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Your Child is Starting Their First Full-time Job A Great Time to Teach Them About Retirement  Your child is starting his or her first job — while he or she is excited about new opportunities to spend money, this landmark signals the start of adulthood and new responsibilities. Financial independence is generally the top goal of both parent and child. As a parent, you can give your children some important pointers to achieving not only that goal, but bigger goals as well — like a secure retirement. Benefit of a Budget: Focused Spending Usually the first emotion associated with a budget is dread. But, it can also be positive. Don't associate a budget with restricting purchases; rather focus on prioritizing spending. Would they rather save for a hot, new car or drink a hot $3 mocha every day? Fixed and Flexible Expenses Help them sort out fixed and flexible expenses. Fixed expenses are basic costs such as rent, electricity, or school loan payments. Paying fixed expenses first is important. You want your young adult to always have a place to live as well as plenty of heat and food. Once fixed expenses are determined, they can earmark the remaining money for flexible expenses such as eating out, clothing or travel. Set Saving Goals Saving for a car or house can be intimidating — particularly if your young adult is still paying off student loans. Emphasize how a little saved consistently over time can add up. Mt. Everest, after all, is scaled one step at a time. Help them figure out what they need to set aside to reach their goals and time line. They also need to be realistic; is it really possible to completely give up mochas? Credit Card Caution While credit cards can pay for dinners out, new clothes or electronics that they can't afford at the moment, the price in the long run is steep. Currently, about 39% of credit card holders only pay the minimum amount due. On top of hefty interest on the outstanding balance, they are also missing out on positive interest that would add up if they were to invest the money. Explain the importance of paying off the balance in full each month. Saving for Retirement...NOW?! Although in the far off future, retirement should be a top budget priority. As soon as your kids have earned income, they should start to save. A little can add up to a lot with the magic of compound interest and time. Take a look under Planning Central on this site. A calculator can help you get an idea of how the magic of compound interest works. What waiting can do to your retirement nest egg:
Common Retirement Options Through Companies: Talk to your young adult about:
Resources In addition to Russell's Employee Investor webpage, there are many resources for your son or daughter online.
Conclusion Financial consultant and executive director of San Diego-based Institute of Consumer Financial Education, Paul Richard, explains, "Young people today are spending, they're not saving — they're getting thousands of messages to spend everyday."2 As they enter the real world, your kids will be ahead of the game with information about budgeting and saving, credit card debt and retirement savings. The habits they develop now will have a considerable impact on their future.
1 South Florida Sun #0151; Sentinel, May 17, 2004 2 Duffy, Jennifer and David Wichner. "Saving For the Future: Younger People Learn Starting Early Makes All the Difference." Arizona Daily Star, www.azstarnet.com, October 14, 2004.
This is a publication of Russell Investments. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Frank Russell Company, whether affiliated or not affiliated with sites linked to this site ("Linked Sites"), is not responsible for their content. The Linked Sites are for the convenience of the user only, and may be accessed by the user only at the user's own risk. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns. First used: August 2005 USI MSL RC878 |
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