Financial Secrets of the Amish
How to save $400,000, raise 14 children and buy a $1.3 million farm
When the Great Recession hit, the Amish barely blinked. “They put aside 20% of their earnings — most of them were just fine,” says Lorilee Craker, author of “Money Secrets of the Amish: Finding True Abundance in Simplicity, Sharing, and Saving.” Craker, a Mennonite who grew up in Winnipeg, Manitoba, and now lives in Grand Rapids, Mich., spent several weeks with the Amish and says the experience changed her life.
MarketWatch spoke with Craker about what financial lessons we can learn from the Amish.
MW: The Amish didn’t have subprime mortgages, did they?
LC: No, they did not. I met this one farmer, Amos, near Bird-In-Hand, Pennsylvania. He had saved $400,000 over the course of 20 years while raising 14 children and renting a farm for around $1,800 a month. He was about ready to put down $400,000 on a down payment on his own $1.3 million farm. They’re big on big down payments and being in as little debt as possible.
MW: How did he save all that money?
LC: It’s this incredible bone-deep thrift, which is not really stinginess. It’s a generous frugality. They will go to great lengths to re-use, re-cycle and re-purpose. They don’t do it to be green, they do it to be thrifty.
MW: Where do those you interviewed put their savings? Do they invest?
LC: They only invest in real estate and owning their businesses (carpentry, boat covers, quilts et cetera). They don’t buy stocks and bonds.
MW: Since writing the book, have you applied the financial lessons from Amos and all the other Amish families you met?
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LC: I did end up shopping at thrift stores. That really changed my life. I was able to get wonderful things for my family. My favorite was a beautiful Scandinavian bedside table with drawers. The price was $25. I thought, “Could the lady giving the garage sale be crazy?” I said, “Why are you selling this?” She said, “A few years ago we were going through a Danish period and we’re not in that period anymore.” I replied, “Isn’t that a coincidence? I’m doing through a Danish period right now.” It was a $400 piece of furniture. Sometimes you find plastic flowers and ashtrays that nobody wants at garage sales, but I’ve learnt to zip in and out.
MW: Rule No. 1: Never buy retail, right?
LC: One lady in Lancaster County, Pennsylvania was making pies while I was interviewing her. She would take the gallon tins from apple butter and cut off the top and the bottom, and create ‘hotkaps’ for gardening. They’re plant protectors that would cost $15 in a store. Their mindset is, “What do I have on hand that would serve that purpose?” They never buy retail unless it’s something like toilet paper. There are always ways around it.
MW: For the most part, the Amish don’t go crazy for Lady Gaga or Apple?
LC: They might have a cellphone or computer for their business, but they can’t have these things in their homes. Their whole goal is to be off the grid in terms of their home lives. They just don’t have that desire to acquire things. It’s so much more important to have a farm to pass on to their children. Our culture is all about, “How can I get the latest iPad?” They don’t think that way at all.
MW: How did that change you?
LC: Before writing the book, I literally had no self-control. I thought, “I want this. I’m going to buy it whether I want it or not.” So I did learn some of that delayed gratification.
MW: What did they covet? I’m guessing it wasn’t a 40-inch, high-definition, widescreen TV.
LC: One lady really wanted linoleum floors. She told me, “Some of my neighbors and friends had it. I kept thinking of the farm we wanted. I waited for years and years.” They don’t make payments on anything except real estate or a business. It’s not like they’re going to buy a buggy on credit and make payments. They’re going to make huge down payments or buy it outright.
MW: Do the Amish re-gift?
LC: The gifts are mainly need-based. A woman might give her husband an LED flashlight. They love these Dewalt flashlights. They’re off the electrical grid. It’s part of their wish to be independent from society. I think if they think they’re dependent on the grid, they’d pretty soon be dependent on the government. Politically, they’re libertarians.
MW: I’m going to make another wild guess: Their kids weren’t spoiled either.
LC: They’re well behaved, they’re very respectful and work harder than my kids, and my kids are good kids. Parents of my generation — I’m 46 — are almost reluctant to work their kids too hard. I saw little girls of two or three years of age up on chairs washing plates and cutlery over the sink. They don’t overwork their children, but they do chores. One child in a family I met earned enough money to buy a wagon, which cost a hundred bucks, over the course of a year. It would be very hard to imagine my children waiting for a year for something they really wanted. It’s a matter of how much they really want it and how much they are willing to learn from delayed gratification.
MW: Did you apply these lessons to your own children?
LC: I have three kids: 16- and 13-year-old boys and a nine-year-old girl. I came home after my research and said, “We’re going to do things a bit differently around here.” My son, 13, saved 7 or 8 months for an iPod. My kids go to a private school and a lot of people are just given things. My oldest son is 16 and he does not have a car. He is going to borrow my husband’s car when he needs it and get a job this summer and pitch in for gas. It has trickled down for my family.
MW: Do you grow your own vegetables now?
LC: We’ve done some cow-pooling. We have paid half a share in a cow from a local farm. It was about $3-per-pound versus $19-per-pound to buy grass fed, natural Porterhouse steak online. The butchering is included. You pick up your meat and order what different cuts you want. It’s a lot cheaper because you’re not dealing with a big company and paying for all the TV advertising.
MW: You write about how the Amish will barter before they buy.
LC: The Amish trade goods and services and no money trades hands. I have an Amish farmer friend, Atlee, who lives in Michigan. He will trade a cow for rag rugs. Then they’ll sell these rag rugs at the farmer’s market or roadside stand.
MW: What’s a rag rug?
LC: It’s a rug — made out of rags.
MW: How did I not know that?
LC: It’s an old-fashioned art to weave a rug out of rags. Just Google it.
MW: They look nice. They’re all over Pinterest. How can we barter in suburbia — swap classes in how to take the perfect “selfie” for credit in Candy Crush?
LC: I have limited skills. I know how to write and talk on the radio. For me, writing a book proposal is a specialty of mine. I’ve traded a book consult — how to get started if you want to publish a book — for a weekend at a cottage on Lake Michigan. If you have an expertise or product that someone wants, it’s a wonderful thing. We don’t necessarily always have money for a $200-per-night cottage on Lake Michigan. My friend traded one hour of Pilates instruction for our trailer hitch to transport her daughter’s backyard playhouse. I’ve had a book swap at my house for my neighbors. Everybody brings a book and takes a book. I’ve been to perfume swaps and purse swaps. That’s all inspired by the Amish.
MW: You say, “Dead horse smells bad, but debt smells even worse.” What does that mean?
LC: This reference comes from P.T. Barnum. He wrote a book a hundred years ago about money. He has a chapter about dead horses. The point is, by the time you pay for the horse the horse could be dead. I could buy an expensive pair of shoes on credit and, by the time I’ve paid them off, they might not even be in style anymore.
MW: But Mary Janes never go out of style.
LC: Hopefully not.
MW: What’s a “frugal feinschmecker?”
LC: It’s about eating good, fresh food. They eat amazing food. They’re so far behind, they’re ahead. They’re super-green. They were eating organic, fresh farmer’s market food before it was hip to do so.
MW: Some studies have found that the Amish have one of the lowest obesity rates in the world. Around 4% compared with over 30% for the rest of the world.
LC: I didn’t see any fat Amish men. They work hard.
MW: And no Snickers.
LC: They don’t eat a lot of junk food. They eat a lot natural food. They eat well. They are very fond of their food and they should be. Once in a blue moon, they might have pizza. But every single one of the people I interviewed said they could make better pizza.
MW: There aren’t a lot of couch potatoes among the Amish. They all pitch in.
LC: This lady made 15 pies right in front of me. If I made 15 pies, I’d alert the media.
MW: If you do ever make 15 pies, you know where to find me. As a Mennonite, what did you have in common with the Amish?
LC: The Amish and the Mennonites broke up about 300 years ago. My parents spoke low German and they speak Pennsylvania Dutch, which is not that different. Like my family, their children have bible names.
MW: What was the most surprising thing you learned?
LC: Culturally, they are leading the way with organic food sourcing, recycling and repurposing and thrift shopping.
MW: And they have a rare quality: Humility.
LC: I came from a journalistic background where I interviewed celebrities and musicians and then interviewed the Amish, who don’t want to brag. I went from saying, “You’re so great,” when they told me about how they saved and bartered, to “Englishers [non-Amish] need your help.”
MW: Thanks, Lorilee. We certainly do need their help.