Kids & Money

Repeat after me: ‘Pay yourself first’

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A confession: In my early days on the job, I was way more interested in buying record albums and building my vinyl collection than saving for the future and contributing to a retirement account.

Employee stock purchase plans? I had no money to spare even though shares were offered at a steep discount. An Individual Retirement Account? That was not for someone a year out of college. In addition, I wasn’t yet eligible for the traditional pension plan and 401(k)s weren’t yet a readily available option.

If only there was a do-over button — I could have added a few more years of savings toward retirement for down the road.

Since this space is devoted to kids and money topics, I’m not at all embarrassed to share my early backward steps before I finally got with the program. In fact, my mistakes can be instructional to parents with children of all ages.

What I mostly learned, and what was also reinforced, was the notion to pay yourself first. It’s that simple. No matter the size of your paycheck, set aside money for long-term savings, then deal with the day-to-day expenses that can quickly drain your wallet.

You also need to be self-reliant. When it comes to setting aside money for a comfortable future 30, 40, or 50 years from now, no one is going to do it for you. Set a savings goal and start chipping away. It’s especially important for younger workers to get in the game, with the future of Social Security in doubt and with traditional pension plans mostly a thing of the past.

Unfortunately, much like I did, many young workers treat saving for retirement as an afterthought. Yet as you get older, it only gets harder to make up lost ground because there are so many demands on your paycheck.

Some employers aren’t helping either by reducing or suspending the amount of money they’ll match in an employee’s 401(k)s. Dozens of big companies have frozen or cut payments since the last recession, according to the Pension Rights Center.

What can parents do?

Start by establishing good savings habits with younger children. First and foremost, talk about money with the kids early and often. It’s a critical life skill for kids to develop.

Suggest that they set aside some of their allowance each payday for their savings account. The same with cash gifts and other rewards. Keep it simple, and don’t talk in percentages.

For older kids who are earning some income from a job, consider opening a Roth IRA. There’s no age requirement for these tax-friendly accounts, only proof of earnings.

What can young 20-somethings do to boost their retirement savings?

Take advantage of free money. If your employer offers to match your 401(k) contribution up to certain limits, don’t leave that money on the table.

Another strategy is to increase your 401(k) contribution each year, even by just 1 percent. This is a time of year when investment firms send reminders to retirement account holders about bumping up their 401(k) contributions. It hardly takes any effort.

There’s encouraging news on the retirement savings front. At those companies that offer 401(k) or their 403(b) counterparts for public-sector workers, employee participation rates are growing, said the Plan Sponsor Council of America.

The organization noted in its latest survey that nearly 90 percent of all employees are eligible to participate in their employer’s plan, and nearly 88 percent actually do so.

Another encouraging sign: A Chase Generational Money Talk study found that millennials are starting to save for retirement 17 years earlier than their baby boomer parents did.

As far as I can tell, the Chase survey did not ask how many people were banking on their record collections to cover their retirement.