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Lesson 5, Activity 4
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Investing Notes

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Investing Notes


The first step in investing is saving. Unfortunately, most people are not consistent savers. The average person in our country is three weeks away from bankruptcy. They have a relatively expensive lifestyle, significant monthly credit obligations, little or no money saved, and are totally dependent on next week’s paycheck to keep the budget afloat.

Scripture encourages us to save. “The wise man saves for the future, but the foolish man spends whatever he gets” (Proverbs 21:20, LB). The ant is commended for saving for a future need. “Ants are creatures of little strength, yet they store up their food in the summer” (Proverbs 30:34-25, NIV). Saving is the opposite of debt. Saving is making provision for tomorrow, while debt is presumption upon tomorrow.

I call saving the “Joseph principle,” because saving requires self-denial. Joseph saved during the seven years of plenty to survive during the seven years of famine. The essence of saving is denying expenditures today so that you will have something to spend in the future. One of the major reasons most people are poor savers is because we live in a culture of self-indulgence, not self-denial. When we want something we want it now!

The most effective way to save is to make yourself your number one creditor after the Lord. When you receive income, the first check you write should be for giving to the Lord, and the second check, for your savings. A compulsory payroll deduction can be very helpful to ensure that a portion of your income is saved regularly. Some commit income from tax refunds or bonuses to be saved. Please recognize this: if you immediately save a portion of your income each time you are paid, you will save more. The Bible does not teach an amount or percentage to be saved. We recommend establishing a goal to save 10 percent of your income. For many people, this is not possible at the beginning. But begin the habit of saving, even if it’s only a dollar a month.

Long-Term Savings

Long-term savings are intended to fund long-term needs and goals, such as retirement income and inheritances. Pensions and retirement accounts fall into this permanent category. Except for extreme financial emergencies, these savings should not be used for any purpose other than the needs for which they were established. They could be called “never-to-spend savings.” Spending these savings often results in tax consequences, and the savings are rarely replenished once they are spent.

Short-Term Savings

Before you develop your individual saving strategy, establish saving goals. Consider these three goals for saving:

  1. To provide for your future family. First Timothy 5:8 reads, “If anyone does not provide for his own, and especially for those of his household, he has denied the faith and is worse than an unbeliever.” This principle extends to providing for your needs in old age and for leaving an inheritance to any children you may have now or in the future.
  2. To become free financially to serve the Lord. One objective for saving is to diminish our dependence upon a salary to meet our needs. This gives us freedom to respond if the Lord leads us to invest more volunteer time in ministry. The more income my savings produce, the less I am dependent upon my salary. Some have saved enough to be free one day a week, and others are in a position to be full-time volunteers without the need to earn a salary.
  3. To open a business. Another purpose for saving is to accumulate enough capital to open and operate a business without going into debt. The amount of capital may vary substantially depending upon the requirements of the business.

Establishing a Maximum Amount

When a runner breaks the tape at the finish line, rarely does he continue running. But many people who have already achieved these three investment goals continue accumulating more and more. I believe that each of us should establish a maximum amount we are going to accumulate. Once we have “finished this race” we should give away the portion of our income that we were saving. This “finish line” on accumulation protects us against the dangers of hoarding.


People place some of their savings in investments with the expectation of receiving an income and/or growth in value.

The purpose and intention of Compass is not to recommend any specific investments. No one is authorized to use their affiliation with Compass to promote the sale of any investments or financial services.

Our objective is simply to draw your attention to the scriptural framework for saving and investing and acquaint you with some basic investments.

Steady Plodding

“Steady plodding brings prosperity; hasty speculation brings poverty” (Proverbs 21:5, LB). The original Hebrew words for “steady plodding” picture a person filling a large barrel one handful at a time. Little by little the barrel is filled to overflowing.

The fundamental principle you need to practice to become a successful investor is to spend less than you earn. Then save and invest the difference over a long period of time.

Examine various investments. Almost all of them are well suited for “steady plodding.” A home mortgage is paid off after years of making steady payments. Savings grow because of compounding interest, and a business can increase steadily in value over the years as its potential is developed.

Compound Interest

The wealthy Baron Rothschild was asked if he had seen the Seven Wonders of the World. It is reported that he responded, “No, but I do know the advantages of the eighth wonder of the world – compound interest.” Understanding how compounding works is crucial. There are three variables in compounding – the amount you save, the interest rate you earn on your savings, and the length of time you save.

The Amount

The amount you save will be dictated by your level of income, the cost of your standard of living, how much debt you have, and how faithfully you budget. When you begin your career, it is our hope that you will be able to increase the amount available for saving as you implement these biblical principles.

The amount you save can be more dependent upon your standard of living than upon income. Dr. Will Norton modeled this principle. He served ten years as a missionary in Africa during World War II and earned only $150 a month. His salary supported his wife and their four young children. By growing much of their own food and spending wisely, they were able to purchase a house upon their return home.

Interest Rate

The second variable is the rate of interest you earn on an investment. The table below demonstrates how an investment of $1,000 per year grows at various interest rates:

As you can see, the increase, in the rate of return has a remarkable impact on the amount accumulated. A two percent increase almost doubles the amount over 40 years. However, be careful not to make investments that are too risky in order to achieve a high return. Usually, the higher the rate, the higher the risk.


Time is the third factor. Who would accumulate more by age 65: Danielle, who started saving $1,000 a year at age 21, saved for eight years, and then completely stopped; or Matt, who saved $1,000 a year for 37 years starting at age 29? Both earned 10 percent. Is it Danielle, who saved a total of $8,000, or Matt, who saved $37,000? Check out the chart below.

Incredibly, Danielle accumulated more because of the earlier start.

The following graph will help you visualize the benefits of compounding. If a person saves $2.74 a day – $1,000 a year – and earns 10 percent, at the end of forty years the savings will grow to $526,985 and will be earning $4,392 each month. However, if the person waits one year before starting, then saves for 39 years, the result won’t be just $1,000 less; it will be $50,899 less! Compounding is your friend, and the earlier you can start it working for you, the better. Start saving and investing today!

Speculative Investments

“There is another serious problem I have seen everywhere – savings are put into risky investments that turn sour, and soon there is nothing left to pass on to one’s son. The man who speculates is soon back to where he began – with nothing” (Ecclesiastes 5:13-15, LB).

Scripture clearly warns of avoiding risky investments, yet each year thousands of people lose money in highly speculative and sometimes fraudulent investments. How many times have you heard of people losing their life’s savings on some get-rich-quick scheme?

Sadly, it seems that many Christians are particularly vulnerable to such schemes because they trust others who appear to live by the same values as they do. We have known of investment scandals in several local churches, where “wolves in sheep’s clothing fleeced the flock.” Below are three characteristics that will help you identify a potentially risky investment.

  1. You are offered the prospect of an unusually high profit or interest rate that is “practically guaranteed.”
  2. The decision to invest must be made quickly. There will be no opportunity to investigate the investment. The promoter will often be doing you a “favor” by allowing you to invest.
  3. Little will be said about the risks of losing money, and the investment will usually require no effort on your part. You may even be told that sometimes a portion of the profits will be “dedicated to the Lord’s work.”

Before participating in any investment, please be patient and prayerfully do your homework.


“Divide your portion to seven or even to eight, for you do not know what misfortune may occur on the earth” (Ecclesiastes 11:2).

There is no guaranteed investment on this earth. Money can be lost on any investment. The government can make gold illegal. Real estate values can suffer deflation. Money can be inflated until it’s valueless.

Count the Cost

With every investment there are costs: financial cost, time commitments, effort required and sometimes even emotional stress. For example, the purchase of a rental house will require time and effort to lease and maintain. If the tenant is irresponsible, you may have to try to collect rent from someone who does not want to pay – talk about emotions flaring! Before you decide on any investment, carefully consider all the costs.


“There is an appointed time for everything. And there is a time for every event under heaven” (Ecclesiastes 3:1).

The right investment at the wrong time is the wrong investment. The decision to either purchase or sell an investment is best made prayerfully after seeking counsel.

Gambling and Lotteries

Government-sanctioned lotteries and gambling of all types, especially Internet gambling, are sweeping our country. A recent study discovered that people spend 15 times more money on gambling than they donate to churches! The average church member gives $20 a year to foreign missions and the average person gambles $1,174 annually. Hundreds of thousands are compulsive gamblers who regularly lose their income. Many of these people are poor. One who participates in gambling or lotteries usually does so in an attempt to get rich quick. This is a violation of Scripture.

“…he who makes haste to be rich will not go unpunished” (Proverbs 28:20).

“A man with an evil eye hastens after wealth, and does not know that want will come upon him” (Proverbs 28:22).

A godly person should never participate in gambling or lotteries.