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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free 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.
-
The Most Popular Apps for Retirement Planning in 2025A J.D. Power survey ranks retirement planning apps based on customer service and satisfaction. Does your financial app make the cut?
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary FormsStandard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
This Is How Life Insurance Can Fund Your Dreams NowBeyond a death benefit, life insurance can provide significant financial value and flexibility through 'living benefits' while you are still alive, helping with expenses like education, business ventures or retirement.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on RetirementWhile some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.
-
From Mortgages to Taxes to Estates: How to Prepare for Falling Interest RatesAs speculation grows that the Federal Reserve will soon start lowering interest rates, now is a good time to review your financial plans for housing, estate, taxes, investing and retirement to make the most of potential changes.
-
This Is How Lottery Winners Build Lasting Legacies, From a Financial ProfessionalWinning a massive lottery jackpot, like the recent $1.4 billion Powerball, requires seeking immediate legal and financial counsel, protecting your identity and winnings and planning your legacy.
-
I'm an Investment Strategist: This Is How the Fed's Next Rate Move Could Impact Your WalletInterest rate cuts might be coming, which could affect everything from your credit card debt to your mortgage. It's smart to prepare now — here's how.
-
Beyond Banking: How Credit Unions Serve Their CommunitiesCredit unions differentiate themselves from traditional banks by operating as member-owned financial cooperatives focused on community support and service rather than shareholder profit.
-
Want to Advance on the Job? Showing Some Courtesy and Appreciation Could HelpTwo business professors share their insights about the impact of digital communication on the social skills of some in Gen Z and the importance of good manners on the job.
-
From Job Loss to Free Agent: A Financial Professional's Transition Playbook (and Pep Talk)The American workforce is in transition, and if you're among those affected, take heart. You have the skills, experience and smarts that companies need.
