The Many Definitions of Saving

savespendWhen we talk about saving money, what do we mean? I hear the word “saving” thrown around plenty, especially as a blogger who talks about it frequently. But I have found when people say that they have “saved money” they are often talking about very different things. Below are three definitions that I come across frequently:


Saving Definition #1: Not Spending

People talked about how they saved money by quitting their latte habit, for instance. They have cut an expense out of their routine or they decided against a big purchase that they normally would have made. This is great! They have taken an honest look at their spending and decided to NOT spend on an item that isn’t aligned with their goals and priorities. However, if they stop there, problems arise. Have you ever seen those old cartoons where a dam springs a leak? The cartoon character plugs the hole with his finger only to find that it causes another leak nearby. By the end, he has all fingers and toes blocking up various leaks and the whole dam collapses. The same can happen with this definition of saving, if you aren’t careful. Without a plan for your money, everything that you saved by quitting your latte habit can start to leak out through spending elsewhere. So, when you are patting yourself on the back for not spending, make sure to ask yourself the next question: what are you doing what that money saved?

Which brings us to the second definition…

Saving Definition #2: Putting Money in a Safe Place

This definition usually comes up when people are recapping their month or year. They will say that they were able to save $x to put in their 401(k) this year or that they saved up for a down payment on a house. They actively took the money that they didn’t spend, the difference between their income and spending, and put it away somewhere to be used (or not) at a later date. Of course, there is a WIDE range of “safe” places you can put your money, with varying levels of safety, from under your mattress to a low-cost index fund protected by a 401(k) tax-advantaged account. Both the places to save your money as well as the goals to save towards are up for debate, but if you are “not spending” AND “putting your money in a safe place”, you are ahead of the vast majority of people already!

And finally, we have the dangerous definition…

Saving Definition #3: Getting a “Deal”

This is the definition most used by marketers. The idea is that you are spending money on a product or service that you weren’t planning on purchasing previously, but the deal is so good and you are “saving” so much money, that you just have to pull the trigger. Groupon is the perfect example of a company that appeals to our desires to get a deal. However, when people say that they are saving so much money with Groupon on a nice dinner, I think it is actually a misuse of the word “saving”. Even if the deal is a good one and what you are getting is worth much more than you are paying for it, the act of buying a deal is spending, NOT saving. Is that to say that you should never purchase a deal? No. Spending money can lead to enjoyable experiences, especially when aligned with your priorities. However, you have to recognize that this is not an act of saving, as the marketers would have you believe.

It’s important to understand the different definitions of saving. The next time you use the word, think about what you really mean and use that to help guide your money decisions!

Have you found the term “saving” being used in other ways?

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