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A Letter to My Children About Saving

A Letter to My Children About Saving

| March 20, 2019

Here is a “Dadism.” Save early and save a lot.

I know. You don’t have the money to save. I know, it’s important that you experience life now. I know, things are expensive; it probably costs more for you to live now than it cost your parents when we were your age. And, I know, you are probably tired of hearing me advise you to save.

But, here is what I know.

Saving can give you flexibility later. You may want to take some time off to raise a child. You may want to take some time off between jobs. You might want to go back to school. You may want to buy a house. You may want to help your children pay for college.

Saving can provide protection for when bad things happen. You might lose your job. You might experience a cut in pay. Your pet might get sick and need emergency vet services. Or you might get sick and be unable to work for a while. Something might break and you have to get it fixed.

Saving can provide resources when you retire. I know, that’s a long way off. But, if you are fortunate to live long enough, you will retire someday, either voluntarily or involuntarily. And, no one is going to pay for your retirement. Social Security and Medicare are terribly underfunded, meaning you probably won’t get as much benefit from those programs as is currently promised.

In short, if you don’t save now, you are intentionally choosing to put yourself in possible peril later in life. You don’t feel it now, but you will feel it later when you retire or something goes wrong. There are very few things you can control in life, but how much you spend and how much you save are two of them. My advice to you is start now and increase your level of savings every time you get a pay increase.

Here’s some motivation for you. What if I told you that, by making a few small changes in your spending habits you might be able to accumulate $1,000,000 by the time you turn 65? Specifically, if you invest $41/week for 40 years, you could have $1,000,000 when you turn 65!* Impossible? No, it’s really easy! Here are some ways you can do it:

  1. You have a retirement plan at work where your employer matches 100% of your contributions up to 3% of your salary. All you need to save is $20.50/week.
  2. You are a smoker and smoke one pack of cigarettes each day. Give up that pack and invest the savings.
  3. Give up your daily Cinnamon Almondmilk Macchiato with an extra shot of Espresso

If you don’t have the “slam dunk” opportunities above, you might want to make changes to several areas of your financial life. The best way to do this is to see where you are spending your money and try to trim from several places. Here are ten ideas and the approximate annual savings associated with each:

  1. Eat out two less time per month: $25.50
  2. Eliminate one of your streaming services: $7.99
  3. Purchase 2 less bottles of water each week (fill your own): $9.22
  4. Be more intentional with your thermostat at home: $13.83
  5. Shop sales so you can save 10% on your clothing budget: $16.67
  6. Buy two fewer alcoholic beverages per month when you go out: $18.15
  7. Share one of your Uber rides each month: $12.87
  8. Increase your automobile collision deductible from $250 to $500: $7.13
  9. Come home one day sooner on one of your two vacations each year: $16.67
  10. Purchase a less expensive car: $49.97

These small savings total $2,136/year. Of course, not all of these ideas may apply to your situation. The amounts may be different for you too. But, the point is that we all have savings that we can find. And, even if your salary isn’t as high as you want it to be, you can still save. Everyone can – maybe not at the same level, but yes, even you can save.

Still not convinced? Then consider this. It’s too easy to say I can’t. It doesn’t take any effort at all. After all, you can’t feel the pleasure associated with your long term savings now. And, if your financial life is going okay, you probably aren’t feeling any pain. So, what’s the motivation?

It has to be because you want to take personal responsibility for your financial well-being. It has to be because you don’t want to have to rely on someone else to be financially ok. It has to be because you want to reduce future financial stress in your life. And it has to be because you take pride in taking control of your financial achievements – now and in the future.

We are all about helping our clients create strategies that will help them achieve their Second Half goals. If you can begin your savings discipline early, you will not only have a higher probability of achieving your Second Half goals but you will also have more flexibility with regard to the strategies that are available to you. Now, let’s get started - it only takes a few dollars a day to get to $1,000,000 by the time you are 65. No excuses!

*This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing. Assumes an average annual rate of return of 9.64% - the average annual rate of return for the S&P 500 with dividends reinvested from January 1, 1900 – December 31, 2018.  

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.