Go to the 'piggy bank'?

Reader question:

Please explain this sentence: In a healthy financial living at least 10% of the income should go to the “piggy bank” for the future or unexpected expense.

My comments:

To paraphrase: If you want to stay healthy financially in the long run, every month you should put aside 10% of your income as savings.

You can open a savings account at the regular bank, or you can put the money under the mattress.

Or you can save the money via the piggy bank, as children do.

Here, piggy bank is, of course, a metaphor. Adults don’t keep a piggy bank. Most of them don’t, at any rate. And so here piggy bank simply represents what piggy banks are for, i.e. the piggy bank mentality, a willingness or awareness to save for a rainy day.

Well, “rainy day” is also a metaphor. I’m not talking about the real wet rainy days of summer time. Here, “rainy day” stands for any unexpected situation in future under which some extra money may be needed, an unexpected injury or illness, for instance, and subsequent hospitalization. To save for a rainy day is for you to put money aside in advance lest you get caught unprepared when that day comes.

That day will come. That is life, which is full of marvelous miracles – good and also bad, sometimes expected, sometimes unexpected.

In short, you’ve got to have foresight to build your financial house strong – by cultivating a piggy bank mentality.

In other words, be frugal. In still plainer words, do not spend every penny you make every month.

Anyways, piggy bank is the phrase to grasp here. The piggy bank is a container shaped in the form a little pig into which children put coins as their savings. Hence, when people talk about going to the piggy bank, they are talking about utilizing small savings they have put together on the side over time.

Here are two media examples involving the piggy bank:

1. It’s not easy to control your child’s temptations when he enters a mall or a huge toy store. Often you may find yourself loosening your purse strings just because your kid has set his eyes on a jazzy remote-controlled car or a flashy gun.

But this ‘your wish my command’ technique is not a healthy practice. Hence it’s in best interest of both the child and parents to instill financial discipline and adopt the technique of ‘value buy’ from early days.

We identified a couple of parents who understand the need to impart financial wisdom and implement some techniques to teach their little ones.

Kamlesh R Thakur, Manager of Pharmaceutical co.

“One of the main problems is that we earn much more than our parents today. And children have many more reasons to spend. Hence it is very important to draw a line from day one,” says Mr Thakur. He says he has already introduced his 4-year-old daughter to a piggy bank. He and his wife make regular contributions to the piggy bank.

“She was very excited about money getting accumulated in her piggy bank. Once she asked me to buy some pencils, I asked her to withdraw money from her piggy bank. Then she realised that it’s a two-way traffic. Money will come into the piggy bank, but goes out depending upon what she wants. I don’t believe in cutting corners for all kinds of expenses. When it comes to health such as paediatrician’s visit or medicines, I always spend. But a pencil or even a toy is a short term pleasure for my daughter. She grows out of it in 2 weeks, and expect new replacements. I don’t want to encourage that behaviour,” he adds.

“I have stopped buying arbitrary gifts now. I only buy toys during her birthdays. In that manner I keep a tab on my expenses as well her temptations,” he says. “I even ask my daughter to buy some biscuits from the neighbourhood store or give money to the laundry boy, so she understands that she has to spend the money for consumption or service.”

Pawan Sirohi, Web Designer

“My 7-year-old son asked for a bicycle. I told him that he would get his gift only if he saved Rs 100 per month from his pocket money. I don’t need that money to buy his bicycle. But he should understand that gifts don’t just walk in when he wants,” says Mr Sirohi.

“He waited for more than a year and won his bicycle. I am not against spending money on my child or on his demands, but he is growing and he should understand the concept of utility and value. Today it will be a bicycle, tomorrow a bike and then a car. There is no harm in these demands unless he realises that he needs it and hence should work towards buying it.”

- Help your child learn financial discipline, IndiaTimes.com, August 20, 2010.

2. German Chancellor Angela Merkel stood behind a podium at the DZ Bank at Berlin’s Brandenburg Gate, gazing sullenly into the cameras. She had just received the wrong prop for a photo op, and she needed to get it out of sight as quickly as possible.

To thank her for her speech marking the International Year of Cooperatives, a gray-faced official had thrust a porcelain piggy bank into her hands -- an ugly thing with a milky sheen that appeared to reflect the very coldness said to characterize her policies.

Merkel reflected momentarily, then had the gift quickly tucked away in a box. Photos of the piggy-bank chancellor are not exactly what she most urgently needs right now. In fact, for the past few days, she has endeavored to put a more friendly face on her image as the strict belt-tightening politician who is forcing Europe to adhere to Germany’s budgetary discipline dictates.

She is determined to stick by her strategy. But now when she talks about the euro crisis, instead of focusing solely on “structural reforms” and “stability,” she has also started to refer to “growth” and “jobs.”

Merkel's euro strategy is under fire, and she has lost one ally after the next in recent weeks. In the Netherlands, her most loyal follower, Prime Minister Mark Rutte, has submitted his resignation. In Frankfurt, European Central Bank President Mario Draghi has demanded that Merkel’s cost-cutting strategy be supplemented by a “growth pact.” And in Paris, Socialist Party presidential candidate François Hollande has announced that, if he wins the run-off election this coming Sunday, he intends to lead the European opposition against Merkel. “So many people in Europe are waiting for our victory,” he said. “I don’t want a Europe of austerity, where nations are forced on their knees.”

- What Merkel’s Isolation Means For the Euro Crisis, Spiegel.de, May 1, 2012.

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About the author:

Zhang Xin is Trainer at chinadaily.com.cn. He has been with China Daily since 1988, when he graduated from Beijing Foreign Studies University. Write him at: zhangxin@chinadaily.com.cn, or raise a question for potential use in a future column.

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