Money lessons

One of my clients, who is an older man, recently told me about a conversation he had with his daughter, who had just gotten married.

A wedding is a special time and certainly a threshold toward a new and different life. Parents often try to impart one last bit of wisdom before their children fully engage in a new path.

His advice? Put money into your 401(k) at work and automate it.

“If you just take it out of your check and never see it, a lot of times you never know it’s missing,” he told the young bride. “It’s harder if you have it in your account and then try to put it aside.”

“If you get a raise, maybe give yourself a little bit of extra spending money to play with,” he continued. “But put the balance into your retirement. Don’t let your lifestyle today cost your future self.”

Sounds like good basic “dad advice,” right? But the more I thought about it, what my client said to his daughter was actually quite profound. Many people would benefit from shifting their mindset to consider the needs of their future self—although it’s easier said than done.

Finding urgency

Save enough now, let it compound, and you’ll have flexibility with your lifestyle later on.

We all get older and, hopefully, wiser. But our younger selves rarely understand the aging process.  As a result, most people have a very hard time visualizing themselves down the road and what that means.

We know, of course, that we should save for the older person that we become. But we’ve never met that person, so the urgency isn’t there.

This is a huge challenge for today’s young people. They feel they have to compete in the age of social media, where images of luxury and consumption are a kind of currency. They’re under a lot of pressure to keep up, and that involves spending money now.

But it’s not just about youth. Most everyone has a hard time projecting themselves into the future. The Baby Boomers didn’t have access to pensions like the prior generation did.  As a result, that generation hasn’t saved enough for retirement.

Role Models

There are exceptions. My dad was a frugal man. He drove an old Buick, or whatever my grandmother didn’t want anymore. As his daughter, this was a bit painful. He would drive me to school and I would tell him “Just drop me off here,” and I’d walk.

My dad was a successful doctor who understood the value of money. We did well by his financial decisions, even if I didn’t like them at the time.

As a result–and also due to having my own kids (now ages 16, 18 and 20)–I’ve become a planner. I encouraged my middle son, who is a senior in high school, to take financial analysis. It’s a class about budgeting, index investing, really fun stuff to talk about at the dinner table. He’s getting exposed to key financial concepts now, before he earns a paycheck.

You don’t know what you don’t know, and that’s a hard thing. That’s why teaching the next generation to embrace simple, automated forms of saving and investing is a huge service to our kids

That’s our job as parents, perhaps as big a job as any in the course of our kids’ long–and hopefully prosperous–lives.


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