As a freshman at UC Berkeley, I got a part-time job in the Conservation Department at the Main Library. My parents weren’t thrilled. It was only 20 hours per week, but they worried my working would gobble up my study time. Technically, I didn’t need the job. It was the late 80s, when the cost of a semester at my state’s public university was a few thousand dollars — not nothing for my middle-class family, but affordable enough that my parents could manage four years of tuition, room and board. It helped that I’m an only child, because they could do it without major debt. As it happened, working in addition to doing classwork helped me better structure my time. I also had a stream of income I was lucky enough not to have to earmark for rent or student loans. It was enough to pay for four years of textbooks, clothes, and many dollar slices of Blondie’s pizza, with savings to spare. “Start an IRA,” grumbled my Dad one afternoon. I had no idea what an IRA was. “It’s an individual retirement account, and you should open one and put money in it right now.” Retirement? Seriously, Dad?
Dutiful daughter that I was, I opened an IRA account at Fidelity Investments and transferred $500, which I invested in a stock mutual fund he chose. Part of every paycheck from then on went into that account. Thirty years later, I pulled Dad aside. “Dad?” He eyebrows raised in question. “You were right about the IRA.”
All you need are the fundamentalsMy Dad was no money expert but he knew the basic principles of long-term investing. He gave me a basic financial management book to fill in the blanks. I read it cover-to-cover. This was grown-up knowledge I knew would be useful even if most of it went over my head and was years from relevance. That was the sum total of my financial education beyond what I gleaned growing up. It has stood me well even though I’m not immune to money fears nor have I made perfect choices. I know the fundamentals of a simple financial plan, and that’s all anyone needs to get started. Times change, but the basics stay the sameI’ve tried my best to pass those fundamentals onto my kids. Save part of every paycheck if you can, even $25 auto-diverted to a separate account. Keep saving till you’ve built up enough to cover three-to-six months of expenses. Open a Roth IRA and put a little in there every month, too. Pay your bills on time. Don’t get in the habit of carrying a balance on your credit card. Stay debt-free for as long as possible. They’re less gung-ho about investing than I was at their age, and less naive. Disaffection with capitalism, political frustration, pandemic disruption and uncertainty about the future have changed the conversation. None of this is a slam-dunk, but at least we’re talking. Better than money being a taboo subject. “Modeling” is a double-edged swordWhat I’ve tried not to pass along is my fear, but you never know. Dad knew the basics, but he didn’t know how to manage the paperwork, and tax time was always chaotic for him. I’ve never shaken the anxiety that creeps in at this time of year. I’m better at organizing than he was, but I’ve also modeled plenty of fretting. I hope my kids haven’t taken too much of that in. My Dad was also frugal to a fault. His steady saving made a good retirement possible for my parents, but he held fast to a scarcity mentality, putting off repairs and experiences they could well afford until it was too late. I inherited a tendency to underspend. That habit has softened as I’ve gotten older and the preciousness of time has gotten clearer. I hope my kids grasp this earlier than I did.
We do the best we can with what we’ve got, right? The fundamentals of financial planning are simple, but the story of our financial lives rarely is. But that’s not the end! Our young adults may inherit our financial stories, but they’re authors of their own. Those stories can start simply, and it’s never too late to help, no matter our situation, even if we were never taught.
Looking forward to chatting in the comments (always).
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Wednesday, March 27, 2024
Money talks
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