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I used to think that if people just knew the basics of personal finance, they would take action to better their lives. Over the years, I’ve changed my stance. I can now see that only people who come naturally to taking an interest will ever even seek the information. This tracks with the ancient saying, “when the student is ready, the teacher will appear?”
Why is that so true? In a way it’s a slight of hand. The teacher didn’t manifest from thin air. The teacher was always there, but the student had no way of knowing of his existence since the student wasn’t ready (interested).
Last summer my cousin and her husband visited us from Iowa. After a fun pool day, she said she had money sitting in a checking account but didn’t know how to invest. I offered them my help getting started with a Roth IRA. They went home to Iowa and I assumed they probably forgot all about it.
On New Year’s Day I got a text from them. The student was ready, and so was the teacher. I walked them through how to start a Roth at Vanguard and suggested the Total Stock Market Index EFT (VTI) to get them started.
They asked me, “how many other people have you helped?” “Including you two…two,” I responded. “Because no one else cared,” I finished.
I feel great with getting them started on their journey, as my mentor (G-d rest him) once did for me.
Have you ever gotten the call? I’d love to hear about it.
I’ve advised friends over the years—back during my USAF career, I also briefed new troops on the Thrift Savings Plan and the importance of paying yourself first. More recently, I put together a small booklet for fellow Fed employees where I work.
I used to hire a young lawyer every year to be one of my law clerks. When they sat down with the court’s HR to fill out forms and sign up for benefits, I’d sit with them later. For many, this was their first real full time job. They don’t know about / understand health insurance, disability insurance, or 401k / TSP investing.
I found that the best approach was to explain without asking them too much about their own finances (debt, savings, etc.). Instead, I would suggest investing a certain amount to get a match on their savings. I would definitely explain the difference between Roth and traditional accounts, and high/low premium health insurance. and yes, Ben, typically nobody had ever explained any of this to these young people in any helpful way. Very proud that I helped them get started.
There often seems to a push for basic financial skills to be taught in school. I tend to think that teaching 15 year old kids about saving, compound interest, taxation, etc. would largely fall on deaf ears. And for those that are interested, I suspect they would seek out that information really easily from family, books, reputable websites etc.
I used to teach a class for first-year college students at my university. We covered many basic life and study skills, since students were away from home for the first time. One area we were required to cover was personal finance (budgeting, financial aid, etc.). At some point, I decided to include some basics of saving, compounding, and investing—not because the students had much disposable income, but because I figured at least they would hear it early and could follow up later when they got their first job.
After a number of semesters, I wondered if the extra time was really worth it.
Lo and behold, to my surprise, one semester I had a veteran who came up to thank me on the last day of class. She told me that she had saved up a good amount of money while serving and that, based on the information from class, she had invested it in a low-cost index fund.
In the early 2000s, I gave some very simple financial advice to some family members who needed it. You know, spend less than you make, DCA into a Roth and other investments, etc. About 10 years after that I figured, conservatively, they had lost over $100K on depreciation churning ownership of expensive vehicles. 25 years later they live paycheck to paycheck, drive $70K vehicles, and are one job loss away from financial abyss. I never gave them advice again.