Jars! An old concept still relevant today
Written by Trevor Keidan on May 19, 2014.
If you are as old as I am, perhaps you remember back to your youth when your Granny hid jars of money in the kitchen cupboards. The jars were her method of financial planning – a jar for the milkman, one for the bread, one for the electric, one for Christmas, one for a seaside trip and so on. Every time Grandad handed over the housekeeping it Granny would methodically divide it into the jars in terms of priorities. In its way it was a complex piece of financial planning with all the details and ratios kept locked away in my Grandmothers head.
Zoom forward to the 21st century and this all seems a little outdated. Today’s Grannies are more likely using Paypal on their iPads and buying their groceries online. However the old jars concept of saving remains as relevant as it has always been. To summarise in the most simplistic way possible, financial planners provide the metaphorical jars which help you to save your hard-earned money for known future expenses. By taking a small portion of your monthly disposable income and saving it in a ‘jar’ for future use, we help you to effectively plan for known or suspected future expenses without an overbearing financial burden at any single point in time.
Your first jar should be an emergency fund of at least three months’ income, preferably six, kept totally liquid and easily available in case of an emergency. The unforeseen usually occurs at the worst possible time, but having this buffer of cash can at least take away the added pressure of financial strain and ease the stress levels.
Once your emergency fund is sorted out the next thing is to concentrate on savings. Like Granny you will be saving for different things each with its own timescale and priority. Things like retirement, education for your children, the deposit for a property; it could be anything depending on how you define your medium and long term objectives. This is a process that a professional financial planner can help you with. Asking questions that will hopefully stimulate thought, and ultimately action on how you structure saving for you various different requirements.
Unfortunately, the truth is that keeping savings on bank deposit in these days of low interest is likely to provide little better in the way of returns than Granny’s jars. Here again a financial adviser can help you structure you savings so they get decent returns on investment. By utilising compound growth your savings will benefit; a bit like a friend of Granny’s topping up here jars with ever greater sums of money as the years go by.
So as you can see the principle behind Granny’s jars is a sound one that is just a relevant today. But one last piece of advice; if a financial adviser turns up on your doorstep with a bag full of jars …………don’t fill them!