A program helps young adults learn good money management.
Program helps 20somethings build their financial future
There’s nothing wrong about talking to teens and even kids about money. Lessons about bank accounts, credit cards, the importance of saving and even investing can set young people along the path of successful money management. ¶ But it’s the third decade of life, the 20s, that might be the more critical stage. By then, most people have jobs, are making payments on student loans and perhaps mortgages, have cash to spend and maybe even something left over to invest. Financial lessons truly hit home when people are out on their own, with real money at stake.
“It’s the most critical time to maximize your opportunities and plan for future financial success,” said Bob Swift, founder of TCI Wealth Advisors, an investment-management firm with offices in Arizona and four neighboring states.
“People in their 20s have an asset, time, that they can’t afford to waste,” he said. “It would be a big mistake to let those 10 years go by without saving and investing as much as you can.”
Swift decided to do something about it. Through the affiliated TCI Foundation of Tucson, he funded a program to teach financial topics to people in their 20s and early 30s, but with a catch. It focuses on helping young adults in careers with moderate income prospects such as teachers, medical assistants and employees of non-profit organizations.
These are the types of middle-class workers who would struggle to meet the higher income and net-worth thresholds that many financial-advisory firms require.
“If you don’t have much money and are just starting out, access to real financial advice often isn’t that good,” Swift said.
The program is free to participants. As an added incentive, TCI Foundation makes a $1,000 contribution to a Roth Individual Retirement Account on behalf of those students who complete it and pass a test.
“At the beginning, the contribution was extremely important; it motivated me to sign up and commit to the program,” said Tim Malan, a 30-year-old middle-school teacher, in an email note. “At the end, it mattered very little. The true value of the class comes from the knowledge you gain and the individual financial meetings you get from the foundation.”
Malan took the course with his girlfriend, Kaitlin Callahan, a dietitian. The couple live in Tucson, where the initial classes have been taught.
Despite the focus on the third decade of life, the program accepts students up to 35 years of age. Most participants have household incomes between $35,000 and $100,000. Students meet for a total of 10 hours, spread over four weeks.
Another benefit, for couples who participate, is that the program encourages a frank discussion about a topic, money, that frequently has been viewed as taboo.
“Financial openness is extremely important for successful relationships, which this program emphasizes,” Malan said.
Students also get to see or “discover” their own financial picture. “After creating a 12-month budget, a net-worth statement, looking at debt ratios and projecting their income in retirement, they can see how all the pieces fit together,” said Laura Walton, the foundation’s executive director.
Nicole James, who took the classes with her husband, John, said the program helped to fill knowledge gaps about investing and other topics. Nicole, a physician’s assistant in dermatology, already contributes to a 401(k) retirement plan through work but “had no idea about mutual funds or other investing vehicles,” she said in a note. “I wanted to learn the lingo of finance, so I could be more resourceful.”
Walton said few participants initially understand their workplace retirement plans well, so the program gives them a chance to ask about contributions, employer matching funds, investment choices and other details.
“Once they see the long-term payoff of participating in retirement plans, they’re more highly motivated to take full advantage of them,” she said.
Aside from investing, James said she also learned insights on budgeting, debt management, insurance and estate-planning tools such as wills and powers of attorney. After taking the course, the couple decided to hold off buying a home so that they could put more money into savings.
“My husband and I learned vital information on how investing small amounts now leads to significant savings later in life,” she said. “We learned to be patient when investing.”
That ties into one of Swift’s key points — that people in their 20s and 30s still have plenty of time to benefit from making the right decisions. He stresses what he calls the “60 by 30” goal, which encourages young workers to accumulate $60,000 in a Roth IRA by age 30. That can be accomplished by contributing $5,500 annually (the regular IRA contribution limit) over eight working years in an account that earns about 8 percent annually, in line with long-run stock-market returns.
People who meet that goal could then stop adding money, yet they still could anticipate the account growing to around $1 million by their late 60s, again assuming annual returns around 8 percent.
The non-profit includes money-focused blog posts and other related information of interest to young adults (and others) in the FAQ section of its website, tci-foundation.org.
The website also periodically will list other class locations in Arizona, such as one starting April 25 in Tempe.
Swift said he eventually hopes to make the curriculum available more broadly.
“What we hope to teach is the importance of time and maintaining control over your personal finances,” he said. “It’s a big mistake to let those 10 (or so) years go by without saving and investing as much as you can.”
“People in their 20s have an asset, time, that they can’t afford to waste. It would be a big mistake to let those 10 years go by without saving and investing as much as you can . ... It’s the most critical time to maximize your opportunities and plan for future financial success.”
BOB SWIFT FOUNDER, TCI WEALTH ADVISORS