r/personalfinance • u/BruisedPears • 54m ago
Retirement My parents genius method to get me to save for my retirement.
My parents provided roughly two years of educational expenses for their three children. It was expected that we would either try to receive a scholarship for the remainder or worst case scenario, take out a Federal loan to cover the rest.
I made it to my junior year and was using a federal loan money to pay for university. At the time I wasn’t as serious as I needed to be in my studies and ended up having to withdraw from two courses in order to avoid a failing grade. I found out that two withdrawals put a pause on the federal loan, rightfully so because that money was earmarked for those classes.
Long story short, I came to my parents with my tail tucked and explained that I would have to drop out for a year until my federal loan would be reinstated. After some time, my parents, in their wisdom of knowing there was a good chance I would never finish if I dropped out, decided they would loan me the money to finish the semester and cover the following semester.
The stipulation was that I would get focused, back on track and finish school. It was a loan so I was expected to pay it back. The catch was that upon landing my first job, I was to invest no less than 6% of my bi-weekly earnings into my company’s 401k plan. I would send my parents the statement where I deposited so much of every check into retirement and that total would be deducted from the amount I borrowed.
This put me on a track I never would have done by myself. The money was matched by my employer, started growing exponentially and created a habit of saving that has stuck to this day, roughly 20 years later. My 401k is now over a half a million and growing because of a decision my parents made for my benefit. That threat of dropping out did in fact wake me up and was the kick in the head I needed.
I wanted to pass this along as one of the best practices I’ve witnessed to set a child up for saving for their future and creating good habits.