Convincing Your Kids To Plan For Retirement: The Basics
Nov 15, 2016 23:05
As a parent with older children, you probably don’t want to confront the fact they are getting older. And, of course, it can be hard to see them for what they really are - young adults. So, while retirement planning isn’t likely to be an issue on their minds, it sure isn’t on yours, either. But - perhaps it should be.
The simple fact is that children receive little education on finances in the school system. Most of what they learn will come direct from you. And one thing we can guarantee is that you don’t want your children to be left behind. The sooner they start planning, the happier their later years will be. It’s vital to encourage them to consider their retirement fund. We’ve put together a few ideas of how you can approach the subject with them - read on to find out more.
First of all, discuss the benefits of retirement planning with your kids. As The Fortunate Investor say, there are many advantages that planning can bring. The financial implications are obvious, of course. And, they say it can give your kids more confidence and allow them to take more risks. It can also help them establish friendships with like-minded others.
Talk about the dangers of waiting
There are some significant figures you can share with your children to encourage them to start saving early. Assuming an annual return of 7%, a 25-year-old will only need to put away $250 a month to enjoy a pension pot of almost $660,000. If they don’t start saving until they are 35, that monthly amount would need to be $500 for the same payout. Starting early is easier on the wallet - it’s a simple as that.
Most pension plans have significant incentives - they are basically free money. So, give your kids some examples. Show them the matched contributions from your employer, for instance. Or, how a 50 cents on the dollar match can boost their retirement funds by $1,500 a year. Star early enough, and that is a significant boost to their lifestyle in their senior years.
If you can afford it, why not offer to boost their income if they promise to start saving right now? You could match their contributions, for example, so they don’t lose out at all. You could set up an IRA and make contributions that way, so you avoid taxes, too.
Of course, the best thing you can do for your children is to teach them the value of money from a young age. But understand, it’s never too late. Even if you are useless with money yourself, there are lessons they can learn. The point is to talk about finances is a good thing, and there are many tactics you can use to give your children a valuable grounding in money.
OK, we hope this has helped you with a few ways to offer your children encouragement to save for their retirement. With a little luck, maybe you will still be around to see them enjoy the fruits of their hard work!
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