Teaching young folks how to save for retirement

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c.coyle
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Teaching young folks how to save for retirement

Post by c.coyle » Wed Nov 14, 2018 7:43 am

"Over the past four decades, American employers have drifted away from pensions and toward 401(k) plans, which put more responsibility to save on the worker. “And at the same time, we didn’t offer any training—people don’t get any training in how to manage a 401(k) or what a mutual fund is. They’re not taught in any systematic way in high school or in college,”

Article here: https://www.theatlantic.com/family/arch ... ource=feed
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g2morrow
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Re: Teaching young folks how to save for retirement

Post by g2morrow » Wed Nov 14, 2018 9:52 am

The next problem is they are doing away with 401k's and moving toward the gig economy - not sure how the younger generation is going to handle that?

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Re: Teaching young folks how to save for retirement

Post by magicrat » Wed Nov 14, 2018 9:59 am

g2morrow wrote:
Wed Nov 14, 2018 9:52 am
The next problem is they are doing away with 401k's and moving toward the gig economy - not sure how the younger generation is going to handle that?
Hopefully by taking responsibility for themselves and saving money for retirement.

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Re: Teaching young folks how to save for retirement

Post by ThatGuy » Wed Nov 14, 2018 10:50 am

about 39 percent of the wealthiest respondents still did report regret. (One of the most common things people thought they spent too much money on was vacation; cars and clothing also ranked highly for men and women, respectively.)
So the percentage of people who regretted taking vacations was less than 39%, but it floors me that ANYONE (who can pay their bills) regrets this. I thought experiences were always touted as better than things?

I know if I had more money I would be going on vacation more frequently, and spending more on the vacations themselves as opposed to buying luxury cars. Actually, I'd probably step up the maid service first.
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Re: Teaching young folks how to save for retirement

Post by Grt2bOutdoors » Wed Nov 14, 2018 11:14 am

When farmers harvest a crop, they always keep some “seed” corn on the side in case of a future poor harvest. The sun does not always shine, when hard times appear, having resources on the side buffers you from the fallout. When learning about American and World History, there were plenty of examples of hard times and how people managed through it. Teach how to save for retirement? Life provides plenty of examples- it all depends if one wants to learn from it. There is no magic solution to the retirement equation other than to try and set something aside for the future, always. It will be here soon enough.
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cruzbay
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Re: Teaching young folks how to save for retirement

Post by cruzbay » Wed Nov 14, 2018 11:52 am

I think that teaching financial literacy to young people may be an area of interest for me after I retire. So important that they understand at least the basics (savings, compounding, stocks vs bonds, the true cost of credit card debt, etc.) I can understand them being mystified, overwhelmed and lacking in trust in the massive volume of information out there but this is not something that they should ignore.

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Re: Teaching young folks how to save for retirement

Post by CyclingDuo » Wed Nov 14, 2018 12:25 pm

c.coyle wrote:
Wed Nov 14, 2018 7:43 am
"Over the past four decades, American employers have drifted away from pensions and toward 401(k) plans, which put more responsibility to save on the worker. “And at the same time, we didn’t offer any training—people don’t get any training in how to manage a 401(k) or what a mutual fund is. They’re not taught in any systematic way in high school or in college,”

Article here: https://www.theatlantic.com/family/arch ... ource=feed
As parents, we certainly took it upon ourselves as part of the educational process of raising our children to teach them about the value of human capital, saving and investing for retirement and their futures, the pros and cons of debt and general investing advice. We used the game of Monopoly as they were growing up plus we always included them on viewing their individual portfolios that were set up to pay for their college education so they realized what the money was for, what companies they were invested in, how dividends worked and the expectation in our household was that they would be attending college.

Once they were teenagers, they held part-time jobs to earn the value of making a buck, contributed some of their earnings to fund their Roth IRA's, and both got paid internships in college, etc... as part of the process. Our children still have some things to learn, but at least they have been presented with plenty over the past 2 1/2 decades to counter the lack of any training in HS/College that they didn't get when it comes to a 401k plan. We kept it very simple in consulting with them for post college career jobs to use a Vanguard target fund in their 401k and contribute at least enough to get the match, plus the three fund portfolio in their Roth IRA's using low cost ETF's.

Not saying everything is perfect by any means. Where we may be failing now with our youngest is she keeps getting some nice bonuses every quarter from her job in the tech industry and convincing her to save more of that by considering it part of her salary is being met with a level of resistance that will need some more talks. She's young and enjoying herself with the bonus money (travel, food, consumerism) that eventually will need to have a chunk of that going to more savings. Edit: I see she just deposited $1050 of her latest bonus in her 401k last month! Maybe her eyes have finally stopped rolling after mentioning it to her so often with our nagging commentary. :beer
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Re: Teaching young folks how to save for retirement

Post by jadd806 » Wed Nov 14, 2018 12:32 pm

I think that this is a good topic for workplace mentors to pass on some knowledge, especially in the absence of some sort of government-mandated financial literacy training (i.e. a high school class). Unfortunately most of the time I hear older workers talking about the stock market they refer to it as gambling, so I imagine that this type of interaction has a net negative effect overall.

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Re: Teaching young folks how to save for retirement

Post by sarabayo » Wed Nov 14, 2018 12:43 pm

CyclingDuo wrote:
Wed Nov 14, 2018 12:25 pm
Edit: I see she just deposited $1050 of her latest bonus in her 401k last month! Maybe her eyes have finally stopped rolling after mentioning it to her so often with our nagging commentary. :beer
Huh, how are you able to see into her 401k? Presumably you didn't set it up jointly with her, since it comes from her employer, which I presume is not you (?).

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Re: Teaching young folks how to save for retirement

Post by stoptothink » Wed Nov 14, 2018 12:49 pm

sarabayo wrote:
Wed Nov 14, 2018 12:43 pm
CyclingDuo wrote:
Wed Nov 14, 2018 12:25 pm
Edit: I see she just deposited $1050 of her latest bonus in her 401k last month! Maybe her eyes have finally stopped rolling after mentioning it to her so often with our nagging commentary. :beer
Huh, how are you able to see into her 401k? Presumably you didn't set it up jointly with her, since it comes from her employer, which I presume is not you (?).
That's exactly what stuck out to me with that post as well. My thoughts on this topic: "The world is changed by your example, not your opinion..." Paulo Coehlo. We are teaching by example.

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Re: Teaching young folks how to save for retirement

Post by warner25 » Wed Nov 14, 2018 1:42 pm

I really don't think a lack of effort to teach "how" is a core problem. It's not like every young person doesn't already have access to all the information they could ever want on the web. Motivated people will research, read, and figure it out, at least eventually. The issue is motivation. My employer gives an eight-hour class on personal finance to all new hires, and handles retirement plan enrollment forms on the spot, but I can tell you definitively that it has almost no effect. Most 18-25 year-olds just don't have any sense of urgency to squirrel away money for ages 59+.

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Re: Teaching young folks how to save for retirement

Post by randomguy » Wed Nov 14, 2018 1:46 pm

ThatGuy wrote:
Wed Nov 14, 2018 10:50 am
about 39 percent of the wealthiest respondents still did report regret. (One of the most common things people thought they spent too much money on was vacation; cars and clothing also ranked highly for men and women, respectively.)
So the percentage of people who regretted taking vacations was less than 39%, but it floors me that ANYONE (who can pay their bills) regrets this. I thought experiences were always touted as better than things?

I know if I had more money I would be going on vacation more frequently, and spending more on the vacations themselves as opposed to buying luxury cars. Actually, I'd probably step up the maid service first.
The regret us having to work another 5 years because of all those disney cruises😃 And the evidence of experiences being better than things hasnt stood up well in replication studies.

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Re: Teaching young folks how to save for retirement

Post by GerryL » Wed Nov 14, 2018 1:51 pm

cruzbay wrote:
Wed Nov 14, 2018 11:52 am
I think that teaching financial literacy to young people may be an area of interest for me after I retire. So important that they understand at least the basics (savings, compounding, stocks vs bonds, the true cost of credit card debt, etc.) I can understand them being mystified, overwhelmed and lacking in trust in the massive volume of information out there but this is not something that they should ignore.
Check out Financial Beginnings https://www.financialbeginnings.org/ They started in Oregon and are now expanding to other states and regions.

They offer financial literacy programs for all grade levels. I have been volunteering with them since 2014, doing presentations on Credit, Budgeting, and Investing in high school classrooms. They have ready-to-use presentations, but volunteers are welcome to revise the presentations as long as they deliver the key objectives. When I do the Investing module, I leave out the "fun" portion about how a young kid made money trading individual stocks and put more focus on passive investing.

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Re: Teaching young folks how to save for retirement

Post by CyclingDuo » Wed Nov 14, 2018 1:59 pm

sarabayo wrote:
Wed Nov 14, 2018 12:43 pm
CyclingDuo wrote:
Wed Nov 14, 2018 12:25 pm
Edit: I see she just deposited $1050 of her latest bonus in her 401k last month! Maybe her eyes have finally stopped rolling after mentioning it to her so often with our nagging commentary. :beer
Huh, how are you able to see into her 401k? Presumably you didn't set it up jointly with her, since it comes from her employer, which I presume is not you (?).
Track the entire family through Personal Capital. Her 401k is held at the same company where her brokerage account is, so I can see the balance (and additions every month).
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daheld
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Re: Teaching young folks how to save for retirement

Post by daheld » Wed Nov 14, 2018 2:07 pm

Basic financial literacy should absolutely be required as a part of a high school education. I've never used algebra or geometry in my job. Basic financial literacy and investing will be infinitely more important over the arc of my working career.

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Re: Teaching young folks how to save for retirement

Post by c.coyle » Wed Nov 14, 2018 2:24 pm

warner25 wrote:
Wed Nov 14, 2018 1:42 pm
I really don't think a lack of effort to teach "how" is a core problem. It's not like every young person doesn't already have access to all the information they could ever want on the web. Motivated people will research, read, and figure it out, at least eventually. The issue is motivation. My employer gives an eight-hour class on personal finance to all new hires, and handles retirement plan enrollment forms on the spot, but I can tell you definitively that it has almost no effect. Most 18-25 year-olds just don't have any sense of urgency to squirrel away money for ages 59+.
Now don't broad brush people younger than you. You seem to think this is just a problem with "every young person" and "[m]ost 18-25 year olds." Not so. Overall, people in their 50s, 60s and 70s are just as ignorant of financial basics, because they too have never had the "motivation." Ask 10 people in that range what's in their IRA or 401(k), and at least 7 are likely to say "I don't know, it's an IRA." If they have actually done anything to take charge of their retirement funds, they likely have invested in CDs, money market funds, or annuities they don't understand.

Young people aren't any more ignorant or lazy than our generation.

The point is, in the old days, blue collar workers didn't have to know squat about investing, because they had traditional pension plans that were set up and administered by their employers.
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Re: Teaching young folks how to save for retirement

Post by KlangFool » Wed Nov 14, 2018 2:35 pm

OP,

<<Teaching young folks how to save for retirement>>

I believe that the goal is wrong in the first place. The young people believe that they will live forever. So, why would they care and should they care about retirement (62 years old)? The proper goal is to teach young people how to manage their taxes and keep more money in their pockets.

I do not save for retirement. I save in order to be rich and Financially Independent (FI). I will not be fully-employed until retirement age (62). So, it is pointless to talk about retirement.

FI folks will have a better chance to convince the young folks to save.

KlangFool

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GerryL
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Re: Teaching young folks how to save for retirement

Post by GerryL » Wed Nov 14, 2018 2:54 pm

KlangFool wrote:
Wed Nov 14, 2018 2:35 pm
OP,

<<Teaching young folks how to save for retirement>>

I believe that the goal is wrong in the first place. The young people believe that they will live forever. So, why would they care and should they care about retirement (62 years old)? The proper goal is to teach young people how to manage their taxes and keep more money in their pockets.

I do not save for retirement. I save in order to be rich and Financially Independent (FI). I will not be fully-employed until retirement age (62). So, it is pointless to talk about retirement.

FI folks will have a better chance to convince the young folks to save.

KlangFool
Yes. In my revised presentation for the Financial Beginnings https://www.financialbeginnings.org/ Investing module, I ask the kids to cross out the word Retirement in their booklet and replace it with Financial Independence -- after a little exercise that prompts them to try to envision retirement. I actually got that idea on this forum.

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Re: Teaching young folks how to save for retirement

Post by cruzbay » Wed Nov 14, 2018 3:09 pm

GerryL wrote:
Wed Nov 14, 2018 1:51 pm
cruzbay wrote:
Wed Nov 14, 2018 11:52 am
I think that teaching financial literacy to young people may be an area of interest for me after I retire. So important that they understand at least the basics (savings, compounding, stocks vs bonds, the true cost of credit card debt, etc.) I can understand them being mystified, overwhelmed and lacking in trust in the massive volume of information out there but this is not something that they should ignore.
Check out Financial Beginnings https://www.financialbeginnings.org/ They started in Oregon and are now expanding to other states and regions.

They offer financial literacy programs for all grade levels. I have been volunteering with them since 2014, doing presentations on Credit, Budgeting, and Investing in high school classrooms. They have ready-to-use presentations, but volunteers are welcome to revise the presentations as long as they deliver the key objectives. When I do the Investing module, I leave out the "fun" portion about how a young kid made money trading individual stocks and put more focus on passive investing.
Thanks so much for the info. I like the idea of focusing on Financial Independence vs. Retirement as well.

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Re: Teaching young folks how to save for retirement

Post by staythecourse » Wed Nov 14, 2018 3:25 pm

cruzbay wrote:
Wed Nov 14, 2018 11:52 am
I think that teaching financial literacy to young people may be an area of interest for me after I retire. So important that they understand at least the basics (savings, compounding, stocks vs bonds, the true cost of credit card debt, etc.) I can understand them being mystified, overwhelmed and lacking in trust in the massive volume of information out there but this is not something that they should ignore.
Completely agree. Before blaming folks for not being self motivated I think we need to at least ATTEMPT to teach them these skills. When I was in school (mind you that was only the 90's) we had to take a basic finance class. How to write checks, pay bills, understand what the terms like grace period was for credit cards, what interest rates and APR meant, etc... Does anyone take classes like that anymore or more important is mandatory. That would be a good place to start.

I'm sure I'll take flack for this but we need to focus more time on this type of education then everyone taking calculus. Most careers NEVER use that yet everyone seems to take that before graduating high school yet they don't know how to handle a credit card. Shame on us for the what we consider basic education for our youths.

Good luck.

p.s. A class like that would be a great intro. on the effects of student debt and credit card debt.
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Re: Teaching young folks how to save for retirement

Post by beyou » Wed Nov 14, 2018 3:27 pm

Teaching the whole gamut is a great deal to take in.
You dont start with calculus, you learn math gradually over a 20+ year education. No different here.

For my kids, at an early age where they didn’t work, no reason to focus on investing. Focus on good spending habits. Don’t just cut the cable cord, tell kids why and how much it will save your family.

When they are a bit older, high school, you start discussing career decisions and financial impact early in life. Where you may live, transportation.

When they apply to college, financial aid discussions should build on LBYM prior discussions, and then introduce debt (or benefits to avoid it).

During college hopefully they apply the lbym lessons learned, and start focusing on career planning.

Once they start earning income, time to start teaching them how to set aside SOME savings, and how for various goals (next car vs roth ira for retirement).

If you live long enough there are many phases, but hopefully you teach them about Bogleheads site so they can become independent (of parental advice) in their lifelong financial education.

No reason to learn to learn this all in HS, nor realistic.

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Re: Teaching young folks how to save for retirement

Post by aristotelian » Wed Nov 14, 2018 3:54 pm

warner25 wrote:
Wed Nov 14, 2018 1:42 pm
I really don't think a lack of effort to teach "how" is a core problem. It's not like every young person doesn't already have access to all the information they could ever want on the web. Motivated people will research, read, and figure it out, at least eventually. The issue is motivation. My employer gives an eight-hour class on personal finance to all new hires, and handles retirement plan enrollment forms on the spot, but I can tell you definitively that it has almost no effect. Most 18-25 year-olds just don't have any sense of urgency to squirrel away money for ages 59+.
You could say that math, English, and science are all out there on the internet, but we still need schools to put them in the curriculum and teach them. I agree that individuals control their behavior at the end of the day, but education can still have a big impact.

It's kind of like sex ed. It really should be taught by the family, but there are huge social taboos against talking about sex. Same with money. That leaves schools with picking up the slack to ensure at least some baseline of literacy.

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Re: Teaching young folks how to save for retirement

Post by warner25 » Wed Nov 14, 2018 3:58 pm

c.coyle wrote:
Wed Nov 14, 2018 2:24 pm
Now don't broad brush people younger than you... Young people aren't any more ignorant or lazy than our generation.
Ha, sorry if I was unclear, I agree with you; this is not a generational thing at all. I absolutely believe that 20 year-olds in 1968 were just as carefree as 20 year-olds in 2018, and it's those folks from 1968 saying they regret it. For the record, I'm a proud Millenial myself, not some Boomer yelling at the kids on my lawn.

Rather than pensions disappearing (since they were never ubiquitous, as I understand it), I will suggest that the biggest difference now vice 50 years ago is more effective (data driven) consumer marketing, influence of social media (more Jones' to keep up with), and easier access to credit.
Last edited by warner25 on Wed Nov 14, 2018 4:25 pm, edited 1 time in total.

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Re: Teaching young folks how to save for retirement

Post by terran » Wed Nov 14, 2018 4:06 pm

How do we teach old folks how to save for retirement? I'd be more concerned about a 65 year old with a $60k median 401(k) balance than a 25 year old with a $1k median balance: https://www.forbes.com/sites/personalca ... -stack-up/

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Re: Teaching young folks how to save for retirement

Post by c.coyle » Wed Nov 14, 2018 6:10 pm

warner25 wrote:
Wed Nov 14, 2018 3:58 pm
c.coyle wrote:
Wed Nov 14, 2018 2:24 pm
Now don't broad brush people younger than you... Young people aren't any more ignorant or lazy than our generation.
Ha, sorry if I was unclear, I agree with you; this is not a generational thing at all. I absolutely believe that 20 year-olds in 1968 were just as carefree as 20 year-olds in 2018, and it's those folks from 1968 saying they regret it. For the record, I'm a proud Millenial myself, not some Boomer yelling at the kids on my lawn.

Rather than pensions disappearing (since they were never ubiquitous, as I understand it), I will suggest that the biggest difference now vice 50 years ago is more effective (data driven) consumer marketing, influence of social media (more Jones' to keep up with), and easier access to credit.
No sweat. I should have read that a little more carefully.
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Re: Teaching young folks how to save for retirement

Post by tennisplyr » Wed Nov 14, 2018 6:56 pm

Work/earn money, live within your means, save/invest....rinse, repeat.
Those who move forward with a happy spirit will find that things always work out.

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Re: Teaching young folks how to save for retirement

Post by Taj_Mahalo » Wed Nov 14, 2018 7:13 pm

daheld wrote:
Wed Nov 14, 2018 2:07 pm
Basic financial literacy should absolutely be required as a part of a high school education. I've never used algebra or geometry in my job. Basic financial literacy and investing will be infinitely more important over the arc of my working career.
Absolutely agree. I was just thinking about this the other day. More, functional, coursework should be taught in high school.
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Re: Teaching young folks how to save for retirement

Post by LadyGeek » Wed Nov 14, 2018 10:51 pm

This thread has run its course and is locked (not personal nor actionable). General comment threads are off topic in the forums with "Personal" in the title. See: A reminder that non-investing general comment threads are OT
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- It must be actionable. You must be able to do something specific with the replies that will make a difference in your situation.
If you have a specific question, please ask directly and provide sufficient information for members to supply appropriate advice.

This thread is now in the Personal Finance (Not Investing) forum (retirement planning).
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