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Turning a Job into a Personal Finance Education

Parents can’t always teach their kids the best money lessons. Find a job or other resource that will provide your personal finance education.

Parents aren’t always the best role models for a personal finance education. Even the most frugal and financially responsible back-track every once in a while. It’s important for kids to have other resources available to teach them about money.

Today’s essay is by Alix Glassbrenner, a student at the University of St. Thomas. He shares how a summer job taught him the best personal finance education he could get.

Check out Alix’s story and please share on social media. The most-shared essay on how parents can teach their kids about money will win our $500 personal finance scholarship, announced August 31st!

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Turning a Summer Job into a Personal Finance Education

Finances have always been a large part of people’s lives but with the cost of living and cost of education increasing it is very important, now more than ever, that people take charge of their financial plans and goals.  For most young individuals, learning basic financial information starts in the comfort of their own homes and absorbing the saving, budgeting and investing habits of their parents.

Children subconsciously take note of the examples that their parents have set which can be both good and bad.  Some parents set extraordinary examples for their children being that they are organized and proactive planners whereas other parents are stuck living paycheck to paycheck and working well past age 65 before having the ability to retire due to poor saving habits.

My story is a bit different and doesn’t really fit into either of those categories.  My parents have always been very involved in my life whether that was with my friends, education, or athletics, and they have taught me numerous invaluable life lessons over the past 20 years.  I am very grateful for all that they have taught my siblings and I, but personal finance educationone thing that I didn’t learn from my parents was how to properly handle money.

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Finding My Personal Finance Education at Work

My parents will openly admit that they don’t know a lot about saving, investing or money in general and they often blame their financial shortcomings on their “low” income.  They balance their checkbook every pay period and that is pretty much all I have learned from them.  They constantly say that I “need to get a good paying job after graduation or I will never be able to retire” but I disagree.  It isn’t all about the job that one has but rather what is done with the hard earned money from that job.

I have always been interested in numbers, math and finances so this summer I accepted a position as a financial representative intern at a very reputable financial services company.  In the few short months that I have been working at this job, I have learned so much more than what my parents had ever taught me.

The list of valuable knowledge that I have acquired since beginning to work could go on forever but some of the most important things I have learned include the value of starting to save at a young age, protecting oneself and being tax efficient with one’s money.

Protecting Your Most Valuable Asset

Protecting oneself is something different and often times overlooked by many.  Although unlikely, it is important that one plans for all of the “what if’s” in life.  No one likes to talk about all of the potential horrible events that could happen and it is not a fun conversation to have, but when putting together a financial plan one should consider all of the possibilities.

Your most valuable asset is their ability to put on their shoes, go to work every morning and earn an income for the next 30 to 40 years of their life so why do so many people decide to leave their income unprotected?  This poor decision leaves oneself and one’s financial future in jeopardy if something were to derail the financial plan that they have in place.  I think it is vital to protect as much of one’s income as possible with disability insurance, both short term and long term.

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Another important aspect of personal finance that I have learned is the value of starting to save and invest at a young age.  Compound interest can do some amazing things if used correctly and in order to use it correctly it needs time.  The more time that goes by the larger the amounts of compound interest earned.

I think many young adults don’t realize the large advantage that they would be giving themselves if they started to save at a young age so they just push it off to the future.  Planning for retirement starts now, and although retirement may seem like more of a concept than a reality to most twenty-something year olds, it is important that they start practicing good money management habits today.

Pay Yourself First and Budget for Saving

As one ages, their expenses will continually increase so it is much easier to budget one’s money and save 20-25% of one’s income from the beginning rather than trying to adjust and start saving more down the road.  Pay yourself first, pay the bills second and then the leftovers are fair game for whatever this month’s adventure may be.

Paying yourself is essential in planning for retirement and having the ability to retire comfortably one day, but doing so in a tax efficient way is critical as well.  Taxes are a hot topic in today’s world, income tax in particular, so it is imperative that one is aware how to save in a tax efficient manner.

Roth IRA’s are great vehicles for doing exactly this.  The money one puts into a Roth IRA is taxed on the way in, grows tax-free and then can be taken out tax-free.  If possible, you should fully fund a Roth IRA every year, for as long as their income level allows.  This way, in retirement, one has already paid taxes on these funds and they can take them out tax-free.  This is a huge advantage in retirement and a great vehicle to take advantage of at a young age due to the compounding effect previously mentioned.

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A second valuable investment vehicle is the 401k. 401k’s are often offered through employers and are also good assets in retirement.  Opposite of the Roth IRA, the money put into a 401k is not taxed on the way in but is taxed on the way out, and these taxes can often times be very large.

Most employers offer a match percentage so one should always contribute up to the max because otherwise free money is being left on the table.  Any contributions over the match should be put into the Roth IRA if it’s yearly maximum has not yet been reached.

Life Insurance as a Savings Account

Another great savings vehicle that provides a source of safe money in one’s balanced portfolio is whole life insurance.  It seems odd referring to life insurance as a savings vehicle, but it is an effective tool to include in one’s plan.  Whole life insurance offers a cash value feature that grows and accrues over time due to the dividend schedule and compound interest earned on the premiums paid.

Over time, the cash value and death benefit grow at a faster rate and soon enough one has a large pot of accumulated cash readily available to them if need be.  This money is not involved in the market, so it is not affected by down years that cycle through the economy.  For example, if the market falls during retirement, one can begin to pull money out of this account rather than their market dependent 401k or Roth IRA.

This is why whole life insurance is considered “safe” money.  One should continue to pull money out of their cash value whole life insurance until the market has bounced back and the balances of their 401k and Roth IRA are both back up to where they were prior to the down fall.

Sharing What I Learned about Personal Finance

I have gained all of this information and much more over the past few months simply by exposing myself to the field of financial planning and engaging in my work.  I am astonished by the amount of knowledge I have gained through this internship opportunity and want to share it with others.

My parents were the first people who came to mind when I started to learn everything and I constantly thought to myself “I wonder if they know about this” or “I hope they are doing this.”  I shared some basic information with them at the start and as time went on and I began to learn more and more, I convinced them to come in and meet with me.  Although they were reluctant at first, taking financial advice from their own daughter, they agreed to listen to smart money kidswhat I had to say and to keep an open mind.

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They were very receptive to everything that I had to say, and they allowed me to help them plan for their futures.  Although they missed out on the advantages of starting early, it is never too late to turn everything around and begin to make good personal financial choices.  They thanked me for sharing my knowledge and helping them get on track for their financial plans and goals as they continue to work and move towards retirement.

This may not be the most typical way to learn about personal finances, but if it weren’t for my parent’s lack of financial knowledge, I don’t think I would have taken control of my situation as I have.  Their shortcoming in teaching me good financial habits inspired me to learn and explore the field.   I have so much to thank my parents for that helping them is the least I can do in attempting to repay them for a lifetime full of sacrifices and invaluable lessons.

I want to thank Alix for his story about the personal finance education he got from his summer job. Be sure to support Alix by sharing the article through social media and check in August for the winner of the personal finance scholarship.

Joseph Hogue, CFAAbout Joseph Hogue

An investment analyst by profession, I run two blogs (Crowd101 and PeerFinance101) in personal finance, peer lending and crowdfunding. I've been on both sides of the table as a lender and a borrower and am excited to be a part of the peer movement. With the power of the internet, people are helping other people manage debt and raise money in ways never before possible.

A veteran and Iowa-native, I now live in Colombia with my wife and son. Like so many people, I was once trapped into the money myth and what it means to be successful. After taking control of my finances and learning how to make money in a job I love, I found a level of financial freedom that just has to be shared.

Comments

  1. Great advice!! Good for him for taking charge of his finances.

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