Most critical time for financial planning: Your 20's
Bob Swift of the TCI Foundation lectures on personal finance to a group of Tucson residents in their 20s and 30s.
TCI Foundation Executive Director Laura Walton and Tim Malan, who completed a personal-finance course with the non-profit.
Malan took the course with his girlfriend, Kaitlin Callahan, a dietitian.
Despite the focus on the third decade of life, the program accepts students up to 35 years of age. Most participants have household incomes between $35,000 and $100,000. Students meet for a total of 10 hours, spread over four weeks.
Another benefit, for couples who participate, is that the program encourages a frank discussion about a topic, money, that frequently has been viewed as taboo. "Financial openness is extremely important for successful relationships, which this program emphasizes," Malan said.
Students also get to see or "discover" their own financial picture. "After creating a 12-month budget, a net-worth statement, looking at debt ratios and projecting their income in retirement, they can see how all the pieces fit together," said Laura Walton, the foundation's executive director.
Nicole James, who took the classes with her husband John, said the program helped to fill knowledge gaps about investing and other topics. Nicole, a physician's assistant in dermatology, already contributes to a 401(k) retirement plan through work but "had no idea about mutual funds or other investing vehicles," she said in a note. "I wanted to learn the lingo of finance, so I could be more resourceful."
Few participants initially understand their workplace retirement plans well, so the program gives them a chance to ask about contributions, employer matching funds, investment choices and other details, said Walton. "Once they see the long-term payoff of participating in retirement plans, they’re more highly motivated to take full advantage of them," she said.
Aside from investing, James said she also learned insights on budgeting, debt management, insurance and estate-planning tools such as wills and powers of attorney. After taking the course, the couple decided to hold off buying a home so that they could put more money into savings.
Nicole and John James stand with Bob Swift of the TCI Foundation after completing the group's free personal-finance classes.
"My husband and I learned vital information on how investing small amounts now leads to significant savings later in life," she said. "We learned to be patient when investing."
That ties into one of Swift's key points — that people in their 20s and 30s still have plenty of time to benefit from making the right decisions. He stresses what he calls the "60-by-30" goal, which encourages young workers to accumulate $60,000 in a Roth IRA by age 30. That can be accomplished by contributing $5,500 annually (the regular IRA contribution limit) over eight working years in an account that earns about 8% annually, in line with long-run stock-market returns.
People who meet that goal could then stop adding money, yet they still could anticipate the account growing to around $1 million by their late 60s, again assuming annual returns around 8%.
The nonprofit includes money-focused blog posts and other related information of interest to young adults (and others) in the FAQ section of its website.
"What we hope to teach is the importance of time and maintaining control over your personal finances," said Swift. "It's a big mistake to let those 10 (or so) years go by without saving and investing as much as you can."
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