New born babies do not work for those items that will sustain their life. New-borns are exempt because they are unable to work. They are completely dependent on their parents or guardians for survival. They cannot find and create their own food and clothing, nor can volitionally create goods and services to trade with others. It is only when they grow up that they eventually gain enough reason and physical ability to provide for themselves. If they choose to exercise this ability, they will gain independence from their parents.
One gains independence by creating value for others and trading for money. Initially one will create value in the form of simple services such as selling lemonade or mowing lawns. Over time, services and/or goods become more complex and require more skills. As one gains money, he/she can trade it for goods necessary for survival such as food, clothing, and shelter. Individuals can make more money than they need to survive. They can choose to spend all of their money on survival and immediate pleasure, or they can choose to save a portion of their money.
Why would anyone want to save a portion of their money? There are 3 main reasons:
1. To insure against temporary loss of the ability to produce value for others.Since the conditions of life are uncertain, everybody should save money. If one has not saved and he/she looses the ability to produce value, then he/she will loose her independence and will have to depend on others for survival. Examples of insuring against the loss of the ability to produce include becoming sick or severely injured.
2. To make larger purchases than their regular income would allow. Cars, homes, computers, jewelry, etc can cost more money than our usual income of money will allow. We can obtain such items through saving or borrowing. I will cover borrowing and debt in later post.
3. To intentionally stop working for a period of time. For most of human history, people would die before they were too old to work. They had little reason to save money for a retirement because they would likely die before they could retire. In modern times, people in developed countries will very likely survive past the point that they are too old to work. 75% of Americans live past the age of 65. If people want to maintain independence in their later years, then they must save money for retirement. Otherwise, they will return to the state of dependence just like when they were born. Most people make enough money to retire before they are too old to work if they save money wisely. Other reasons to stop working include taking a vacation and furthering education.