PASSING ALONG GOOD FINANCIAL HABITS by Scott Boatwright
If you’re in your fifties, sixties, or seventies, there’s a good chance you can recall a really lousy financial decision at some point in your past. If you’re lucky, it was buying a wildly overpriced article of clothing that you wore once before realizing that your friends were snickering behind your back. More likely, it was more on the scale of buying a quite fun, but needlessly expensive, car in your twenties, when you could have been contributing to a retirement plan instead. There’s a high likelihood that your personal lousy decision came before you turned fifty. In fact, even if you don’t consider yourself a money maven, you almost certainly have acquired some well-earned financial wisdom from which the younger generation could benefit mightily. Here are some concrete examples of what you can do to educate kids, grandkids, friends or mentees about the way money has worked in your life—both good and bad. Incentivize a young person who works. Is there a teenager in your circle who makes $1,000 per year babysitting or cutting grass? Or a young adult who has overcome some odds to get a first real job, even though it doesn’t pay great? Is that behavior that you want to incentivize? Then consider jump-starting the ability to save by matching some portion of that young person’s earnings, with the understanding that your contribution is for long-term goals only. For the teen, consider opening a Roth IRA and matching, say, 50% of their earnings with contributions that you make to the account. For the young adult, encourage him or her to defer at least enough earnings into an employer’s retirement plan to max out the employer match; your gift replaces those deferred wages for current living expenses. Take advantage of the opportunity to explain why you’re 14 | 50+ Living | August 2020
doing this: Because you admire their work ethic and want to help them develop the savings habit as soon as possible, and because money they put away early in life has the longest investment horizon—more time for compound returns to work their magic. Take a young person to a meeting about finances. Many of us aren’t great at talking about finances within our own families. Ironically, we can talk about how money should be allocated in other environments all day long. Here’s an idea to bridge that gap. Take a young person to a meeting that will decide how limited dollars will be deployed to meet important goals. The setting of the meeting doesn’t really matter that much: work, church, synagogue, and other non-profits all work fine. Your goal is to expose a young person to smart people following an intelligent process to decide how money will be spent. After the meeting, take some time to emphasize that there’s usually no perfect allocation of money. It’s having a process to work out competing priorities that’s really important. Show a young person how your budget works. Spend half an hour talking a young person through your personal budget. Hits the basics: Here are my income sources and here are my expenses. Talk about budgeting for known expenses and for the surprises that inevitably come up. Explain how to budget for expenses that occur annually rather than monthly. Slip in some of the best financial advice I’ve ever received: Set your budget up based on what
