An Interest In Savings

I was fortunate to be taught early on in life the power of delayed gratification – that is, the ability to resist the temptation of an immediate reward or pay-off, for a later reward or pay-off.
“A dollar a day”, “saving for a rainy day”, and “look after the cents and the dollars will take care of themselves” – these phrases were regularly bandied around when I was growing up.
Is saving a good thing?
So is saving for the future a good thing? Or are we better to live liberally and freely, without any regard to the future, just trusting that God will provide what we need when we need it?
I think there are good reasons why developing a regular practice of saving is important. Here are three:
Earning interest

Like many others of my generation, the simple Post Office savings account and the ubiquitous “piggy bank” were a compelling way of teaching this principle. In fact, they helped inculcate a lifetime habit of saving for thousands of Kiwis.

I also remember the book that was held in the office of my parents’ retail shop, recording the “lay-by” purchases of their customers. Each week, clients would come in to pay off another few dollars of an item that had been put aside for them out the back, until such time as it was completely paid off. Only then was the item handed over.

Then there were the stories from older couples of how long and hard they had “scrimped and saved” in order have enough for a deposit on a house. People denying their immediate comfort and pleasure in order to invest for the future; this was very much part of our folklore.

Saving was key to providing for the future.

Of course, our cultural narrative is so very different now. Credit cards have replaced lay-bys, Eftpos cards the piggy bank, and low or no deposit loans superseded well-secured mortgages.

As I noted in the previous article, I think there is plenty enough biblical justification to take care to save for the future. The qualifications, of course, are that this should go hand-in-hand with a practice of giving, and we should be ever vigilant that our provisioning for the future does not subtly displace our trust in God.

It helps us to be more responsible stewards

The call to trust God for his provision does not excuse us from doing all we can to take steps to provide for our present and future needs. When we value the resources God has entrusted us with, we will be careful and prudent with their expenditure. This includes our time, gifts and abilities, and our money and assets. If we do not see the need to conserve resources, we are less likely to responsibly manage what we have been given.

It helps develop the virtues of self-control, patience, self-denial, gratitude, and generosity

Our cultural tendency is toward compulsive consumption. One of the catch-cries of our society is,  “I want it and I want it NOW”. And there is little encouragement to question the basis of this sense of entitlement. We are taught that it is our right to spend our money when and how we choose. One of the consequences of this is that our consumption tends to expand to fill whatever our income level is.

However, satisfying our every desire does not take us down the road to maturity. Learning to say “No” is as important as learning to say, “Yes”. The disciplines of saving and giving can remind us that God’s good life involves learning self-control, patience, and self-denial.  Learning to do without (at least for a time) is good for us – it makes us more grateful for what we do have, and helps us appreciate our need of God and his provision. It also gives us greater capacity to give money away if and when God asks it of us!

It helps us navigate the cash-poor years

An old friend of mine used to say that the sooner young adults learn that their future will likely have seasons where they have heavy financial commitments and other seasons where they have excess income, the more they will be motivated and equipped to save hard in the good years in order to take the pressure off the “cash poor” years. For many people, our early adult years (pre-children) are relatively flush with resources. If we learn good saving habits during this season (including paying off any student debt as soon as possible) we are more likely to be prepared for harder years ahead. However, frittering away valuable money resources in times of relatively light financial obligations will leave us facing significant pressure later. They will also likely reduce our options regarding how and where we invest our time and gifts.

Albert Einstein suggested that compound interest was the eighth wonder of the world, noting that “…he who understands it, earns it…while he who doesn’t, pays it”!

His sobering reflection raises another important question for Christians – one where there is some level of disagreement. Is earning interest on loaned money legitimate?

Strictly speaking, the Bible identifies any return on loans as usury.[1] Some Christians believe that the charging or earning of any interest is condemned by the Bible. To the contrary, others argue that what is prohibited is excessive interest.

Several passages in the Law instruct the people of Israel about the charging of interest. However, indiscriminately reading these passages is problematic. The reasons for legislation against interest need to be understood in their context if we’re to be able to make sense of what it might mean for us today.

The charging of interest on loans made to those who “fall into financial difficulty”, is most definitely prohibited. Leviticus 25:35-37 suggests that such actions are really profiting from the poor and are likely to make the situation of vulnerable people worse.[2] This is clearly a protection measure – and for good cause. The primary reason for such laws revolves around the value placed in the covenant community on relationship, and on the need to ensure all are able to provide for their families. Debt was avoided where possible, because of the entrapment and potential poverty it could lead to.

Deuteronomy 23:19-20 appears to be wider in its application:

You shall not charge interest on loans to another Israelite, interest on money, interest on provisions, interest on anything that is lent. [However] On loans to a foreigner you may charge interest…

If we were to contextualize the spirit of these laws today, rather than strictly prohibit any interest, how might these principles apply in our economy? Firstly, lending to those who are investing in their business venture could be differentiated from loaning money in order for people to pay basic costs or fund emergencies. One is a basis for wealth creation which those funding the venture should expect to share fairly in its success (and in its risk, too!). The other is adding an extra burden to a person’s already stressed financial situation. They are very different contexts. Secondly, in modern economies we have the issue of inflation to contend with. This should be factored into the equation, as over time it erodes the value of money.[3]

The key question to ask in all interest-bearing investments is: what is the nature of the loan? Why is the person or business wanting to borrow money? Is it to grow their business, to take advantage of an opportunity, to gain some competitive advantage in the market? In this context the loan is really “capital” in order for the person/business to create wealth.

However, if the loan is to someone who needs the money in order to live, and charging interest would just add to their indebtedness, then making the loan interest-free (or at very low interest) would seem the just and right thing to do. For those who don’t have the capacity or resources to use their loan for capital, they should not be treated in the same way.

Sadly, economic systems don’t differentiate between these two very different situations. In fact, they essentially discriminate against the poor by charging them higher interest rates than those with resources. Without assets to “secure” the loan against, the money lender considers them a greater risk. While understandable in pure economic terms, nevertheless it has the effect of aggravating the lives of those who struggle.

Consequently, most societies have an abundance of “loan sharks” and/or “consumer finance companies” who set up in poorer neighbourhoods (like my own) and prey on those who are desperate and (because of their circumstances) would be turned down at the local bank. Such outfits compound people’s indebtedness by also charging them all manner of administration charges, on top of the interest. These loan sharks are most definitely guilty of “usury”.

What about those who can’t save?

A fair question that is sometimes raised is, “Isn’t saving just a prerogative of the well-to-do? What about those who are struggling so much they have no excess at all. Surely it’s impossible for them to save?”

There is some truth to this. Those in our society who are often most at risk of not being able to save are parents on low incomes with dependent children – particularly if they have to live in cities where housing costs are very high. Sometimes, no amount of government assistance or careful consumption through tight budgeting and cutting “unnecessary” expenses can create space for families to save.

However, I do tend to think that this reality is more rare than we may think, and usually only for a season in life. And even in these cases, I would like to think that developing the practice of regularly putting away something for the future (however small) is a powerful and worthwhile practice to develop. As is the practice of giving.

I’m aware that suggesting this may make me sound incredibly out-of-touch, naïve, even politically incorrect. So let me qualify it by saying that in the Christian community there is a degree of responsibility on both the people struggling and the faith community they are a part of. For those trapped in an unrelenting cycle of excess expenses over income, being part of a supportive Christian community should be a real help.[4] Sadly this is rarely the case (though when it is, it is truly inspiring). On the one hand, our awfully independent economic lives mean that we fiercely protect our “right” to live our own way – and so resist input from others. On the other hand, we seem to lack the will and creativity to find ways of helping each other in empowering ways – a hand-up rather than a handout, so to speak.

I am also reminded of a good friend of mine who works with agencies seeking to assist poor communities in Asia. Rather than providing capital for small business loans (micro enterprise) these agencies promote savings. Savings? This seems crazy and completely counter-intuitive. How can families living hand-to-mouth possibly have the capacity to save?

But here’s the amazing thing: even the poor are able to save (though sadly, not those in extreme poverty). It may not be much per week (a cup of rice?) but if a way was found to pool these resources, and invest them, then over time the eighth wonder of the world would do its thing.

What these agencies have discovered is that some of the primary barriers stopping such families and communities from developing economically are inaccessibility to the banking system and a corresponding lack of help in being able to put aside resources for the future. No bank is going to allow you to open an account to look after your cup of rice deposit each week. Stripped of safe and effective mechanisms to save, these communities understandably consume all they earn. And when disaster happens, there is no back-up to help people through. We can only imagine what stress this must cause such communities.

The beauty of these savings co-operatives is the power of collective action. Together they are able to develop a fund that can eventually be borrowed against by members who want to start a small business, or who have a crisis (like a death in the family) and need some help. The growing fund also allows the co-op to invest in vital infrastructure in their neighbourhood. They are the ones who can make decisions on how to invest such resources. You can imagine the empowerment this brings a community who, not having relied on charity, are able to say after a few years, “We did this. Together.”

Next article in the series: Investing in the Future

How should we invest our savings? (forms of investment)

What makes an investment ethical?

What is the difference between investment and speculation?

What about owning a house?

[1] This comes from the Latin word usura, which means “interest”.

[2] The parallel passage is Exodus 22:25-27.

[3] For example, if you loan someone $1000 and the inflation rate per annum is 5%, that $1000 is going to only be worth about $952 in value, twelve months later. In other words, you are going to need $1050 to have the same “buying power” the following year.

[4] There’s lots of precedence in the New Testament for this kind of communal response – see for example, Acts 2 & 4, and 2 Corinthians 8 & 9.


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