In our practice, we work with clients – and their adult children – on building strong family finances across generations.
Clients want to see family wealth used as a positive force, and part of that means teaching younger generations to handle money responsibly.
It’s certainly true that the choices you make in your 20s and 30s can make or break your financial future. Here’s some tips to put you on the right track in five minutes or less.
Seize the moment. If you are eligible for a Roth IRA, don’t pass up this fabulous once-a-year use-it-or-lose-it opportunity. “If a 25-year-old contributes $5,000 each year until she retires and makes an average annual return of 8% on her investment, she’ll have $1.4 million saved by the time she retires at age 65. And she won’t have to give the IRS a cent of it,” says Kevin McCormally for Kiplinger.com.
Harness the power of long-term compounding. Don’t miss the boat on long-term growth by parking money in low-return investment options (like money markets and CDs) meant only for the short-term. When we see a twenty- or thirty-year-old investing long-term retirement funds in a bank savings account, we really want to cry.
Play to win. Eligible for your company’s retirement plan? Sign up to get at least the full employer match. Better yet, try to max it out. Maximizing your contributions will minimize your taxes and get you way ahead of the game in terms of saving. Take our word for it, it won’t get any easier to save down the road. Although you’ll make bigger bucks, your spending will go up even more.
Stay out of trouble. Don’t waste your money by getting into high commission traps like annuities and complex insurance products claiming to build wealth over the years (they rarely do). They’re easy to get in to, but like the Hotel California, you may never leave.
Don’t blow it. Big spending on car payments and restaurant meals will leave you empty-handed. Focus your spending on assets that go up in value, and experiences that will make you richer in mind, body and spirit.