If I had a DeLorean with a Flux Capacitor and could go back in time, this is what I would tell my younger self regarding how to save money.

Step 1: Save Money.

I’m not going to tell you to “use coupons” or “buy things on sale.” You are smart enough to figure that out for yourself.

With respect to the conventional wisdom of “a penny saved is a penny earned,” if the grocery store checkout person tells you that you “saved $7 today,” that’s not really true. They should say “Congratulations! You spent $7 less than you normally would have.” If that $7 is still in your bank account or wallet or purse, you will eventually spend it later, and you really haven’t saved it.

You only save the $7 when you take it away from yourself (and your ability to spend it) and move it to a place where you won’t touch it. The best way to accomplish that is to create an automatic habit of moving the money before you get your hands on it.

So start small. Whenever you earn money, set up an automatic monthly transfer from your checking account (get one if you don’t have one) to a savings account, or better yet, to somewhere that will allow your money the potential to increase in value. That brings us to…

Step 2: Make Your Money Grow

It’s one thing to stash money in a savings account, but if that’s all you do, then your account will only grow when you add to it. You’re doing all the work. If your money starts making money for you (in addition to what you are adding), then your account balance will grow much faster.

How do you do that? In my opinion, the simplest way is to buy small pieces of companies. If a company grows large enough, the owners can break it up into millions of tiny pieces called shares and make those shares available for other people to buy. The act of buying shares is known as investing in the stock market.

How do you buy shares and what should you buy? There are companies that assemble shares from hundreds or thousands of other companies and package them into something called an ETF (Exchange Traded Fund). All you have to do is buy shares of the ETF.

For example, a company called Vanguard has an ETF called the Total World Stock ETF (the trading symbol is VT; ETFs has symbols to identify them). VT currently owns shares of Apple, Amazon, Facebook, Google, Visa, Verizon, and many other companies. When you buy shares of VT, then you own part of those companies too. I’m not specifically recommending that you buy VT, but I want to demonstrate how easy it is to acquire ownership in hundreds of companies around the world.

To own shares of corporate stock is to invest in human ingenuity. All of those companies are trying to improve their operations with better methods, new technology and new products. When you invest your savings in those companies, you harness that human ingenuity and your savings will grow over time as those companies grow.

Note: this is not to say that every month or year will have positive growth, but unless the end of the world is here, and humans are done inventing things and selling things, then there is opportunity in stock ownership.

“It’s one thing to stash your money in a savings account, but if that’s all you do, then your account will only grow when you add to it.”

Step 3: Protect Your Money

When you follow steps 1 and 2, you will attract the attention of entities who would like to benefit from your success. This is called taxation.
Paying taxes on the growth of your investments will reduce the speed at which your account will grow. Thankfully there is a way to shield yourself from this with something known as a Roth IRA (IRA stands for Individual Retirement Arrangement).

A Roth IRA is essentially a “container” that holds your investments, and that container’s primary function is to protect those investments from taxes.

Continuing with our previous example, if you buy VT in a personal investment account, you may owe the IRS taxes if you sell VT and turn it back into cash.

However, if you buy VT inside a Roth IRA, then you are immune to taxes on VT for life. I’m oversimplifying, and there are some specific rules to follow (how you earn the money, the length of time your money stays inside the Roth IRA, your age when you access the money, etc.), but when you follow those rules, you can protect your savings from the government’s ability to take your money through the power of taxation.

Let’s summarize: When you earn money, save some of it (1) and make it grow (2) by creating the habit of automatically buying stock in companies around the world using ETFs, and protect your money (3) by holding those investments inside a Roth IRA to eliminate tax. When you start doing that, you are on your way to unlocking the secrets of how to save money.

What does God think about all of this? The Bible says things like “Don’t store up treasures here on earth” (Matthew 6:19a). But it also says that God gives you the ability to produce wealth (Deuteronomy 8:18, NIV) and that “the wise have wealth and luxury, but fools spend whatever they get” (Proverbs 21:20).

In my opinion, it is a question of where your focus is. “Seek the Kingdom of God above all else, and live righteously, and He will give you everything you need” (Matthew 6:33). Check your heart. Do you have a relationship with your Creator through His son, Jesus? That is infinitely more important than money. Get that right, then ask Him for wisdom—He will “instruct you and teach you in the way you should go” (Psalm 32:8).

So, ask Him. He’ll show you what you should do.

“Seek the Kingdom of God above all else, and live righteously, and He will give you everything you need.” – Matthew 6:33

For further study:

“The Richest Man in Babylon” by George S. Clason—financial principles expressed as short stories. If you hate reading, buy this and read the first few chapters.

“The Automatic Millionaire” by David Bach—full of practical steps to follow.

“Rich Dad, Poor Dad” by Robert T. Kiyosaki—considered to be controversial by some, but it has been useful to Shawn.

Google anything you don’t understand, and find people who do understand these topics. Discuss Shawn’s article with them. Your particular situation will be different from everyone else, so apply what works for you. Investment products and tax laws are always changing, so learn as much as you can!