Two from my day jobs.

I’ve been busy in New Jersey: visiting relatives, carrying irrigation pipe, meeting deadlines, dragging away dead Christmas chainsawed by my dad. So busy, in fact, that I forgot to call attention to my recent columns at MSN Money and Get Rich Slowly.

Is your kid saving for retirement?” sounds counterintuitive. But as soon as your son or daughter gets a job delivering papers or scooping ice cream, he or she should start a Roth IRA. Two words: compound interest. Even a few hundred a year will grow big and strong eventually.

Got the urge to splurge? Use these strategies to fight it (or not)” gives you permission to be human, i.e., to be easily distracted by bright, shiny objects. It gives you some tools to help hold yourself accountable. Finally, it gives you an occasional day off from snowflaking debt because an occasional treat is more important than a shiny frugality badge.

Once you’ve read the pieces I’d be interested in hearing your opinion of their premises. Do you see the value of putting even a small amount in little Johnny’s Roth IRA? And what about splurges: Do you have a favorite one, either a cheap thrill or a budgeted-forĀ  luxury?


17 Comments

  1. I see the value of starting out young and contributing to a Roth IRA…but did I see it when I was young? And have my daughters (23 and 25) started one, even when Mom offered to match anything they contributed?

    Naahhhh to both answers. Darn it.

    • Donna Freedman

      @Cindy: Maybe you can get them to start Roths now if you show them some examples of compound interest.
      Start one yourself, too. It’s not too late!

  2. Do you happen to know if starting my child’s Roth IRA would impact their ability to qualify for college funding later in life? I would like to think that my husband and I will be able to fund her with no problems, but life (and incomes) can be mercurial. I do not want to put her in a position of needing to apply for grants, and not qualifying due to all of that wonderful compound interest…

    • Donna Freedman

      @tisf: According to savingforcollege.com, “A good type of asset to own when applying for financial aid is a retirement account such as an IRA or 401(k). These qualified retirement accounts, whether owned by you or by your child, are not counted at all in determining EFC for purposes of federal financial aid.”
      http://www.savingforcollege.com/financial_aid_basics/financial_aid_and_your_savings.php
      Even if it did make a difference, here’s something to keep in mind: You can’t finance retirement. Again, I’m not saying to borrow $80k for school. I’m saying that a short-term sacrifice now (even a few hundred or a thousand a year scraped into the Roth) will stand her in good stead later on, especially if she has to slack off contributions for a while (e.g., she has kids of her own and can’t find $5k a year to fund the Roth fully).
      The money she sets aside in her teens will be a huge help when she’s in her 70s. And as noted in the column, it doesn’t have to be all hers — her parents, her grandparents and other relatives can chip in.
      Thanks for reading, and for leaving a comment.

  3. I do not and do not ever intend to have kids so I skipped the first one. But I thought the second article was great. I have budgeted for treats and an occasional true splurge. I don’t begrudge myself the occasional splurges and I refuse to feel guilty about it.

    • Donna Freedman

      @CandiO: I agree. Life without an occasional treat isn’t much fun. The nice part a somewhat abstemious life is that even a small treat — say, an ice cream cone — is a big deal to be savored.
      In other words, we’re cheap dates.
      Thanks for reading, and for leaving a comment.

  4. Teens are notorious for not being able to think ahead 60 minutes, let alone 60 years, so an IRA would be a hard sell to most kids in a 1st job.
    It’s a good idea though but one he’d have to tie them down and force them to take advantage of.lol

    And along the same lines(the compounding interest deal)I’ve been a proponent for years of the federal govt. setting up an account for each new baby born with a sum of $ in it, letting it grow for 65 years and then giving them access to the money. This is in lieu of paying out SS when they hit 65(or whatever the magical number is currently)until they croak. They could also have access to put away money they earn to grow it even more.
    I know it would be a mess for about 15 years to change it over to this system since the generation before’s SS would still need to be funded, but in the end, it would be a way to stop putting the support of the elderly in this country on the shoulders of the ever diminishing numbers of the subsequent generations. A one shot of cash from Uncle Sam at birth. Of course you’d still be required to pay SS taxes on wages during your life but this way, it could be a smaller chunk taken out of your income to fund SS this way.

    Nobody can resist the urge to splurge now and again as none of us are superhuman. Splurging is good for our psyches….otherwise 99% of the adult population would be on anti-depressants instead of just 10%.
    As long as you can pay cash for your splurge, it’s ok by me.
    I don’t care if it’s a Funnel Cake at the fair or a vintage DeLorean, as long as you don’t go into debt to buy it, I’m down with it.
    If a purchase puts you into debt, it is NOT a splurge….more of a death wish, or should that be debt wish.lol

  5. My 18 (almost 19) yo realized the beauty of compounded interest about a year or so ago, and has built herself a really nice savings account from working a well-paying job this past summer. I first suggested she put it in a Roth IRA but she balked because she felt like she couldn’t tap into it if she needed to. I told her that wasn’t the case, but then she didn’t like the market fluctuations that might impact her account balance. So I gave up trying to convince her, realizing myself that she seems to have pretty good money habits for a kid her age. I’ll keep my mouth shut for now, and pick up the conversation again in a year or two. Maybe I can convince her then.

    Enjoyed your splurge article; I get paid every two weeks, and I buy myself either something new to wear to work (shirt, earrings, belt, etc.) or get tickets to some event for my hubby and I to attend. I usually limit myself to $75 for whatever it is. I agree with Sluggy – I don’t go into debt to splurge – not a smart thing to do.

    • Donna Freedman

      @Shellye: How about a compromise, then? She puts at least $300 a year into a Roth. If anyone in your family is in a position to contribute another $50 or $100, then that gets added.
      Compounding. Seriously.
      What about putting it into CDs? The interest is negligible, but the point is that she’s SAVING it. We’re talking about $6 a week. I bet most of us can piss away $6 a week without even trying.
      Just sayin’.
      And I won’t go into debt to splurge, either. To repeat: If you’re a cheap date, a splurge doesn’t have to cost much. I’m all excited about a $2.50 six-pack of Tastykake Butterscotch Krimpets, myself.

  6. I wish I would have taken my grandparents up on their offer to match what I made as a teen and young adult. I think setting it up for the child makes a lot of sense. The thanks will come later. My husband’s grandparents did this for him, and it’s amazing to see the power of compounding of a little money in just 15 years.

    I imploded with dietary splurges last night and could totally see some of these tips working in that arena too.

  7. Procrastamom

    I showed my then 18 year-old daughter the power of compounding by plugging numbers into an online RSP calculator. She had $800 saved and her eyes nearly bugged out of her head when we realized that that $800 would be almost $29,000 by the time she was 65. At 20, she still hasn’t started an RSP (Canadian Roth), but she is putting something away every month in a high interest tax free savings account and seeing the rewards first-hand. I plan to use the same lesson with my other two kids and wish someone had shown me this when I was young.

    • Donna Freedman

      @Procrastamom: The Roth wasn’t around when I was a kid, but I sure wish I’d started one back in 1998. Too soon old, too late smart.

  8. ImJuniperNow

    Alas, I have no offspring, but I wish I could put away some Roth $$$ for my cat’s old age. Has anybody out there been to the vet lately?

    As for splurges, oh, how I agonize over them. I do a lot of returning because of it.
    :o -)

    • Donna Freedman

      @ImJuniperNow: It’s surprising that no one’s come up with pet retirement plans. Maybe you should invent them and become wealthy.
      Probably wouldn’t work unless there were someone you really trusted to care for your pet and use the money in the account for that care only, vs. on the caregiver.

  9. No kids here, now or ever, but I try to pass the advice along to nieces/nephews. I’m pretty sure they only hear “BLah blah blah” at their ages, but I’m hoping someday it will sink in.
    As far as splurges.. 3 words for me Used Book Superstore :) At 1.99 for a hardcover where else can you go and leave with a small pile of books/cd’s for $10.00.. makes me feel decadent!

  10. ImJuniperNow

    Well, I do know several people who have trusts for their pets. No lie – one to the tune of $100,000. (I think Leona Helmsley started it all.)

    Now, how to advertise myself as Professional Pet Trustee………

  11. You really can do it all even clean out my sinus cavity.

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