to invest a portion of their salary in a retirement account. Many times, employers will even match the employee’s contribution. It’s like giving yourself a raise.
Individual Retirement Account
An IRA is another retirement account set up by individuals to save money for retirement. The two main types of IRA’s are a traditional IRA and a Roth IRA.
Interest
Interest is the money financial institutions give for saving money with them. The more money you keep in your savings account, and the longer you keep it there, the more interest you will receive.
How does Interest work?
The credit union will keep track of how much money you have in your savings account and multiply it by the applicable Interest Rate. The number calculated equals the interest payment to your account.
Why would the credit union pay Interest?
By saving money at a credit union, you’re really loaning it to the credit union to make more money. This is usually done by lending money to another member.
Interest is what the credit union gives its members for using their money. However, even though the credit union is using your money, you can always withdraw your savings anytime you want.
“Rule of 72”
An easy way to determine how long it will take to double your money in a savings account is to use the “Rule of 72.” The Rule of 72 says if you divide 72 by the interest rate, the result will be the number of years that you’ll need to keep your money in the savings account to double.
For example, if you were earning 6% interest, it would take you approximately 12 years to double your money. That's because 72 divided by 6 equals 12.
Words to the Wise
- Learn to live off 70 percent of your income.
- Only put the money that you'll need soon in a checking account. Keep the rest in savings.
- Start early – time is your greatest asset.
About the Author:
Joe Tippetts is our Director of Communications. He loves spending time with his family, reading, and participating in outdoor activities.
