Program stresses financial importance of third decade
There’s nothing wrong with talking to 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 something 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.
“People in their 20s have an asset — time — 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.”
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-profits. These are the types of middle-class workers who would struggle to meet the networth thresholds many financial-advisory firms require.
The program is free to participants. As an added incentive, TCI Foundation makes a $1,000 contribution to a Roth IRA 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. “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.”
Most participants have household incomes between $35,000 and $100,000. Students meet for a total of 10 hours over four weeks.
Another benefit, for couples who participate, is 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. Malan took the course with his girlfriend, Kaitlin Callahan a dietitian.
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.”
Few participants initially understand their workplace retirement plans well, so the program gives them a chance to ask about contributions, employer match- ing funds, investment choices and other details, Walton 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.”
Swift 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% annually, in line with long-run market returns. Those who meet that goal could then stop adding money, yet still could anticipate the account growing to around $1 million by their late 60s, assuming returns around 8%.
“What we hope to teach is the importance of time and maintaining control over your personal finances,” Swift said. “It’s a big mistake to let those 10 (or so) years go by without saving and investing as much as you can.”