We’ve all heard it.

The financial analogy about the Starbucks latte, how much it will cost you in the long run, and how if you just saved that $5 a day, you’ll be able to retire on that money when you’re 70.

As financial advisors…we’re a little tired of it.

It’s easy to get caught up in the whirlwind of financial planning, constantly crunching numbers and calculating the future value of every dollar we spend. As a parent, you might be watching your soon-to-be adult children start navigating the world and doing a little math yourself. But what if we told you that obsessing over the future value of every expense could hold them back from living a fulfilling life in the present?

As financial advisors, we’ve seen people fall into the trap of constantly worrying over their spending habits, often sacrificing enjoyment in the moment for the sake of saving a few bucks here and there. Whether it’s skipping that morning Starbucks run or opting for a homemade meal instead of dining out, many of us have been guilty of scrutinizing every expense through the lens of future savings.

But here’s the thing: life is meant to be lived, not just meticulously budgeted. While it’s important to save for the future and plan for retirement, it’s equally crucial to strike a balance between enjoying life now and preparing for what lies ahead.

Here’s how you can help your kid spend and save realistically:

• Be a Role Model: Show how you balance enjoyment and saving in your own life. Share examples of experiences you’ve enjoyed as well as how you’ve prepared for the future.
• Budgeting Apps: Introduce them to budgeting tools that can help manage both spending and saving. Apps like Mint or YNAB (You Need a Budget) can be useful. Help them realistically allocate funds for enjoyment within their budget, ensuring it doesn’t compromise their financial stability.
• Savings Plans: Show how setting up automatic transfers to a savings account or retirement fund can help build savings without much effort. Help them create a separate savings account specifically for fun and leisure activities. This ensures they have a budget for enjoyment without dipping into essential savings.

Where You SHOULD Encourage Your Kid to Watch the Numbers

On the flip side, we shouldn’t ignore the importance of considering the future implications of debt. Whether it’s a loan for a new car or credit card debt from overspending, every dollar borrowed comes with a price tag attached.

Here’s an example that might resonate with your kids: If they buy a pizza for $10 using their student loan, in 20 years they’re actually paying $46.61 for that pie (at the current prime rate). In other words, before taking on any new debt, it’s crucial they weigh the long-term consequences and consider whether the purchase is truly worth the added expense.

By shifting their perspective to view debt through the lens of future value, they can make more informed decisions about when and how to borrow responsibly. Rather than focusing on instant gratification, encourage your kids to consider the true cost of debt and its impact on their financial well-being down the line. In other words, get them into the habit of asking, “Is this really worth it?”

Finding a Balance

Working with a financial advisor might be another behavior you could model for your kids to help them understand that we’re here to help clients plan for the future AND create a strategy that encourages fun without the guilt.

As you know, finding a balance between enjoying life in the present and planning for the future is key to financial health and overall happiness. It’s important they learn that, too – and the earlier the better.

 

All opinions expressed in this blog post reflect the judgment of Approach Retirement Advisors, LLC (“Approach”) as of the date of publication and are subject to change. The information in this blog post is believed to be factual and up to date; however, we do not guarantee its accuracy. This blog post should not be regarded as a complete analysis of the subjects discussed. This presentation is for educational purposes only and does not constitute personalized investment advice. A professional advisor should be consulted before implementing any of the strategies presented. This blog post should not be construed as an offer to buy or sell or as a solicitation of any offer to buy or sell any securities mentioned herein. Clients and members of Approach may own any securities mentioned herein. Investments are subject to market risks and potential loss of principal invested, and all investment strategies have the potential for profit or loss.  Past performance is no guarantee of future results. Different types of investments involve varying degrees of risk. There can be no assurance that any specific investment will be suitable or profitable for a particular investor’s portfolio. There are no assurances that any portfolio will match or outperform any particular benchmark.