5 Lessons to Teach your Kids about Retirement
One of the unfortunate realities surrounding retirement in the United States is that many people spend more years in the workforce than they had anticipated since they didn’t save adequately for their retirements. This post is about making sure that your children don’t have to learn this lesson the hard way, by teaching them about saving for retirement while they’re young. Here are 5 essential lessons about retirement that all parents should teach their kids:
Slow and Steady Wins the Race
It may be tempting to tempt fate by earning a ton of money in the stock market overnight, but you have to make sure that your kids appreciate how unlikely that is to happen. In fact, when you invest your money into markets which are constantly fluctuating, you’re sure to run into speed bumps along the way. The key takeaway for your kids is that over time, compound interest is the most effective strategy for planning one’s retirement. By saving early, even when they are in their 20s and 30s, their investments will accrue significant interest by the time retirement approaches.
Related: Money saving lessons every child should know
“A Penny Saved is a Penny Earned”
This famous quote, attributed to the great Benjamin Franklin, captures a lot about what it means to save for retirement. Of course one can spend a tremendous amount of time deliberating what type of retirement investments are most profitable, but it will all amount to nothing if you are unable to cut your spending. Teach your children that the best way to save for retirement is by being thrifty at times, and with the understanding that cutting your expenses when they’re young will lead to an exponentially larger nest egg when they are older.
Saving Effectively Means Early Retirement
A great lesson to teach your kids about retirement is that by saving and investing strategically, they’ll be able to retire years earlier than their peers. Of course, they’ll have to work hard and stick to their savings plan, but by being diligent they will be able to leave the workforce years earlier. This is a powerful motivating factor for countless Americans who are saving for retirement and would do everything possible to bring it about as soon as possible.
Keep Reading: How to prepare for retirement in your 20s, 30s, 40s and beyond
Choose your Own Savings Priorities
When it comes to saving for retirement, instruct your children to proactively choose the strategy that will make them most happy. In most cases, there may not be a particular decision that is objectively right or wrong, and it all depends on the life that they choose for themselves. Some individuals may want to retire early, while others who truly enjoy working may want to stick it out through their 60s and beyond. In this respect, make sure your kids don’t feel pressured to make decisions that go against their personal priorities.
Everyone Needs a Retirement Plan
It’s true that not everyone will have the same priorities, but everyone needs a retirement savings plan. It’s important to be hands-on, or you’ll find out the hard way when the times comes that your options are severely limited. Let your kids know that they have a wide range of choices, but that they need to decide on a plan.