40–Lever #4: Interest Earned (Part One—Saving and Investing is Biblical)
The wisdom of saving and investing money for future provision
With this article, we come to Lever #4: “Interest Earned” (IE). To get here, you started with an income (I), perhaps some starting wealth (W), which, as measured by net worth, was possibly negative starting out. Then you learned to minimize your tax burden (T) by using tax-deferred accounts, such as 401(k)s, and the importance of controlling expenses (E). (We’ll discuss avoiding debt—interest paid, IP—later on. You want to do all of these things to create financial margin while increasing generosity (G).
This is probably the lever you were looking forward to the most. But if you hoped I would tell you how to get rich quickly by picking the right stocks, I’m sorry to say you’ll be disappointed. Trust me, I believe you’ll be in a better financial position 20, 30, or 40 years from now if you pay attention and follow the suggestions I'll provide in the next few articles, but you probably won’t be able to retire at 35.
In this “lever” series, you’ll learn about the wisdom of saving and how to invest the money you have saved in both taxable and tax-deferred accounts like 401(k)s, 457s, 403(b)s, and IRAs to increase “IE”. As we discussed earlier, these fancy account type numbers are nothing more than labels on the outside of a bucket where you store your money. Inside each bucket is (or will be) a pile of cash you can invest and grow, in some cases, tax-free or tax-deferred if it’s in a retirement account-type bucket.
Having some cash is better than having none, but cash is generally not a good investment, because, as you now know, inflation erodes its value at a rate of 2-3% per year, sometimes more. As a result, you will want to invest in something that at least beats inflation.
Simply put, this involves saving and investing to grow your wealth, which, as you may recall, is one effective way to utilize your money.
Therefore, when discussing “interest earned” (IE), I’m talking about the accumulation of assets that 1) pay you interest or dividends, or 2) appreciate, or 3) do both. I’m also referring mainly to “liquid” assets, meaning they can easily be converted to cash (not to older vintage estate wines).
For example, stocks in a brokerage account can be quickly and easily sold for cash. A house you own is an asset that may have appreciated, but your equity (what it’s worth minus what you owe on it) isn’t easily accessed— it’s “illiquid.”
Some assets, such as stocks, appreciate (grow in value) and may also pay “interest” (stocks pay dividends). Others, such as money in a high-yield savings account or a certificate of deposit (CD), only pay interest.
If we return to our FLE, we see that “interest earned” (“IE”) is additive to the formula. Therefore, besides increasing your income, the only way to grow future wealth (Wt+n) is to reduce all the negatives (except giving) and increase interest earned (IE).
Wt+n = Wt + ∑It+n –∑Tt+n–∑Gt+n–∑Et+n+ ∑IEt+n–∑IPt+n
Where: ∑IEt+n = The sum of all future interest earned (i.e., investment returns) for the period t (current time) plus n (years in the future).
To accumulate interest-paying assets, you have to set aside some of your income for that purpose, which is what saving is about. You save money today and let it grow, so that you can use it for something else later on, which is the opposite of borrowing (a/k/a “negative saving”). Once you do, those savings mathematically increase current wealth.
To increase future wealth, you must save more, and unless it is significantly more, you also need to grow it by investing it to earn interest (IE). You can save and not earn interest (perhaps by putting your money under a mattress or burying it in a coffee can in your backyard). Still, it is almost always better to invest it because you will have more later on to use for whatever purpose you intend.
Saving is a good use of your money, but, as with most things involving money, the challenge with saving is your heart—your motivations for saving. Scripture provides us with a vision for saving that is not driven by fear or greed, but by wisdom and faith. “For whatever does not proceed from faith is sin” (Romans 14:23b, ESV). Therefore, before I discuss how to save, earn interest, or grow our assets, you need to understand what saving means and how to do it in a way that honors God.
From a biblical perspective, saving is simply one of God’s ordinary means of provision. Failing to do so can leave you vulnerable, not just financially, but spiritually. Have you ever heard the story of the man waiting on God to rescue him from a flood, refusing a boat and a helicopter? He didn’t realize those were God’s provisions.
You and I live in a fallen, broken world. Things break, jobs disappear, and emergencies happen. That’s why saving is so important; it creates margin so you can avoid crisis-driven debt and bless others.
Saving can also help with significant, expected needs in the future, such as a down payment on a home, a vacation, medical expenses, retirement income, or helping others in need. It can also be good and biblical to leave something for future generations (2 Corinthians 12:14, Proverbs 13:22).
On the one hand, it is foolish to save too little, especially if you know you will have needs in the future, as funds won’t be there when they’re needed. Failure to save is a chronic problem that can ruin individuals and families. Scripture says you should follow the example of the industrious ant:
"Go to the ant, O sluggard; consider her ways, and be wise… she prepares her bread in summer and gathers her food in harvest” (Proverbs 6:6-8, ESV). The ant saved so that she would have food when she needed it. Verse 11 in Proverbs 6 can be the sad outcome for those who don’t:
And poverty will come upon you like a robber, and want like an armed man (ESV).
The Bible is clear: it is wise to prepare for the future. Other verses support this.
"The plans of the diligent lead surely to abundance” (Proverbs 21:5, ESV).
"Precious treasure and oil are in a wise man’s dwelling, but a foolish man devours it” (Proverbs 21:20, ESV).
The story of Joseph is a prime example. After God warned Pharaoh of a coming famine, he stored grain during the good years so that there would be food during the bad ones. His planning provided not just for Egypt but also for God’s people.
But on the other hand, it is foolish to save too much. Consider the parable of the rich fool (Luke 12:18-19). It describes God’s view of money and saving in particular. Saving isn’t sinful, and is even wise in many cases. But it can be sinful, particularly when we act as owners instead of stewards. The rich fool was consumed with himself. Also, he was only focused on this life, not the life to come. God was a non-factor. He thought he was clever, but God called him a fool.
Jesus wasn’t against planning, but He was against hoarding. The man’s mistake wasn’t storing grain. It was storing it only for himself. That’s the difference between wise saving and sinful hoarding: Hoarding is saving without generosity, without dependence on God, and lacking a godly purpose. And the Bible has much to say about it:
"People curse the man who hoards grain, but blessing crowns him who is willing to sell” (Proverbs 11:26, ESV).
"Wealth hoarded to the harm of its owner” (Ecclesiastes 5:13, ESV).
"You have hoarded wealth in the last days” (James 5:3, ESV).
"Greed...is idolatry” (Colossians 3:5).
But hoarding isn’t just about money; it is a heart issue. It reveals where our true trust lies. If saving makes you feel invulnerable, then savings have become your savior. And that’s a tremendous spiritual danger.
Assuming you agree that saving is important, you may wonder, “Which takes priority: giving, spending, paying off debt, or saving?” This is not a math equation with a simple answer, but the general pattern we see in Scripture is to give first and save last; your “savings” are what you have after you give and spend (i.e., provide for yourself and your family).
Saving is wise, but it's not always possible. If you’re barely making ends meet, you probably need to focus on things other than saving: either increasing your income, reducing your expenses, or both.
That said, if you’ve done all you can to lower your expenses (which may include things like eliminating that daily latte at Starbucks), it’s okay not to save right now (though I would strongly encourage you to get at least a $300 to $1,000 emergency fund in place). Do all you can to get into a better place, then start. Just be aware that if you wait a long time, you’ll have to save more aggressively in the future.
If you're able to save, great! Do it prayerfully, intentionally, and generously. Remember, as Christians, we view saving differently than the world does. The world trusts in their savings; Christians trust in God. Jesus Himself said:
"Do not be anxious, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’... Your heavenly Father knows that you need them all. But seek first the kingdom of God and His righteousness, and all these things will be added to you” (Matthew 6:31-33, ESV).
For Reflection: Are you stewarding your finances to create the margin you need to save? If so, are you saving out of fear, greed, or faithfulness? Have you submitted your saving plan to God, or are you trusting in it instead of Him? How can your savings be used for yourself and to bless others?
Verse: "Whoever trusts in his riches will fall, but the righteous will thrive like a green leaf” (Proverbs 11:28, ESV).