Water Savings Accounts and Money Reservoirs
I live in a desert. The Salt Lake Valley gets about 15 inches of rain a year and semiarid deserts are classified as areas that receive between 8 and 20 inches of rain. And yet, the Salt Lake Valley today doesn’t look like a desert.
The Mormon pioneers first entered the Salt Lake Valley on July 24, 1847. This week marks the 171st anniversary of that occasion. During the arduous trip across the plains Brigham Young and the Mormon pioneers ran into the famous mountain man Jim Bridger heading east.
Bridger expressed some doubt about the prospects of the Salt Lake Valley as a suitable place to settle, telling the Mormon prophet, “Mr. Young, I would give a thousand dollars if I knew an ear of corn could be ripened [there].” Brigham Young responded, “Wait eighteen months and I will show you many of them.” About a month later Brigham Young looked down at the Salt Lake Valley from the foothills and pronounced the immortal words, “This is the Place!”
As Bridger had stated, the valley was mostly barren. However, it was not without its charms. The majestic Wasatch Mountains rose abruptly to the east and there were seven deep canyons that terminated in the valley. The pioneers had entered the valley though one of these canyons, which they aptly named Emigration Canyon.
And best of all, each of the seven canyons had flowing through it a beautiful mountain stream of cold, crystal-clear water. Within only a day or two of entering the valley the hearty and ingenuous pioneers had harnessed the water from City Creek Canyon into irrigation ditches and planted their first crops.
As the population increased it became clear that the water flowing from the canyons would not be sufficient for everyone. However, the Wasatch Mountains get abundant amounts of “The Greatest Snow on Earth” each winter, and each spring much of the water from this melting snow was wasted.
The solution was to dam some of the mountain rivers, creating reservoirs (water savings accounts) that could be used during the hot and dry summers. Here is an illustration of some of these water savings accounts with the thirsty Salt Lake Valley in the distance.
These reservoirs are now beautiful mountain lakes where people go to escape the summer heat and fish, boat, and waterski. However, their primary purpose is not recreation. Their primary purpose is to sustain and improve life in the valley below and help things grow.
If sufficient water is not released from the reservoirs life could not exist downstream, and the water in the beautiful mountain lakes would become stagnant and dirty. But by managing the water properly over a million people can thrive in the Salt Lake Valley. The system only works because water is allowed to flow downstream and fulfill its purpose of supporting life and helping things grow. To keep the system working water needs to flow both into and out of the reservoirs.
Yes, I live in a desert, but you would never know it by looking at the Salt Lake Valley today. The desert has “blossomed as a rose” due to a system that allows water to be accumulated during periods of abundance and used later during times of need.
Money Reservoirs
I am a saver by nature. I would often rather save money than spend it. It gives me a feeling of security and progress towards a better future. I love to see the amounts in our savings accounts grow and I get stressed when I see the balances drop.
I hate taking money out of our emergency fund, even when we have a legitimate emergency. Alice has to constantly remind me that this is alright by saying, “Isn’t that what we saved the money for?” and “Just be grateful that we have the money saved.” She is right, of course.
To combat this I have been trying recently to imagine our various Capital One 360 Savings Accounts as money reservoirs. Just as the purpose of water reservoirs is to help things downstream grow, the purpose of money reservoirs is not to continually grow larger, but to improve our lives and help us grow. For this to happen I have to learn to let money flow both into and out of our savings accounts.
Imagine what would happen if you damned a river, and never let any water out of the dam. Instead of sustaining and improving life below the dam, and helping things grow, such a dam would cause needless suffering and death. The water in the reservoir would become stagnant, dirty, and stinky and life below the dam would struggle to survive. The dam would make things worse rather than better. The same is true for savings accounts.
Don’t get me wrong. I would still rather see more money flowing into savings accounts than out, and emergency funds should only be used for emergencies. I also still believe that the security and sense of progress provided by sufficient and rising levels of savings is important. However, that is not their primary purpose.
The primary purpose of savings accounts is to help you accumulate money during times of abundance to be used later in times of need. The purpose of savings is to make your life better, easier, and to help you “blossom as a rose”.
Thinking of savings accounts as “money reservoirs” has helped me understand this important concept. Letting money out of savings accounts at the appropriate times is just as important as saving it in the first place. In fact, it is the very purpose of saving. With both water and money, flow is the key!
Interesting analogy.
Thanks so much. Glad you enjoyed it.
I love this. Mrs. C. and I have saved up over 6 months in our emergency fund, and since I work seasonally this ebbs ands flows throughout the year from a peak of 8 months to a valley of roughly 5 months. We had to tap our emergency fund once for a major vehicle replacement 2 years ago. With working seasonally I have only had 1 bad season in the last 5 years (I have 2 busy seasons per year Spring and Fall) and now it looks like I am approaching another one. I have been getting the same stress you are talking about with letting money flow out, but our significant others are right, the money is there to eliminate that stress and make our lives easier, we are blessed to have saved it. We can weather a bad season thanks to our emergency fund and rebuild it next Spring without causing us any significant damage thanks to the emergency fund. Great article!
Thanks for the comment. We are lucky to have great spouses to keep us in line.
I really like this analogy. I am also a saver by nature and because I’ve gone quite a long time between emergencies, the idea of spending money seems more painful than it should be. But it’s good to think that it’s healthy for the accounts to have flow.
I also chuckled at this sentence: “Imagine what would happen if you damned a river, and never let any water out of the dam” Well, the river would go to hell, clearly.
Thanks for the kind words. Glad the analogy worked for you. It makes it easier for me to let money out of the accounts at the appropriate times to think of it this way.
The analogy is a little off base IMO. Those reservoirs were never meant to be used only in emergency situations. They are seasonal right? Snow in the winter turns to water in the spring to be used for irrigation in the summer & fall. The water flowing into a reservoir is intended to be used sooner than later. It would be cost prohibitive to build a dam and then never let the water out of the reservoir or only once every 25 years. Of course dams & reservoirs have finite storage capacity whereas savings accounts do not.
I keep it all in one savings account. A portion is considered “emergency.” I’m 50 years old and have never had an emergency important enough to touch my emergency savings. Knock on wood. Best case scenario is the money in my emergency fund never gets touched – sits there unused for my lifetime.
Anything over that emergency amount is considered “parked money” meaning it is just sitting there until I decided what to do with it – buy a house, buy a car, buy a mutual fund, etc. I have no problem moving parked money out of that account because when I see a large balance in my savings account, I realize I should be investing it somewhere for a higher return or buy the item (car, house, roof, etc.).
My main point is that there is no reason to have multiple savings accounts. It’s needless overhead. Just have one and mentally note how much of it is “emergency funds.” No need to feel guilt over moving money above that level out of the account. You should try to keep your savings account at the emergency level for as much of the time as possible. There is an opportunity cost of having to much cash earning savings account rates. The best you can get now is 2% or so? You should try to minimize the share of your portfolio earning 2%.
Thanks for the comment. I am glad you have a system that works for you, but I love having multiple savings accounts. I would agree with you if it took any time or money to set them up, but with Capital One 360 it is so easy there is no reason not to do it. That is why I love Capital One 360 so much.
Nice analogy of the stagnant water. But we have another dynamic at play too. Inflation eats at money set aside without a mechanism to grow much like the sun evaporates a stagnant pool into a dusty and mud caked flat.
Indeed, flow is the key.
-Mike