Ben Franklin is one of my personal heroes and one of his more famous sayings was “a penny saved is a penny earned.” Frankly (pardon the pun), I’ve never been fully comfortable with that one. I understand the premise, that not spending an amount of money leaves your bank balance the same as it would by spending it and earning an equal amount. But I don’t really agree with it.
Actually, it turns out that ol’ Ben didn’t come up with the saying. First of all, the attribution didn’t first appear until more than 100 years after his death. And in slightly different form, the proverb had been kicking around since at least the 17th century. In 1633 “a penny spared is twice got” appeared in Outlandish Proverbs. That one also suffers from not being mathematically sound; if only I could double my money by simply not spending it!
Now I’m not a member of the “rah, rah don’t bother saving money, just earn more, rah, rah” camp. In fact the claim is a pet peeve of mine. But I disagree with the premise that saving is equal to earning.
As a proverb, I get it. It’s a good concept. But when people start taking it literally, I balk.
Examples of taking a penny saved is a penny earned literally:
I occasionally watch the TLC show Extreme Couponing. While I disagree with some of their tactics, I have to admire someone who can manage to get their groceries for basically free. But there was one episode that always sticks out in my mind. One woman planned on using the savings from her extreme couponing shopping trip to pay for a family vacation. This is a great example of taking the proverb literally.
My problem with this is related to a common complaint about the show. She bought all sorts of stuff that she didn’t need or was stockpiling well past what she had to or possibly past what she could use before it expired! It’s not saving money if you wouldn’t have spent it otherwise.
Besides, most stores have a 90 day sale cycle. A stockpile doesn’t need to last beyond when you can get that item for the same price again. Doing so is just borrowing against your future self.
We’ve all seen them; the car commercials that show people buying all sorts of stuff with the money they saved on their car purchase. This one is absolutely ridiculous. Most new car purchases are financed, which means that you didn’t actually have the money you “saved” in the first place.
Even worse, when the offer is “cash back.” When you get a car loan and get cash back, you are basically borrowing money from you future self. If go out and buy Christmas presents with that cash, you are going to be paying for those presents for up to 5 years.
At the end of the day, treating money saved as money earned is simply penny-wise and pound-foolish. If I saved myself $2 this morning by not buying a cup of coffee, does that mean I have an extra $2 to spend on lunch? Or is that simply $2 that I would have been short to pay my bills? By being responsible about a purchase, I haven’t created any more money than I had before.
Do you agree with the saying that a penny saved is a penny earned?