You have undoubtedly heard of match.com and its ability to connect people. In this month’s article, I want to discuss a different “matching” connection and teachable moment for you and your children or grandchildren.
Most working Americans have seen or participated in retirement plans at a company that matched up to a certain level of a participant’s contributions. Many programs will match dollar for dollar on the first 3 percent you contribute -- and then 50 cents on the next 2 percent you contribute. Your contribution of 5 percent in your retirement account, plus the employer’s contribution of 4 percent, results in 9 percent of your income being saved.
The importance of this match is that it encourages a behavior -- saving -- and it rewards this action for the employee. The government encourages this type of matching program by making them "safe harbor" for the employer (less expensive to administer). The government knows they need individuals to save for their retirement, and this is a way to support the behavior.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Parents, or even grandparents, would be wise to consider this type of matching program for their children as they try to encourage the behavior of saving for longer-term goals such as education, a first home, a vehicle, and retirement. Many of these may be things that you would fund a substantial portion of anyway, or would put money toward helping them down the road.
As a firm, we manage 40 retirement plans with thousands of participants. Each participant looks at their retirement account as something "they" have done for their future.
Would it not be a great outcome if we could instill a similar sense of confidence in our children? As they save for their future, they defer immediate gratification and learn the importance of saving toward longer-term goals?
We have matched our oldest son on "earned income." His income sources have come primarily from babysitting and working at a golf course for the past three years. We have "matched," dollar for dollar, any money that he has saved for college or for his investment account. One thing we found very interesting was the fact that he always wanted to work as many hours as he could get, even if it was in a minimum wage job, because it was no longer a minimum wage job for him -- an $8.25-an-hour job was now worth $16.50 an hour, because of our dollar-for-dollar match.
This is a wonderful way for a young adult to build their self-esteem and motivation toward investing and saving for longer-term goals. This also serves to help them understand the value of taking advantage of any matching program that a future employer may present. My wife and I planned on helping our son with college anyway. This approach has helped in guiding his contributions to a long-term goal, i.e. education, along with providing a systematic way for us to make our contributions. Both parties win and are happy with the outcome.
James D. Maher is CEO and Founder of Archford Capital Strategies, an independent wealth management firm with over $525M of Advisory Assets Under Management, located in the St. Louis metropolitan area. The proud father of four boys, he is committed to guiding them in building a solid financial foundation to serve them for the rest of their lives.
-
Is ESPN’s New Streaming Service Worth It?ESPN will release its standalone streaming service this fall for $29.99 per month for one year. Is it worth the cost? We'll break it down.
-
Why Shark Tank’s Barbara Corcoran Is Selling Her $12 Million NYC Dream HomeReal estate mogul Barbara Corcoran is trading her luxurious NYC penthouse for a more age-friendly space that will fit her future lifestyle — here’s what to consider when planning for the long term.
-
Do You Need Disability Insurance? Three Things to KnowDisability insurance can help replace some of your income during unexpected life events. Here are the basics, courtesy of a financial professional.
-
How to Turn Education Planning Into Retirement PlanningNervous about investing in a 529 plan? If college doesn't pan out, the money can now be rolled over into a Roth IRA, which will grow tax-free until retirement.
-
We Took Them in After the Fire, and Now They Won't LeaveA well-meaning older couple responded to a young couple's plea for help. Now they're looking at having to evict tenants rather than simply asking houseguests to go. How could this happen?
-
Why Does Talking About Money Still Feel So Taboo in 2025?Financial issues affect everyone, yet many people are still afraid to talk about them. The good news is that younger generations are changing that.
-
I'm an Insurance Expert: This Is How You Get the Right Insurance Coverage at the Right PriceFirst, you have to know what you want and ask the right questions of the right professional. This insurance pro explains exactly how to do that.
-
Four Tips for Mastering a Financial Security MindsetThis financial professional's mom helped him learn that financial security is more than making money — it's about cultivating a mindset that will help you stick to an investment plan even when times get tough.
-
Turn Your Tax Return Into an Engine for Long-Term GrowthRather than filing away your paperwork and forgetting about it, this CPA recommends using it as a source of insight to optimize your long-term financial strategy.
-
How to Get Reliable Insurance InformationBefore you decide to buy insurance based on what some anonymous guy on social media says, think about the reliability of your source.
