Get your kids on the right track
Posted August 31, 2023
Posted August 31, 2023
If you’re a parent concerned about your children’s financial futures, this guide offers key principles you can share with them for effective retirement planning. Although originally designed with Generation Z in mind, these core principles are timeless and relevant for anyone, including your children.
The most incredible asset your children have is time. Compound interest works like a financial multiplier, making even modest initial investments grow significantly over the years. Urge them to start saving as soon as they start earning, no matter how small the amount seems. The sooner they begin, the less they’ll need to save each year for a comfortable retirement.
If your child is eligible for workplace retirement benefits like a 401(k), it’s crucial they make the most of this opportunity. Many employers match contributions, effectively offering free money. Stress the importance of contributing enough to secure this full employer match—it’s an immediate, guaranteed return on investment.
Investing might seem intimidating, but it’s vital for long-term financial stability. Teach your children that diversification—spreading investments across various asset types like stocks and bonds—is key for reducing risk and maximizing gains. If they’re not sure where to start, recommend seeking guidance from reputable financial advisors like Thayer Financial.
Everyone’s comfort level with market volatility varies. Young people generally have a higher capacity to take on risk due to their longer time horizon for recovery. But it’s important for your children to identify an investment strategy that aligns with their comfort and long-term goals.
Life is unpredictable. Encourage your children to build an emergency fund that covers at least three to six months’ worth of living expenses. This financial cushion can help them avoid withdrawing from their retirement savings during unforeseen events such as medical emergencies or sudden unemployment.
The economic landscape is ever-changing. Encourage your children to stay informed about retirement policies, investment strategies, and economic trends. Remind them that the plans they make today may need adjustments as they mature, change jobs, or undergo other life shifts.
Preparing for the future is important, but so is enjoying the present. Help your children find a balance between saving for retirement and living a fulfilling life now. Smart budgeting can allow for both current enjoyment and future financial security.
By encouraging your children to start early and adhere to these key principles, they’ll be better equipped to build a secure and comfortable retirement for themselves. If you or your children have questions about retirement planning at any stage, Thayer Financial is available to provide personalized advice. Book a consultation through our website today.
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