3 Lame Excuses For Not Saving Money

by Brett and Kate McKay on January 21, 2008 · 27 comments

in Money & Career


It’s common knowledge that if you want to be wealthy, you have to save and invest. But looking at statistics, it seems this knowledge is becoming less and less common. In 2005, the United States recorded a negative savings rate for the first time since the Great Depression. We live in one of the most prosperous times in the history of the world, yet we’re not saving. Why?

Well, here’s a short list of lame excuses that people give to justify not saving.

1. I’ll do it later. This is a common excuse among young people and probably the lamest. A young person in their 20s thinks “I’ve got 60 years to save money. I need to enjoy myself now.” If you’re in your 20′s, NOW is the time to save. You have plenty of time to let the magic of compound interest grow your wealth. Start young and you can save less and still make more money in the long run than if you started to save later.

To give you an example of the power of compound interest, consider two different people- Jack and Jill. They’re both 22 years old and both have an extra $2,000 a year. Jack takes his extra $2,000 and socks it away in a IRA Account with a 12% return. Jill on the other hand spends her $2,000.

Jack saves $2,000 a year for 6 years and doesn’t save a dime after that.� Jill spends her extra $2,000 a year for 6 years, but decides she should start thinking about the future. She finally opens up an IRA account with the same 12% interest that Jack gets. She invests $2,000 each year until she’s 65. The chart below shows the value of Jack and Jill’s respective accounts when they’re 22 years old. Remember that Jack only invested $12,000 while Jill invested $74,000.

Age Jack Jill
22 $2,240 $0
23 4,509 0
24 7,050 0
25 9,896 0
26 13,083 0
27 16,653 0
28 18,652 2,240
29 20,890 4,509
30 23,397 7,050
35 41,233 25,130
40 72,667 56,993
45 128,064 113,147
50 225,692 212,598
55 397,746 386,516
60 700,965 693,879
65 1,235,339 1,235,557

They ended up with the same amount, but Jack saved less. Imagine how much Jack would have he kept saving $2,000 a year after the first six years. Whoa! He would have been a millionaire a couple times over.

2 . I don’t make enough money. If you earn a paycheck, you earn enough to save. It doesn’t have to be much. Start off small. Sock away 5% of any income you make into a high yield savings account. You’ll be amazed how little contributions can add up quickly. Gradually work your savings up to 15% of your income. Whenever you get a windfall like Christmas gifts or a tax return, put half in the bank. Slowly, gradually, by saving money you’ll find yourself with a small fortune.

3. I deserve a little luxury in my life. Many people sabotage their savings plans by taking the money and splurging on stuff they don’t need. Usually the justification is they’ve worked hard and deserve the splurge. I’m battling this excuse in my life right now. I really want to buy a Macbook. I have the money for it and could easily go to the Apple Store and buy one. I justify the excuse by telling myself I’ve earned it from the hard work I’ve done and the sacrifices I’ve made saving. But do I really want to lose $1,000 in savings for something I don’t really need? No way.

Instead of looking at “things” as luxuries, think of saving as a luxury. When you save, you’re giving yourself the luxury of financial freedom. How nice would it be to not have to worry about money? Pretty dang awesome.

What some other lame excuses that you hear people give for not saving money? Drop a line in the conversation box and add to the conversation.

{ 27 comments… read them below or add one }

1 Allen Taylor January 21, 2008 at 12:34 pm

I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you.

Allen Taylor

2 Sean Meyer February 1, 2008 at 7:55 pm

I’m not sure about other people, but judging from me and my friends I think there may be one other reason that needs to be added to this list: not being familiar with savings accounts. I’m 19 right now and I have saved some, but when I read this article I didn’t know what an “IRA” account was and the term high-yield savings definitely brought my eyebrows up. I plan to go research these types of savings accounts now, but before coming across this post I didn’t really have any idea about them.

Me and my friends would definitely be much more interested in saving if we knew how and where to open a good savings account instead of the Washington Mutual savings accounts we mostly have.

Great site by the way, I really enjoy it.

3 Brett McKay February 2, 2008 at 10:51 am

@ Sean- That’s great you’re going to start researching. That shows you have the initiative to take control of your life. Very manly. Good luck with your research.

If you want a better savings account, you might consider an ING account. They have great rates. Email me through the contact form and I’ll send you a referral. If you put in $250 you’ll get $25 for free.

I hope you keep coming back. I’ll be posting several posts on personal finance for young people. If you haven’t already, make sure to subscribe to the blog and tell your friends, too.

4 Toby February 10, 2008 at 1:10 pm

Excellent information, I’m going to send it to all of my friends.
Much thanks

5 James February 21, 2008 at 7:02 am

I would love to hear your opinion on different saving methods and high yield methods.

6 Find a job July 21, 2008 at 5:44 pm

Currently 40 years old I must admit it took me most of my life until about age 35 to get it into my thick head to tuck some dough away. Nobody was giving me money and I was spending all I had. I encourage all the whippersnappers to start early even if only a little. Now I am trying to play catch up and while not impossible it is pinching me a bit. Just do it damnit!


7 click4credit November 1, 2008 at 8:13 am

A bit related to No. 3, some people actually do not know the difference of wants and needs. Some would say something like, “I need to buy use my savings on this one” when in fact it is something that they could live without.

8 Joshua November 7, 2008 at 9:02 am

If Jack had saved 2000 a year until he turned 65, he would have 1,235,339+1,235,557.

I recently subscribed to your blog and have really been enjoying it.

9 Michael Q February 8, 2009 at 12:03 am

There are many different ways to “save.” There isn’t anything wrong with treating yourself to luxury once in a while, but you must have discipline. If you can budget a purchase far enough in advance, you can enjoy luxuries and save at the same time.

This may seem counterintuitive, but if you want to save money in the long run, pay for quality and take care of your stuff. Sure you can buy a $90 dollar pair of dress shoes, but how long are they going to last you? If you buy a $300 pair of shoes, if you take care of them and resole them when you need to, you will save more money in the long run. It’s the same for everything, whether it’s kitchen utensils, safety razors, or luggage. Quality eventually pays for itself.

Every man needs a little motivation sometimes. Plan ahead and enjoy your savings.

10 Fred June 30, 2009 at 10:28 pm

Just to help people out, what Joshua said on the amount if Jack saved continuously 2000$ until 65 he would not be making 1,235,339+1,235,557. He would in fact make much more, though Joshua used nice logic it wasn’t quite sound. I have forgotten the formula but im guessing Jack would have made around 3 million-4 million. It just goes to show how powerful a savings account is.

11 Patrick August 31, 2009 at 3:26 am

Actually, I think he makes very near that amount? Close to $2,470,000. If I did the math correctly. Correct me if I’m wrong please.

In any case, a bunch of money. Excellent article Brett.

12 Kyle August 31, 2009 at 8:06 am

This principle is definitely lacking in the America. But I’d like to know how Jack consistently achieved 12% interest each year. The articles that promote saving always seem to use these large and unrealistic numbers. The average high yield savings rate is 2-3% while many were 4% before all the bank failures. Is he using stocks/funds? Because if he is you must also consider the risk of an investment which could mean a loss to savings, as many have experienced recently.

I have a small amount of savings in stocks and majority in high yield online savings, which yields about 4% return.

13 Will D August 31, 2009 at 10:03 am

Hey Kyle.
As a 22 y/o man who has fully funded his IRA this year I will say that a good fund manager will be able to get you close to 10% with conservative investing by buying/selling government “No coupon” bonds. Federally guaranteed treasury bonds

In short – dont worry about it. Get the money together, and send it away to a smart guy (conservative) whose job it is to make his clients money. Someone with experience and a quarter million dollars spent on research is going to make better decisions than you or I.

Hope that helps

14 James M September 1, 2009 at 12:56 pm

This article proposes a good idea that I’m not sure works in practice. I am 24, and with a frugality instilled in me by my parents (i.e. making to without a car, and buying better not more), have managed to save (while still at university) a reasonable sum of money. When I was younger, this money was all kept in CD’s or savings accounts, which earned paltry interest. However, in accordance with apparently logical principles of money management, I invested in 2004 some of this money (which I don’t need for spending) in a variety of large-cap stocks that have global reach. Well, all went well and good, until everything went to crap in 08/09, and as I didn’t have the foresight to withdraw before then, forcing me to ride it out, take my lumps, and call it a “learning experience” while as of right now, I’m still waiting to regain the $4k to just get back to my principal (requiring another 6.5% growth, not counting 4 years of “lost growth”).

Granted, other than having more foresight, it made little sense to invest money not needed in the short-term in savings/CD/bonds, as these earn too little interest when the historical assumption is that broad risks of diversified market investing balance out over a 20-year horizon. Considering my recent experience, I have started to become skeptical that this conventional wisdom has much merit.

But a thought-provoking article nonetheless!

Best wishes,

15 G September 26, 2009 at 9:44 pm

Patrick is correct, Jack would have saved $2,421,625, to be exact. However, if Jack had started saving 2 years before hand, at age 20, he would have saved $3 million!

16 David February 9, 2010 at 1:23 pm

Excellent article. Thank you for all your hard work. We all appreciate it very much.

17 Nicholas May 27, 2010 at 10:15 am

If you’re Canadian, one of the best high-interest accounts I know is ING Direct, an online bank with no fees. I have an Investment Savings Account (ISA) and a Tax-Free Savings Account (TFSA) with them, and plan on setting up my RSP and (Un)Mortgage through them also.

Plus they are offering a $25 bonus to any new account openers (min. $100 balance), so if you are looking to start saving, this is a good place. The Orange Key to get the bonus is 17100653S1.

For more info and easy instructions on how to open an account, check the ING Direct website: http://www.ingdirect.ca/referafriend/

Happy Savings!

18 Kris Freeberg May 27, 2010 at 12:31 pm

See Budgeting Myths & Realities


19 Andre Sanchez June 5, 2010 at 2:01 pm

“Saving money” is a lame behavior fostered by a consumerist society. Think about it.

You “save money” by “buying” a savings account (yes, I know it doesn’t look like you are buying the savings account, but that is in fact what you are doing) or some other investment PRODUCT. You then sit back and expect that “purchase” to automatically generate wealth for you. All you have to do is go to work and use your wages to “consume” investment products as opposed to coffee and you’ll be rich! Except that’s not how the world really works. Granted, you can get lucky. You can win the lottery, or your blind purchases of investment products can pay off. But aside from luck and theft, you only make money when you produce wealth. Even the money from dividends or interest has to be earned through your own efforts. Being a man is primarily about thinking for yourself and not getting stuck in a fantasy world. Children and women can live in fantasy IF they are anchored to a man that is himself anchored to reality. A man should “save” some money, enough for an emergency. He should, if storage room is available, “save” some food and other primary items as well.

He should invest too. An investment is the application of capital to a particular purpose. First in his health and education, then in the tools of his trade, and then in his social alliances and secondary trades (being a “stock investor”, a “lender” (even to banks) or a “real estate investor” are all occupations, regardless of how much time you spend on them. You get paid for doing your work right, not for having cash to dump somewhere).

I also wonder where you found this savings account paying 12% a year (every single year no less!), unless you are talking about the saving accounts of countries with 10 to 15% inflation.

20 Zeno Izen June 19, 2010 at 11:20 am

Andre- The second half of your comment has some value, but the first half I think is merely provocative.

In any case, saving money nowadays is more complicated than ever. There’s hardly any place to actually get a return. You’re lucky to neutralize inflation, really. Myself, I have an ING account, and I’m getting roughly 1% monthly. The BofA fee to transfer what little money I earn wipes my return out before I even see it, so I have to keep my money in checking and pretend it’s not there.

Securities etc. are a joke. It’s a second job just to figure out what investments are sound enough to buy and hold. Willy nilly trading pays as well as the craps table. And that was before the 2008 wipe out.

Now we live in a weird world that won’t let you get away with anything other than working for a paycheck and holding onto it for dear life. At least the pretence is gone.

The essential point here may be that you’ve got to be smart with your money. And you’ve got to have self control. Don’t try to get rich, and try not to be poor. Work harder, live simpler, be smarter and keep your eyes open for threats and opportunities. Create objectives for yourself and try to meet them. Everything else is extra.

Oh, and anytime you’re getting a 12% return, you’re probably participating in a bubble (or a criminal enterprise?). It won’t last long. Get out fast.

21 Daniel Coats June 25, 2010 at 7:38 pm

I agree with the unrealistic 12% number. If someone could assure me a cool 12% every single year, I would put 20% of everything I made into that.

22 Daniel Coats June 25, 2010 at 8:05 pm

This site is a good intro to beginning the savings track, and get into investing too at some point.

High yield online savings accounts are the best way to get started at first. The rates used to be much better but they are still better than a brick-and-mortar bank. Then when you get some capital saved up get into the investment world as some of suggested earlier. Buying precious metals every so often doesn’t hurt either.

23 Daniel Coats June 25, 2010 at 8:07 pm

Well it would have been nice to post the link of the site I was referring to….


24 Andre Sanchez July 6, 2010 at 4:32 am

Zeno Izen,

The first part of my comment is “provocative” only in the sense that people need to be shocked awake. It is entirely true. The entire modern perspective on what it means to invest is a consumerist-driven fantasy. That is why there are “no good places to invest”, because there aren’t supposed to be any. Investing is not a passive activity. It has never been a passive activity and it will never be a passive activity. You can’t “buy an investment product” and be done with it. Not even if you are a big bank (as was clearly seen by the banking “crisis”). Not even if you are China and the investment products you are buying are U.S. Bonds. This mentality is hugely destructive and should be crushed ASAP.

25 Anto April 16, 2013 at 1:27 pm

Savings! This will be my next hobby! As soon as I am back to the working world that is. I had been saving money for 3 years, then spend them ALL for my postgraduate studies abroad. I come from something called the ‘third world country’ hence can’t really pile too much of them green stuffs. I do feel that it’s been a life worthy experience of studying abroad. So hopefully my ‘investment’ whatsoever pays back well enough soon!

26 M April 22, 2013 at 7:46 pm

Boy I wish this article were still accurate. Any advice for the current market? Now that my bank is paying a paltry .04% interest rate on savings and I have a roth IRA but not enough for the minimum of many/most stocks/bonds/etc…. It’s hard to know even where to begin, except to save anyway and keep your credit good/fix your credit.

27 Murph March 21, 2014 at 6:00 am

Somebody handed me the Jack and Jill story when I was 18 years old while I waited in line in Millington, TN. I called an investment company the next day. I am 40 this summer. I have changed investment firms twice but I never let these three excuses above get in my way. I am crushing Jack’s numbers because I didn’t quit after 6 years. Some say “Pay yourself first.” I am more honest about it. I “hide the money from myself” through direct deposit and/or allotments. Boom.

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