Read an Excerpt
Making Your Money Work for You Through Consistent Budgeting and Saving
The moral imperative of our day is to leave no one behind.
Barkin' Bill Smith is a blues singer who plays at famous clubs like Buddy
Guy's Legends on Wabash Avenue in Chicago. Some of the most talented
musicians in the world, such as Stevie Ray Vaughan, Eric Clapton, Willie
Dixon, and Otis Rush, have played there. The club's founder, Buddy Guy,
revolutionized blues guitar playing and jammed with greats like Muddy
Waters and B. B. King.
Barkin' Bill is tall and dapper, gliding about elegantly in a gray tweed
jacket, sporting a dark fedora, with just the hint of a smile. He carries
an elaborately carved walking stick and looks as if he might break into
dance any minute. Far and away he is the best-dressed guy in the place.
He's seventy years old, working hard, traveling to clubs all over the
country. He claims that he's never been sick a day in his life, adding that
he feels great. "I'm just as limp as a dishrag," he says.
Barkin' Bill clearly loves life. He has a big, full-throated laugh, and his
exuberance is infectious.
He's not only a terrific entertainer, he's an entrepreneur as well. He and
his band, Cold Sweat, have CDs they'll sell you for $15. Everybody at Buddy
Guy's seems to know him. They come up and greet him, and he talks
animatedly with all of them. Barkin' Bill sells a few CDs in the process.
He knows how to market. That's why he's not old, broken, and broke.
He's making a good living. The night before, he earned $1,100 at a club in
There's onlyone problem. Ask him what he does with the cash he earns and
he replies: "I keep it in a lockbox at home."
It's all about the money. There are still too many people out there like
Barkin' Bill. Talented. Energetic. Hardworking. Well dressed. They have
their act together. They're enjoying life.
But ask them about how they handle their money, and they give you a blank
So many people say, "Money doesn't grow on trees." We challenge that. You
can grow money on trees, but you have to plant it in money mud. So many of
our churches take up collections on Sunday morning, put the money in a
lockbox Sunday night, then deposit the funds in a low-yielding savings
account for months or even years, passing up the chance to earn a higher
rate of return on their investments. We know of one case where a pastor
friend of ours was trying to raise $1.5 million to buy some property and
build a new church. The church eventually raised $1 million, but they held
$900,000 of that money in a low-yielding certificate of deposit (CD) for
seven months. This is not the way to make money grow.
Too many people don't have their share of the money, their share of the
wealth, their share of the equity. It's not that they can't win it. They're
losing it by forfeit. Keeping their money in a lockbox is one of the ways
they're losing it. When thousands of African American churches across the
country tie up their money in long-term, low-yielding savings accounts,
they're also losing the chance to build wealth, and their communities are
losing out, too.
Money can grow on trees, but you have to plant it in money mud. A money
tree will not grow out of a lockbox; but it will grow out of the fertile
soil of prudent saving and investment. Ted Turner, the multibillionaire
entertainment mogul, recently gave away $1 billion to a number of good
causes. It was money that he earned from his extensive array of
investments. He didn't have to do a day's work to get it: he simply let the
money work for him. He's an example of someone who knows how to grow money
on a money tree.
Affluent people make the choice to save, invest, and follow a disciplined
financial plan to insure a prosperous future for themselves and their
children. You can make that choice, too. For African Americans to succeed
in the fourth great phase of the civil rights movement, it is a choice that
our community must make.
Handling your money wisely is not just the right and prudent thing to do
economically. It's also supported by Scripture. The Bible has many parables
in which people are rewarded for financial prudence.
For example, there is the famous parable about the talents in Matthew
(25:14). A man was going on a journey and called his servants and entrusted
his property to them. To one, he gave five talents; to another, two; and to
the third, just one. A talent was an ancient coin used in the Holy Land.
Each servant was given sufficient talents "according to his ability," says
the Scripture. Then the man went away.
The first fellow, who had five talents, went out and traded with them and
made five more. The second fellow, who had two talents, traded with his and
made two more. "But he who had received the one talent went and dug in the
ground and hid his master's money," says the Scripture. This is like
putting your money in a lockbox or under the mattress.
After a long time, the master came home and settled accounts with them. The
first servant who had doubled his five talents to ten came forward and told
what he had done. The master praised him and rewarded him. The second
fellow came forward and did the same, with his two talents that had become
four. Likewise, the master praised him heartily and rewarded him.
But then the third fellow-who had just one talent that he had buried in the
ground-came forward. "Master, I knew you to be a hard man, reaping where
you did not sow and gathering where you did not winnow," he said. "So I was
afraid, and I went and hid your talent in the ground."
The master answered him angrily: "You wicked and slothful servant! You knew
that I reap where I have not sowed and gather where I have not winnowed?
Then you ought to have invested my money with the bankers, and at my coming
I should have received what was my own with interest."
The master took the talent from him and gave it to the first servant, who
had ten talents, then declared: "For to every one who has will, more will
be given, and he will have abundance; but from him who has not, even what
he has will be taken away."
So don't you be like the fellow who buried his money in the ground. Do
something with your money. Make it work for you. As the Bible teaches,
using your talents tends to multiply them. This works not only in the
spiritual realm, but also when it comes to money.
The biblical parable teaches us about the value of investing money at a
bank and drawing interest. This is a crucial concept.
We urge you: Set up an account at a bank, credit union, or savings and loan
association (S&L). There are some compelling reasons to do this. Among them:
* Money held there is safe from fire, loss, or theft.
* You can earn interest on money deposited in savings accounts.
* Having an account eliminates fees charged for cashing payroll
checks and other checks.
* Maintaining a checking or savings account makes it easier to get
good deals on credit cards and loans.
* Depending on the type of account, deposits at most financial
institutions are protected by federal government insurance, through the
Federal Deposit Insurance Corporation or the National Credit Union
Administration for up to $100,000.
Banks, S&Ls, and credit unions resemble one another in terms of services
provided, although there are some differences. Commercial banks offer a
variety of services, including checking and savings accounts, loans,
safe-deposit boxes, investment services, financial counseling, and
automatic bill payment.
Savings and loan associations historically have accepted savings and only
furnished home loans. But that's changing. Many of them now provide most of
the services offered by commercial banks.
Most checking and savings accounts at banks and S&Ls are federally insured
by the Federal Deposit Insurance Corporation (FDIC) for a maximum of
$100,000. To check out the insurance status of a bank or S&L, call the FDIC
Credit unions are not-for-profit cooperatives, owned by their members.
They're not open to the general public. Instead, to become a member you
must have some common association, such as the same employer, union or
place of worship. Some credit unions serve a particular geographic area,
and you can join if you live or work in that region. The services that
credit unions offer are much the same as those offered by banks, and can be
less expensive than the fees charged by banks and S&Ls. To find out whether
you qualify to join a credit union and to obtain the names of those located
near you, call the Credit Union National Association at 1-202-682-4200, or
contact your state credit union league. Most credit unions are federally
insured by the National Credit Union Administration for a maximum of
You may also want to look into community development banks and community
development credit unions. They tend to be located in areas that are
traditionally underserved by financial institutions, such as low-income or
minority neighborhoods. The American League of Financial Institutions is a
trade group representing African American-, Asian American-, and Hispanic
American-controlled S&Ls and savings banks nationally. To obtain a listing
of all their members, you can call them at 1-202-857-3176. Among their
members are Carver Federal Savings Bank in New York, the largest African
American savings bank in the country; Berean Federal Savings Bank in
Philadelphia, Pennsylvania, the oldest continuously operating African
American thrift in the United States; Broadway Federal Bank, located in Los
Angeles, the oldest African American savings and loan association west of
the Mississippi; and Illinois Service Federal Savings and Loan in Chicago.
Another group active in developing communities nationwide is America's
Community Bankers, a trade group representing 2,000 savings and community
financial institutions and related business firms; you can phone them at
With the rise of the Internet, many banks and other financial institutions
now offer online banking services as well. But even with a basic account at
a bank or similar institution, you'll be able to move funds around
electronically. That is, you'll be able to use "direct deposit" and
"preauthorized payments." The first feature enables your employer to
deposit your paycheck directly into your account every month; the second
allows regular bills-such as your rent or mortgage-to be deducted from your
account automatically. Many institutions also have automated teller
machines (ATMs), so you'll be able to deposit or withdraw money from your
account using a computer terminal.
Before selecting the right bank or financial institution, shop around.
Visit a few banks, credit unions, and S&Ls, and compare features for
convenience-namely, location, hours open, and ATM access. Then compare all
additional costs, including monthly charges and fees for ATM usage, check
writing, andor failing to maintain a minimum balance. Find out how much
you need for an opening balance, and whether or not your account will earn
Compare the cost of cashing a $1,000 check through a checking account or a
check-cashing service, and you'll quickly see the benefits of maintaining
an account at a financial institution. Banks and credit unions often don't
charge their customers anything to cash a check. But according to the
Consumer Federation of America, the average cost of cashing a paycheck at a
check-cashing store in 1997 was 2.3 percent of the amount of the check; 2.2
percent for a Social Security check; and 9.4 percent for a personal check.
These may not sound that high, but the figures quickly add up. Cashing your
$1,000 check every month for an entire year would run you $276, $264, and
$1,128, respectively. Having a checking or savings account at a bank, S&L,
or credit union will save you these exorbitant fees.
To open an account, you will need money to place into it, your Social
Security number, and a picture ID, plus one other form of identification.
With a checking account you'll get a checkbook, and you will need to learn
to balance it so you don't "bounce" checks, or write checks when your
account does not have sufficient funds to cover the amount. Bounced checks
can be costly. You might have to pay a service charge of $10 to the bank
and another $20 to the store or company that you wrote the check to. In
addition, always write your checks in ink, so no one can erase them or
What are some of the other lessons about money that we can learn from the
parable of the talents?
First, think about how you can increase your assets. Even if you have only
a few extra dollars after all the bills are paid, find out ways in which
you can put your money to work. Avoid credit card debt and lottery tickets.
Slowly and steadily save and invest any extra money so you can build a nest
egg for the future. The man with the five talents now has ten and a more
secure future. The one who buried his money faces tough times.
Second, rent out your money. Money is bought and sold in the marketplace,
like anything else. People pay a price for money, just as they pay a price
for bread or eggs or chicken. And the price of money-known as
"interest"-fluctuates depending on the number of buyers and sellers in the
marketplace. This process is known as "supply and demand."
Interest rates go up and down on money-higher or lower, driven by market
demand. If you keep your money in a lockbox, you can't lend it to others
and collect interest from them and make a profit on it. You can't grow
money on the money tree. When you make a bank deposit, you rent your money
to the bank. The bank pays you "rent" in the form of interest. If you don't
take your money down to the marketplace, you can never get anything for it.
You can't invest it. It's just sitting there idle.
By depositing your money in an interest-bearing account, you'll benefit
from the principle of "compound interest," which means that your money
earns interest on the interest that it accrues, as well as on the original
principal amount. Interest may be compounded daily, monthly, twice a year,
or once a year, depending on the financial institution. Over time this
really adds up. Even small amounts can become big ones over a period of
years. As you can see from the following chart, $1 invested at a 5 percent
annual compounded rate of interest more than doubles, to $2.08 (rounded)
after fifteen years-and this takes place without your ever having to add
more money to that initial $1 investment.