The Cash Box: Saving Money Is About Developing Good Habits

in Retirement Planning by

I’ve been a financial advisor for over ten years and it’s hard for me to imagine doing anything else. Nothing makes me happier than steering my clients toward a comfortable retirement, or maximizing the effectiveness of those 401K contributions. And the only thing better than watching my clients get richer – apart from maybe watching the Giants take the World Series – is knowing that I practice what I preach. If I have to drive an extra mile to save five bucks filling up my gas tank, or buy next year’s Christmas presents in January, I’ll do it with a big smile on my face.

My family and friends are used to it. I’ve always been frugal. In college, I spent one winter walking around in my ski jacket and gloves rather than turn on the heating during the day. I had the money to pay the bill, yes, but I knew being cold wasn’t going to kill me and I wanted to save every penny I could. Okay, that sounds a little extreme, but this was a Californian winter and I wasn’t going to get frostbite. I just wanted to save a little money!

For as long as I can remember, I’ve wanted to save money. I know it’s why I love my job, but it’s also deeply embedded in who I am, and I can trace it back to one specific Christmas present that my grandfather gave me decades ago.

The Cash Box

When I was seven years old, my grandfather gave me a gift that probably cost him $2 (this was the ’80s, people), but it ended up changing my life forever. No, it wasn’t the fancy Nintendo or Megatron Transformer I was hoping for, but the look on Grandpa’s face when he gave it to me said it all. He folded his arms across his chest and watched expectantly as I tore open the gift wrap to find a small, square red tin that said “Cash Box” on the front.

I didn’t know it at the time, but there in my hands I was holding a little piece of who I would become. For me, the reason I loved my cash box at first sight wasn’t just that I knew my Grandpa wanted me to. Even at the age of seven, I knew that my Grandpa was a “Saver,” and more than anything I wanted to be just like him.

Not only was Grandpa good at the important things, like bike riding, fly fishing, and fixing things, but he had been an engineer in the Navy in WWII, had made it through the Great Depression (living at home while attending U Penn to save money), started his own business in San Francisco, bought a beautiful old house he and my grandmother fixed up themselves, and put their two daughters through the best private school in the city.

My grandparents never acted ‘rich,’ because in their minds, they weren’t. They shopped at budget supermarkets, fixed anything they could themselves, and drove their modest cars into the ground before buying new ones. And I wanted to be like them.

Grandpa’s instructions were simple. He told me I could use my cash box to put my allowance and earnings inside. He also said not to spend all of my cash or else I would not have any for later. I took these suggestions to heart, and boy did it pay off.

By the time I was ten, I became known by our family as “The Cash Box”. Not because I was a miser, but because I was frugal and only spent my money on things I thought were absolutely necessary– at that time, it was just the occasional pack of baseball cards and candy. I watched my sister blow all of her birthday money on a Cabbage Patch Kid and then the next day she was broke and wanted a My Little Pony.

I just silently held on to every cent I earned. In fact, whenever anybody needed cash in my family (usually my Mom when she didn’t have change in her purse for hot lunch, or a $20 book order), they would come to me and I would give them a loan (and charge interest.)

By the time I was 12, I had several hundred dollars saved, denominated in ones, fives, and tens, plus loose change. As I got older, the cash box always reminded me to save my money. I would come home over the holidays from college and the cash box was always in my room on the shelf. Whenever I made a significant purchase, I always thought about my Grandpa and if he would approve my decision. I was now, officially, a “Saver”, just like my Grandpa.

Being a Saver is the simplest thing to do (don’t spend money unless you have to!), but that doesn’t mean it’s easy. It takes discipline and willpower. It could mean giving up your Venti Vanilla Latte coffee three days per week or going out to dinner once a month instead of every Saturday night. You might have to sacrifice your pride and drive your Honda escort for another 100,000 miles, or make your next time-off a Stay-cation. However, it’s those small sacrifices that allow you to reach your financial goals in the end.

It seems harder now to be a Saver than it was for my grandparents. Back then, the shared experience of the Great Depression meant that everyone saved every penny, because the financial abyss was right around the corner in their minds. Most families relied on a single earner, had more children and fewer government subsidies, and yet somehow most people managed to save money. These days, if you aren’t taking your family to Cabo for Spring Break on the credit card or getting a big car loan for the shiny new hybrid, you’re out of place.

Five Reasons Why People Save Less Today

Why do people save less than they did 20, 30, or 40 years ago? I believe there are 5 simple reasons why people save less than then they did 20 or even 30 years ago:

1. Immediate Gratification – Americans today want things right now. The idea of giving up something today for future gain is becoming more challenging than ever. The media bombards us every day with messages that make us believe we deserve things we don’t.

2. Education – Many people simply have not been educated enough on how important it is to save for their future. According to the U.S. Bureau of Economic Analysis and Trading Economics, the personal savings rates in America have significantly declined over time (see chart below). In 1959, the U.S. personal savings rate was just over 8% and as of July 2014 is now 5.3%. (Source: Trading Economics & U.S. Bureau of Economic Analysis)

3. Sense of Urgency – Another common belief is that you can put saving off until later in life. This is a huge mistake. Contrary to popular belief, most of the growth over time in a portfolio does not come from savings, but from dividends, interest, and capital gains. It’s compounding baby!

4. Too Much Debt – This can be a killer. It’s one thing to have a home mortgage or student loan, but having credit card debt is usually preventable. According to the Federal Reserve numbers, the average indebted household has $15,252 in credit card debt. High interest credit card debt is one of the single worst things you can have when trying to build a nest egg. For example, paying 17% APR on a credit card is literally throwing away your money. You can’t even build an aggressive portfolio that would outpace an APR of 17% as the long term returns of the U.S. market have averaged around 10% per year over the past 80 years.

5. Bad Habits – Yes, saving is a habit. If you get in the habit of putting a certain percentage away into to savings or your company sponsored retirement plan every month, then it makes things much easier. Heck, if you put money into a Traditional 401(k) or IRA you get a dollar for dollar tax deduction and tax deferred growth! As an example, if you make $50,000 per year and contribute the maximum into your Traditional IRA for 2014 which is $5,500 (if you’re under 50), that would mean your adjusted gross income would be reduced to $44,500. If you decided to spend the money instead of saving, you would have been taxed at the 25% marginal tax rate for federal taxes and another 8% state income tax (if you live in California). By simply saving into an IRA you saved $1,815 in taxes and can let your money grow tax deferred in a retirement account!

5. “I can continue working in my retirement years” – It’s great that you love your job and don’t want to retire, but you still must save and plan as if you would retire. This is because the job you enjoyed for the past 10 years, you may despise 20 years from now when you reach retirement age. You also have to remember that health issues become more prevalent in your golden years which can keep you from working in the same capacity or working regular hours. I’m not advocating doing nothing in retirement, but you need to create a safety net in case life throws you a curve ball.

US Savings Rate

So, how much do you need to save in order to retire comfortably? If you are looking for a good place to start, I recommend saving at least 10-15% of your gross income.

Here’s an example:

Age – 30

Starting Portfolio Value – $100k

Annual Income – $50k

Time Horizon – 35 years (retire by age 65)

Savings Rate – 10% (tax deferred)

Assumed Inflation – 3%

Social Security – $15k at age 65

Assumed Growth Rate – 7% per year

Result – $762,870 by age 65

At a conservative 4% withdrawal rate, you would be able to generate nearly $30k per year from a well-diversified portfolio. Combine $30K with Social Security and the total income comes out to roughly your average working income.

If you are trying to save later in life, you might have to put away considerably more, or work longer. Either way, the foundation of any solid nest egg starts with saving, not relying on your stock portfolio to produce 30% returns year over year or hoping to pick a winning lottery ticket.

More than anything else, you need to think of yourself as part of a tribe: the Saver Tribe! It’s okay to be judgmental (silently) about your friends who throw their paychecks away and run up credit card debt. It may be cool now to buy $250 tickets to see Jay Z or Beyoncé, but that $250 could be $2,000 in retirement!

I know it sounds cliché, but my Grandpa always told me, “a penny saved, is a penny earned”. Sometimes old-fashioned advice is the best advice, and I know he was onto something.

Grow your savings with Personal Capital.

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Scott Baber

Scott Baber

Scott has been in the financial services industry for 10 years. His experience has been in working with individuals, families, and businesses to achieve their financial goals. Scott spent the majority of his career at Merrill Lynch where he advised hundreds of clients and provided a variety of wealth management services. Scott's success led him to start an independent practice focusing on people needing help planning for their retirement. His in depth knowledge of wealth planning and strong background in technology, enable him to deliver the innovative solutions offered by Personal Capital. In his spare time, Scott enjoys playing golf, fishing, and hiking in the Sierra Nevada Mountains.


  1. Will Steinberger

    Nice refreshing article, Scott!

    I feel that the phrase “a penny saved is a penny earned” could be updated to reflect the power of compound growth. Something like, “a penny saved is a nickel earned.” It’s not as catchy as the original…but it works 🙂

    • Financial Samurai

      I think I’m going to steal that line!

    • Scott Baber

      Thank you Will. I like your phrase too–very clever!

  2. Financial Samurai


    Good stuff about this small childhood memory leading to greater things thanks to your grandfather.

    I definitely think our parents and our upbringing shape most of who we are today (+1 for nurture). And that’s encouraging, since that means parents can do more to help their children.

    My parents were always so frugal, that I have grown up frugal as well. I wanted to save like crazy since I graduate college b/c I wanted to be free sooner, rather than later.


  3. SavvyFinancialLatina

    Great story! I grew up in a modest, low income family, so saving is just part of DNA. Honestly, now I feel guilty because we spend so much much more money than my family did while I was growing up. I don’t ever want to live paycheck to paycheck and that’s why I save money.

  4. A Taught Saver

    Prior to marrying, I was a spender, but my wife taught me the value of saving. The lessons started right as we walked in the door from our honeymoon when she turned to me asking, “How much do you owe on credit cards?” (Literally, as we walked in the door.)

    She wrote a check to pay them off and we started working as a couple on our spending.

    With both of us being engineers, we began a life of living on close to one income. We both maxed out our 401K limits, monthly contributions to a taxable account, and full Roth contribution for both of us. Soon, we started making double house payments on our modest home, which is paid off now. We never carry a credit card balance and we don’t purchase new cars or the like without cash on hand.

    When our child came along, we dropped to one income (with one of us at home). Mentally, it was a big leap from the financial viewpoint not even considering the first child aspect.

    With our bigger family, we continued to max out the single remaining 401K and full Roth contributions. We have adjusted our taxable account contribution to not be monthly, but they are more a quarterly event.

    We are teaching our daughter about financial matters along the way. She receives birthday money from grandparents and puts a part in savings (a piggy bank), tithing, and purchases herself a gift with the remaining portion.

    Financial independence is our goal and it is in our reach at a very early age.

  5. Mr CB

    I feel like the main reason that people don’t save is not because they don’t have money but because we all have too many luxuries. I understand that there are people that struggle for other reasons but for the average middle class person the luxuries kill savings. Think about it, 50+ years ago people lived in smaller houses with more people, drove one car for the whole family that they general maintained themselves and drove for 100s of thousands of miles, didn’t have internet, cable, cell phones with data plans, etc. How do we do things now? We live in big houses with a room for every kid plus hobby rooms, entertainment rooms, game rooms, etc; we lease/buy new cars every few years with all the added features (wifi for your car, for example); most people couldn’t change the oil on their car to save their lives, let alone make any major repairs; everyone has internet, cable, cell phones with data for each member of the family, etc. We also spend a lot of money putting kids in day care, something that wasn’t common 50 years. We even have doggy day care instead of putting the dog out in the back yard because it might get lonely. While most people don’t do all of these things, we almost all have at least one luxury that costs us a lot of money that people didn’t have 50 years ago. Maybe if we lived like people did 50 years ago we could all be savers. Maybe we could all change at least one financial habit and put that money into savings instead of spending it. The one I’m working on now is eliminating fast food/junk food. My family has definitely cut back a lot but we still have a ways to go. It’s been good for the budget though and my waist line.

  6. Esther

    Thanks, i will begin savingc


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