How Saving Money in 3 Different ‘Piggy Banks’ Can Transform You Financially

As an entrepreneur, you know you have to save more money, but you keep scratching your head saying, “I don’t have any extra money to save.”

I get it: I’ve heard it, I’ve seen it — and you’re not the only one. According to U.S. News and World Report, people get caught in the cycle of “being broke” for three main reasons: They haven’t planned ahead, aren’t tracking their spending well or simply have poor financial habits. But there is a way to save money that is catered to your lifestyle, is sustainable and, believe it or not, is something you probably did as a child: the modest piggy bank.

Think of saving your money in one. Yes, a piggy bank. I have set up three different types of piggy banks for my daughter, and even you — as a serious adult businessperson — can adopt this same system to create an entirely new relationship with money. You won’t be put on a budget, you won’t be told what to spend or not spend and you won’t feel at all deprived during the process.

How can you use piggy banks to break the cycle of being broke? Let’s begin by talking about those three piggy banks in my daughter’s room and the purpose each one serves.

1. A white pig piggy bank with pink spots. So you can enjoy your money.

The first piggy bank is a white pig with pink spots. It is very cute and fun, which is exactly what it is there for: fun money. My daughter saves money into this piggy bank each month to buy a future bike or new toy. She has to spend the money that same year, so she can enjoy her savings.

That’s the key to this piggy bank: You have to spend the money by the end of the year. Why is this so important? Because you have to be able to enjoy your money that you work so hard for. If you are always putting off the activities or new things that you want in your life, you will feel deprived and start resenting your money.

You will also end up stuck in your life, which might be how you’re feeling right now. By saving each month for the purchase, you won’t feel guilty spending your money. You’ll basically already have spent it. This is your money to spend on a trip, a relaxing retreat, a home renovation, car purchase, or whatever you’ve been craving all year. It allows you to enjoy and live a richer life today — because you know you are still saving plenty for your tomorrow.

2: A hot-air-balloon piggy bank: for your longer-term goals.

My daughter’s second piggy bank is a toy hot-air balloon. It’s meant for her bigger dreams, which are just floating in the air right now. It will be for her first car or other big purchase sometime in the next 10 to 20 years. This is my favorite kind of piggy bank, because it becomes your second or third salary.

Your money will be earning its own income based on the investments you put it in. It can help supplement your income in retirement, give you a big safety net if you have to leave work for health reasons or become an investment for a vacation house or something else, depending on your longer-term goals.

3: A basketball piggy bank: Don’t touch until you retire.

The third and last piggy bank is a basketball bank, because we are hopeful she will play basketball in college; so this is her college fund money. For you, this will be your retirement money, which will be saved into some type of retirement vehicle such as a 401(k), IRA or Roth IRA, to start.

The money here needs to be kept in a place where you won’t be tempted to touch it before retirement. These types of vehicles have restrictions on them for taking money out, such as taxes and penalties, which helps deter you from withdrawing any of it before a certain age. Yet, this doesn’t always work, so it should be kept somewhere else, perhaps with a trusted advisor who will steer you away from depleting the money before your retirement age.

So, where do you find the extra money for your piggy banks?

Now that you know how the piggy banks I’ve described can work with your money, how do you get money into them? The key to is to start small. You will be slowly increasing your savings each month until you hit your optimal savings rate.

It’s similar to a diet — the kind that works because it doesn’t leave you starving all day long, leading you to scarf down that entire piece of chocolate cake. By small, I’m talking putting 1 percent into each account to start, then increasing your set-aside amount each month until you hit your maximum savings rates for each account.

The beauty behind this strategy is that you begin by lowering your expenses slowly, so you can stop spending money on stuff that isn’t bringing much fulfillment into your life.

Using the piggy bank method, you can get out from under student and/or business-loan debt, pay off credits cards and even consider early retirement. Once you see the power of these deposits into your different piggy banks, you’ll want to save more so you start prioritizing your spending better.

You can create a new life where you are living more richly today and tomorrow by shifting your financial mindset away from “being broke” to simply saving a little extra money — just the way you did as a child.

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