Financial Lessons from a Squirrel

August 17th, 2009

Squirrels are accomplished little rodents. They have managed to become one of the few animals humans tolerate in their backyards. A lot of this accomplishment comes from good financial management skills.

Hear me out.

A squirrel’s currency is food. The way they handle their food is very organized, responsible, and forward-thinking. By contrast, other animals desperately tear through your garbage or catch prey, leaving a mess to rot on your property. Owing to the squirrel’s peaceful nature and good food management, we give them a free pass.

This affords them a comfortable place to stay, and the means to survive. Which is what we’re all looking for, right? So how do they do it? It turns out their asset management habits are very similar to mine.

Squirrel Financial Lessons

Squirrels bury their food in several geographically distributed locations. Cumulatively, they store more food than they need. Should another animal pilfer their cache, another sufficiently-sized reserve is waiting elsewhere. Zoologists call this method scatter hoarding.

This is something I’ve done with money for years, and it has benefited me in much the same way it helps squirrels.

I have more than a dozen individual bank accounts. There’s an expenses account, a personal spending account, an education account, and an emergency account, just to name a few. Every week automatic transfers take portions of my income and distribute it appropriately to each account.

There are many benefits to managing your finances in this way. It automatically assigns a reasonable amount to all your needs so there’s always enough money to pay the bills. It also imposes financial discipline. When the money runs out in my personal spending account, it’s gone. No more trips to the batting cages until the next auto-transfer goes through.

Sometimes the unforeseen happens. Having money spaced out and stored separately affords some slack in case of emergencies. You can always adjust how much goes into each account to deal with shifting circumstances .

It also helps to over-save. Putting a little more than necessary into long-term savings can reduce your stress when prices go up or emergencies arise.

Human World Implementation

So, how does one execute this structure of financial management pragmatically? It’s important to be able to live life normally and not spend too much time juggling accounts.

I recommend starting with three core accounts:

• Expenses: for necessities and basic living costs including utility bills, groceries, insurance, etc.
• Personal: for entertainment, dining, presents, etc.
• Emergency: as needed – endevour to have at least three months of living expenses saved at any given time

The expenses account is the best place to deposit your cheques. From this account, setup automatic transfers to your personal and emergency accounts. The former will help you control your spending; the latter is simply Personal Finance 101. If you don’t put a bit aside for emergencies, you must have missed the first day of classes.

As time goes by you will get a good idea of what other expenses need their own accounts. I never want an excuse to skimp on education, so I setup an account just for that. Now whenever I feel like learning something, there’s money waiting to make it possible. And should my house burn down, I’d reapportion that money, justified by the level of disaster.

Nature has done us a favour. The scatter hoarding techniques developed by thousands of years of evolution don’t just work for nuts and berries. There are many advantages to keeping separate holes in which money is buried. Setup the three core accounts – personal, emergency, and expenses – and see for yourself why squirrels have financial management figured out.