Making Change Count

Last time, we talked about the lost art of making change. As we prepared for that show, we remembered another little tidbit about change:

You can save your change for a change.

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If you find that you’re running out of money before the month runs out, this is one of the easiest ways to get started saving. Give yourself an allowance. Pay for everything with that cash. At the end of the day, put all of your change in a jar or a piggy bank.

Did you ever have one of those cool banks where you get to see the coin going down into the bank? It made saving fun and is a great way to encourage kids to save. Or adults for that matter … why should the kids have all the fun?

It’s amazing how much you can save with this simple little technique. Ever so often, say at the end of the month, go to the bank and deposit your change. Once you get your money in a savings account at a bank, you can start earning interest on it. Your money making money on your money … that’s what you want.

The five little piggy banks

Richard Jenkins, editor-in-chief of MSN Money and author of A simpler way to save: the 60% solution, has an outstanding idea:

We know what you’re thinking – you’re having a tough time getting by on 100 percent. It’s ludicrous to think anyone could get by on only sixty percent!

But hear us out. You just might like this program …

Set up five piggy banks (or envelopes, accounts, or any other way that works for you). The key thing is to segment your money right upfront. Here’s what the five piggy banks are for:

Piggy Bank #1 – This little piggy stays home. This piggy bank gets sixty percent of your gross income. You’ll use it to buy the basics – things like food, clothing, household expenses, taxes, insurance, donations, and the like.

Piggy Bank #2 – This little piggy goes to the market. This piggy bank gets ten percent of your gross income to invest in long-term assets, like the stock market. Most likely, your investment vehicle will be a tax-advantaged account, like a 401(k) through your employer.

Piggy Bank #3 – This little piggy gets the beef. Set aside ten percent in this piggy bank to beef up your long-term savings even more. You’ll also invest this in long-term assets, but you’ll want to maintain enough liquidity so the money is available for an extreme emergency.

Piggy Bank #4 – This little piggy gets none. The ten percent that goes into this account is for irregular expenses. So you won’t get any long-term benefit from this piggy bank. What you will get is the ability to pay for large expenses upfront instead of with a credit card. So from this account, you’ll pay for your vacations, major repairs, replacement of appliances, gifts and the like.

Piggy Bank #5 – This little piggy cries “Wee, wee, wee” all the way home!
This ten percent is your fun money. It’s your reward for setting aside the money in the other piggy banks the way you planned to.

Think about it this way – If you meet your goals, you get to spend an extra ten percent!

Managing your finances with these five little piggy banks will help you live bigg now and retire bigg later!

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Thanks so much for reading our post today. Join us next time as we wrap up this series. We’ll discuss making change work. Until then, here’s to your bigg success!

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(Image in today's post by woodsy)