I recently stumbled upon a startling revelation in a Money article: the current batch of college graduates might be looking at retirement only at the age of 75! Considering an average lifespan of 84 years, that leaves a mere nine years for retirement. More concerning is that many might not even get to enjoy those nine years, passing away before reaching 75.
While I absolutely advocate the value of hard work, it’s equally essential for my children to relish the joys of life.
Why Retirement Ages are Creeping Up
The article pinpoints soaring student loan debt as a primary reason for this shift in retirement age. This mounting debt burden pushes graduates to postpone significant life milestones, like purchasing a home. The delay in building home equity and availing tax benefits further dampens their prospects for an early retirement.
In essence, the weight of student loans is causing graduates to delay building assets, such as home ownership, until much later in their lives.
Inculcating Financial Wisdom Early On
Even though my eldest is just in the 6th grade, our lessons in financial prudence have already commenced. Here’s our approach:
- Earning and Allocating his Allowance: His allowance isn’t just handed to him; he earns it. Chores around the house and dedication to his schoolwork determine his allowance. Slacking means no money. Of what he earns, he allocates: 10% for giving, 20% towards investing, 10% for savings, and the remaining 60% for his discretionary spending.
- Encouraging Investment with Matches: My spouse and I haven’t created college funds for our kids. Instead, we’ve established an account specifically for our son’s college fund, but it’s under our control. We match whatever he puts into this from his investing allocation. This matching has spurred him to invest even unexpected money, like birthday gifts or the $20 he found once.
- Discussing the Future of Finances: We frequently chat about retirement, the magic of compound interest, and the advantage of initiating a Roth IRA early in life. My son is eager to get started on this during his teen years.
- The College Conundrum: College is a frequent topic at our home. My son understands our aspirations for his higher education and the importance of selecting a financially rewarding major. He’s well-aware of the pitfalls of student loans. His proactive approach has him researching scholarships and colleges, even spotting ones available for 7th and 8th graders.
- Value for Money: The lesson of money’s worth starts early. From picking free books as gifts for his sisters to couponing for groceries, he’s learning to stretch his dollar.
- Teaching Through Refusal: While we meet his needs, we often refrain from fulfilling all his wants. This has taught him the art of saving for what he desires.
I’m well aware that my 6th grader will evolve as he grows older, but the foundational principles we’re instilling now will stand him in good stead. My aspiration is that, armed with this knowledge, he might not only avoid retiring at 75 but perhaps even consider early retirement.
What strategies do you employ to provide your children with a strong financial start?
