Neglected Child

Sanjib Saha

I GREW UP IN INDIA, where I worked for a few years before venturing overseas and finally emigrating to the U.S. In our culture, most parents feel responsible for their children until their offspring are fully settled in their career and their life, which is often well into adulthood. In turn, the children feel dutybound to support their parents in old age, financially and otherwise.

This cultural tradition is mutually beneficial when both parents and children can fulfill their respective responsibilities. I’m forever grateful that I could start my career without the burden of student loans. Education costs are considered a parental responsibility in our culture, and my parents happily took care of those costs for both my brother and me.

Meanwhile, my parents quit sweating over their retirement readiness once my brother and I were settled in our career. Though they decided to continue living in India, they knew they could count on us to support them in old age. As it turned out, thanks to my father’s generous pension and lifelong health care benefits, my parents were financially independent in retirement and needed no monetary help from my brother and me. But our unstated commitment was surely a source of comfort to our parents.

This culture of generational interdependence, however, doesn’t always work out. Consider my distant cousin, whom I’ll call Ratan. Ratan fell short of his parents’ expectations when it came to their needs in old age. But it wasn’t entirely his fault.

When Ratan was young, his father was absorbed with other matters, including running his own business. He had little time for anything else. That meant Ratan didn’t get the ongoing attention he badly needed. He struggled in school. His high school grades were too poor to secure a place at a good college.

Ratan could have used more parental guidance. By the time his dad started paying more attention, it was too late to make much difference. As a grownup, Ratan ended up in unstable and low-skill jobs. His meager income was barely enough to support himself, let alone his parents.

Why am I telling you about all of this? I see parallels between neglected children like Ratan and our own often-lackadaisical attitude towards retirement savings. Since most of us will depend on those savings to support us in old age, we should feel dutybound to care for our nest egg’s wellbeing, in the same way we care for our children. If we did that, we could reap five benefits:

1. We wouldn’t procrastinate. Even before a child is born, parents start spending time, energy and resources on their future offspring. Our feelings of affection and responsibility spur us to action.

If we applied the same attitude to retirement savings, we’d act as soon as we started our career and got our first paycheck. Those paychecks won’t last forever and, as the years pass, other competing priorities begin taking a bite out of our income. Result? We’d realize that procrastination is not an option.

2. We’d focus on early development. Learning and changing is easier when children are younger. Catching up later may be possible, but it grows more difficult.

The same principle applies to retirement savings. The compounding enjoyed by our initial savings has a profound effect on our retirement fund. Take the example of a 22-year-old who starts stashing $200 per month in a retirement fund and continues at that level, adjusted for inflation, until age 67.

Assuming a 6% after-inflation annual growth rate, those contributions eventually grow to more than $500,000, figured in today’s dollars. But more than a quarter of that final stash comes from the first five years of savings, while the first 10 years account for nearly half. In other words, the savings from the last 35 years has barely more impact than the first 10 years of contributions.

3. We’d gather the information we need and muddle through. Parenting is hard, but it doesn’t require an advanced degree or fancy credentials. Most people learn from common sense, experience, friends and family, and readily available information.

Similarly, taking care of retirement savings involves nothing more than common sense and basic financial literacy. Help is plentiful. It’s certainly hard to be disciplined and stay on course, but it doesn’t require a PhD in finance.

4. We would show more patience. Kids don’t grow overnight. They need ongoing care and support for a long time. When we sign up our kids for swimming lessons, we don’t expect them to be budding Olympians the following week.

Saving for retirement is no different. It takes time, patience and tenacity. We need to monitor how our retirement fund is growing and whether things are on track. Thankfully, there’s a tipping point when the results of our hard work become visible. Soon enough, the annual investment growth of our nest egg should surpass our annual savings, boosting our morale and encouraging us to keep at it. Take the example above of our 22-year-old. By age 35, the annual growth of the money already saved starts to exceed the sum socked away each year.

5. We’d grasp the richness of the reward. Most parents get great joy from watching their kids grow and guiding them through new experiences. It’s a long journey that brings enormous satisfaction. Similarly, financial freedom—the ability to live life on our own terms—can take years to achieve, but both the journey and the goal can be hugely satisfying.

On the flip side, negligence is costly. Neglecting a child’s needs eventually hurts everyone involved. Likewise, neglecting our future financial wellbeing almost never ends well.

A software engineer by profession, Sanjib Saha is transitioning to early retirement. His previous articles include Fatal AttractionIdentity Crisis and Triple Blunder. Self-taught in investments, Sanjib passed the Series 65 licensing exam as a non-industry candidate. He’s passionate about raising financial literacy and enjoys helping others with their finances.

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