Two Friends, Different Fates
Here is a story about two friends who could be anyone around us.
- A: The “Wizard of Returns” envied by everyone. Boasting an astonishing 20% annual return, but due to a lifestyle of spending as much as he earns, his savings rate stayed at 10%.
- B: In contrast, B is a very ordinary office worker. Quietly investing in an index fund with an 8% annual return, steadily saving 50% of his income.
Ten years later, a trial came for both. When a terrible financial crisis halved the market, A’s flashy castle built with leverage collapsed instantly, and he went bankrupt. Meanwhile, B’s assets also shrank, but thanks to the solid foundation of steadily accumulated savings, he weathered the crisis and even seized new opportunities.
So, who was truly wealthy? Should we teach our beloved children the fleeting tricks of lightning-fast returns, or pass down the wisdom of steadily building wealth like a turtle?
This story clears away the fog of the “return myth” that once captivated us and embarks on a journey to find the true value of wealth firmly in our hands: ‘saving.’
Chapter 1: The Sweet Illusion of ‘Returns’
“I heard someone hit the jackpot with that stock!”, “They turned their life around with one apartment!” Why do these stories shake our hearts so much?
1. Our Desire for a ‘Big Win’
Our brains respond far more thrillingly to a rare “jackpot” than to steady success. Seeing a few success stories around us, we believe “I can do it too.” Perhaps investing gives us the excitement of buying an “intellectual lottery ticket.”
2. The Story Whispered by the Financial Industry
The financial industry grows by selling us hope for “higher returns.” The more we trade and subscribe to complex products, the more profit they make. The simple truth of “save 50% of your salary and invest in an index fund” is just too straightforward to earn them hefty fees.
3. Numbers Don’t Lie
Rather than a hundred words, let’s check with simple numbers:
| Category | A (High Return, Low Savings) | B (Moderate Return, High Savings) |
|---|---|---|
| Annual Salary | 100 million KRW | 100 million KRW |
| Savings Rate | 10% | 50% |
| Annual Savings | 10 million KRW | 50 million KRW |
| Investment Return | 15% | 8% |
▶ After 1 Year, Their Assets?
- A: 10 million KRW (principal) + 1.5 million KRW (returns) = 11.5 million KRW
- B: 50 million KRW (principal) + 4 million KRW (returns) = 54 million KRW
▶ After 5 Years, the Gap Widens (Simple Calculation)
- A: About 71 million KRW
- B: About 293 million KRW
The result is crystal clear. Especially in the early stages of building wealth, the savings rate, which we can fully control, is overwhelmingly more important than the uncontrollable ‘return rate.’
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Chapter 2: Saving Is Buying Freedom, Not Deprivation
When you hear the word “saving,” do you imagine painful sacrifice and tightening your belt? It’s time to change that thought. Saving is not “giving up consumption,” but purchasing the most valuable commodity in the world: ‘freedom.’
Reason 1: The Freedom to Say “No!”
Sufficient savings give you the power to confidently say “No!” to unwanted jobs, uncomfortable relationships, and unfair demands. True wealth is not about driving a flashy sports car, but about waking up in the morning thinking, “Today, I can do whatever I want.”
Reason 2: The Power to Grab Life’s ‘Golden Tickets’
Life brings unexpected opportunities. Only prepared people can seize ‘golden tickets’ like a great business idea or a sudden real estate drop. Saving is both the ‘shield’ that protects you in crises and the powerful ‘spear’ that launches your life onto a new trajectory at decisive moments. This is why Warren Buffett always holds huge cash reserves.
Chapter 3: Psychological Techniques to Increase Your Savings Rate
“Okay, I get it, saving is important. But is it really that easy?” It’s true—saving is not a matter of willpower but psychology. Let’s explore clever techniques to trick our minds and save joyfully.
Technique 1: Invisible and Automatic (The Magic of Automation)
The most powerful saving method is to give yourself no chance to hesitate. Create a ‘Pay Yourself First’ system. As soon as your salary arrives, have a set amount automatically transferred to your savings or investment account. Don’t treat saving as a matter of willpower anymore; make it a fixed ‘bill’ like your phone payment.
Technique 2: Bring Your Goals to Life (Emotional Labels)
Abstract goals don’t motivate us. Give your savings accounts specific, exciting names.
- ‘Retirement Fund’ → ‘Mediterranean Cruise at 70 Fund’
- ‘Children’s Tuition’ → ‘Celebration Party for Our Daughter’s Harvard Admission’
- ‘Emergency Fund’ → ‘Strong Shield Protecting Our Family from Any Crisis’
This way, whenever tempted to buy something, you’ll remember you’re giving up the ‘Mediterranean cruise’ or ‘your daughter’s smiling face,’ helping you resist temptation.
Technique 3: Find Your Own ‘Happiness Threshold’ (Cost-Effectiveness of Happiness)
Have you ever noticed that when your income rises, money somehow doesn’t accumulate? That’s because spending grows with income. But material consumption’s happiness fades quickly. What matters is not comparing with others but finding your own ‘enough’ that truly brings happiness. Setting a rule to save half of any income increase is a very wise approach.
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Chapter 4: The One Legacy to Pass on to Your Children
What is the greatest legacy we can leave our children? It’s not money itself but the ‘wisdom to create and protect wealth on their own.’ At the heart of that wisdom is the ‘habit of saving.’
1. Saving Teaches Attitude
Children who experience saving from an early age learn more than money.
- Patience and Delayed Gratification: They learn to endure present pleasures for bigger goals.
- Planning and Execution: They naturally practice setting and achieving goals.
- Gratitude and Value: They realize the value of money and labor and develop gratitude.
2. The Best Financial Education Is Parents Leading by Example
More powerful than a hundred words is the life example parents show.
- The ‘Three Jars’ System: Divide allowance into three transparent jars labeled ‘Spend,’ ‘Save,’ and ‘Share.’ Children visually learn money flow and balance.
- Family Finance Meetings: Set joint goals like “Let’s save 300,000 KRW for our family summer vacation!” to build responsibility through shared saving.
- Conversations About Spending: When children ask for toys, naturally discuss other cool things that money could do (opportunity cost) to teach reasonable spending habits.
Passing down the habit of saving to children is more than just teaching money management; it’s helping them plan their lives proactively and build a strong inner foundation that won’t waver in any crisis.
Conclusion: Your Choice Becomes Your Child’s Future
The true alchemy of wealth is not a flashy magic predicting market futures. It lies in the simple truth of “spending less than you earn and steadily widening that gap,” which is a high savings rate.
Wealth relying on flashy returns is a ‘Fragile Fortune’ that can betray you anytime. But the castle of savings you build with your sweat and patience creates ‘Unbreakable Wealth’ that will protect you and your family through any economic storm.
Now the choice is yours. And that choice will soon become your child’s future.
Between the gambler’s skill of leaving your fate to the fickle market and the wise person’s wisdom of quietly building freedom, what will you teach your child?