When you’re young, you feel like you’ll always be young. Time will stand still and troubles never appear.
We know that is not true. We have life experience that has taught us so much; lessons we want to pass on to our children without them having to learn them the way we might have. Starting to save early is one of those lessons.
It can be so hard to convince our children to save when they are young. Stunned, with their first paycheck, they can’t believe how much has already been taken out due to taxes and various fees already. Getting them to set aside savings is more than a pull.
Help them see saving is actually paying their future self.
Ask the question: describe to me what you would like your financial future to look like. Help them create a picture of that future.
That future won’t just happen. Just like training, working or schooling helps make that dream a reality, saving will too.
Two “hows” will impact their financial future: how early and how much.
Let’s say there is a girl who begins to save 10% at 20 years old and stops saving at 40.
A 40 year old who begins saving 10% would have to save twice as much as the 20 year old to save the same amount. The 20 year old, because of the interest earned in saving over time, will still have more money in the end than the 40 year old.
The important factors to long-term savings are not where you invest nor how much you earn. What is important is how early and how much.
Help your child start with a minimum targeted savings rate of 10%. Then, with each pay increase, teach her to save 10% of each raise.
Proverbs 13:11 says, “Wealth gained hastily will dwindle, but whoever gathers little by little will increase it.”
Consider setting up a matching fund to help your child get started on saving. When my son began saving for his car, my husband matched him dollar for dollar. When it comes time to save for their retirement, past experience can help make sense of saving.