Aesop wrote his famous fables more than 2,600 years ago and yet his moral lessons are still understood and taught today.
Tales like ‘The Tortoise and the Hare’ and ‘The Boy Who Cried Wolf’ are just a couple of the 725 stories Aesop wrote. But even these were based on earlier works from the Sumerian culture, pre-dating Aesop by 1,000 years or more.
Adages and proverbs have a long history, then, and the truth of these stories and adages still resonates today.
Here are a few financial lessons – from Aesop to Benjamin Franklin – that remain applicable to your finances and that might prove useful in the year ahead.
1. Money doesn’t grow on trees
Having a child is expensive – around £233,000 to the age of 18, according to a recent Times Money Mentor report. This is one of the reasons why you’ll certainly have heard the phrase “Money doesn’t go on trees” as a child, and probably used it as an adult.
Its origin is unknown but it stretches back to at least the 1880s and has iterations in languages other than English.
You know that you can’t plant a money tree and expect to sit back and reap the rewards of its harvest. That’s why you have a long-term financial plan in place that involves budgeting in the present to save for your future.
Falling inflation and the chancellor’s recent National Insurance cut might mean you have more disposable cash this year, but the cost of living crisis isn’t over. Stealth taxes and fiscal drag mean that managing your income and expenditure will remain as vital as ever.
While you might’ve tired of hearing it as a child, this lesson remains valuable to adhere to today. It’s also an important lesson to pass on to children and grandchildren struggling with the concept of saving.
2. Look after the pennies and the pounds will look after themselves
An early usage of this phrase attributes it to William Lowndes, the British Secretary of the Treasury, from 1696 to 1724.
The adage found popularity among Victorian moralists advocating a life of thriftiness, but the lesson wasn’t taken this way originally.
Discussing the use of the phrase, Lord Chesterfield described his friend William Lowendes as a “very covetous, sordid fellow”.
In 2024, you might find that you can take the message literally, using your bank’s top-up feature. Each time you make a debit card payment, an app will round up the purchase and send the difference straight to your savings account.
These amounts soon add up and are a great example of this old adage in action.
3. Save for a rainy day
You’ll have heard us talking about the importance of an emergency fund before, but it’s far from an original Globe IFA idea.
In fact, it dates back to Aesop’s fable of the “Ant and the Grasshopper”. In the late sun of autumn, the Grasshopper is lazily enjoying the sunshine while his friend the Ant is busy preparing for winter.
When cold weather arrives and food and warmth are scarce, the struggling Grasshopper turns to the Ant. The Ant refuses to help, telling the Grasshopper to “dance the winter away”.
While you might question the Ant’s lack of charity, the Grasshopper’s mistake is clear.
Be sure to build your rainy day fund when the weather is fine, ideally keeping between three to six months of household living expenses in an easy access account.
You’ll want to check in with your fund regularly too, as high inflation can erode its buying power and it must be fit for purpose when the unexpected strikes.
4. Money makes money
Founding Father of the United States, Benjamin Franklin is quoted as saying “Money makes money. And the money that money makes, makes money.”
The simplest way to make your money work for you is to put some aside, saving or investing it. You’ll then have the chance for that money to grow, thanks to the effects of compound growth.
Simply put, when you save money, you receive interest on the amount you save and then you receive interest on that interest.
Say your bank account interest rate is 5% and you deposit £1,000. You’ll receive £50 interest after 12 months.
In year two, though, you’ll now receive 5% of £1,050, a rise in interest to £52.50. During a long investment, this snowballing effect (or compounding) can really add up.
5. Never a borrower nor a lender be
While having a mortgage or buying a car on finance might have become the norm, be wary of high-interest debt like credit cards.
By the time you finish work, you’ll ideally be debt-free. That means that your hard-earned pension fund can be spent entirely on providing you with the retirement lifestyle you’ve dreamed of.
You might find yourself tempted to open the Bank of Mum and Dad (or Grandma and Grandad) but be wary. There are some important questions to be asked before you lend and you’ll need to be positive that you can afford it.
Your retirement funds need to last you the rest of your life so be sure that the help you give doesn’t detrimentally affect your standard of living.
Get in touch
If you need reminding of these, or any other age-old money truths, contact us now. Please email hello@globeifa.co.uk or call us on 020 8891 0711 to see how we can help you.
