The 80% Problem: Why Wealthy People Don't Save for a Rainy Day

Tyler Gardner (0:00)

Here's what I know about the rainy day everyone's been saving for. It almost never comes. And when it does, it rarely costs as much as we had feared. And the sunny days, the ones we skipped because we weren't sure we could afford them, those are the ones we can never get back.

Hello friends, this is Tyler Gardner welcoming you to another episode of Your Money Guide on the Side, where it is my job to simplify what seems complex, add nuance to what seems simple, and learn from and alongside some of the brightest minds in money, finance, and investing. So let's get started and get you one step closer to where you need to be.

Quick note before we get into it, June's pre-order incentive for my book Real Wealth is the most personal thing I've ever agreed to share. Pre-order in June and submit your receipt at tylergardner.com, and you'll get an exclusive three-episode audio series that will never appear on this feed. Three pivotal moments in my own financial life. The humbling one, the embarrassing one, and the one that made me rethink everything. Three episodes, three moments, tylergardner.com, pre-order, submit your receipt, get the episodes delivered digitally in early July, and receive every additional monthly incentive between now and the book's release on December 1st. And now, on to today's episode. I want to start today by telling you a personal story about mashed potatoes. When I was nine years old, my family made its annual pilgrimage to visit my grandparents in Connecticut. And if you grew up with grandparents who believed that the highest expression of love was feeding you until you couldn't move, you understand that these visits had a particular ritual to them. Ours involved the All You Can Eat buffet. Now, I want to be clear about something. My grandfather was a man of genuine financial sophistication. He was careful, deliberate, and deeply strategic about money in ways that I would only come to appreciate decades later. But at an All You Could Eat buffet, he became something else entirely. He became the MVP participant in a fully competitive sport. That 1099 entry fee was not a meal. It was a contract, a covenant, a solemn agreement between him and the restaurant that he intended to honor in full with interest. So there I was, nine years old, and my first plate, I piled approximately two pounds deep with mashed potatoes. Marching back to the table with the quiet confidence of a child who has no idea what's about to happen. My grandfather looked at the plate. Then he looked at me. Then he looked back at the plate.

What on earth do you think you're doing? I should tell you that I'm not entirely sure whether I actually remember this evening, or whether it has simply become so thoroughly retold at every family gathering since, at my expense, every single time, without fail, whenever shrimp or mashed potatoes appear on a table within a 50-foot radius, that it has achieved the status of mythology, family legend, the Tyler potato incident of the mid-1990s. What I do remember is the look on his face. Did you not see the shrimp cocktail? I saw it, I said. But I don't like shrimp. I really like mashed potatoes.

Wrong answer.

These dinners cost $10, he said, with the calm authority of a man who has thought about this more than I ever will.

You can eat anything on the line. Why would you fill up on something that we can make at home?

Line drawn, point made. And I will tell you, the only other detail I can confirm from that evening, because my grandfather was, above all else, inconsistent, is that on our way out, he subtly slid approximately seven bread rolls and a handful of butter packets into his coat pockets. He always won.

What lingers from that story, beyond my having to hear it retold every Christmas, is the voice it left behind. My grandfather's voice, in the back of my mind, telling me that financial waste is a cardinal sin. That you don't eat mashed potatoes at a buffet. That you extract maximum value from every dollar, every opportunity, every all-you-can-eat situation life places in front of you. And here's what's interesting. Freud would not be surprised to learn that I am now, as an adult, genuinely obsessed with shrimp cocktail and almost never order mashed potatoes. Trauma, one. Tyler, zero. But here's the thing. That voice, the one that says save everything, waste nothing, protect every dollar. It's a voice that a lot of us have inherited from grandparents, from parents, from a cultural narrative that has been telling us for more than a century that saving money is virtuous and spending it is reckless. And today, I want to push back on that hard, because I believe, and I'm going to spend the next 30 minutes making this case with data, not just opinion, that truly wealthy people, and I mean that both literally and figuratively, do not save money for a rainy day. And more importantly, that the habit of saving money the way we've been taught to save it, is not building your financial future. It is consistently, mathematically destroying it. Let's get into it.