Why I wish I had a money mentor in my 30’s

Posted by Kerry Hannon.
When I was 30, I quit my job in New York City and moved to Washington D.C. for a new and improved one.
The bad news is, I cashed out the funds I had saved for five years in my employer’s tax-deferred retirement plan. I of course had to pay the taxes and the penalty on the early withdrawal.
Admittedly, it was not a huge sum of money at the time, but today, nearly three decades later; it would have been worth a tidy sum, even with the stock market ups and downs.
When I look back at that decision, I still wince. But it’s a teachable moment that I share with younger workers, and, of course, my own twenty-something nephews and nieces, as they make their way into the workforce.
Back then, the very notion of retirement seemed so far away to me, and to be honest, it is to some of the younger workers I talk to today. I wanted to tap my savings right then and there to deal with a present-day need. Setting money away for decades seemed almost irrational to me. And leaving my employer offered me the chance to use my money immediately, instead of rolling the money over into an Individual Retirement Account, or possibly my new employer’s plan.
I regret that I didn’t have someone to ask about my choice, a money mentor of sorts.
Today I make it a point to mentor younger workers about their money decisions. If you have the chance to help someone younger understand the mechanics and motivation necessary to slowly accumulate a retirement fund, do so. It really just comes down to being vulnerable and sharing some of the money lessons you’ve learned along the way.
Here are four examples of how you could be supportive if someone reaches out to you for guidance on money matters.
  1. Talk about retirement savings. Mentoring is not about telling your mentee how much to invest, or selecting specific investments for her. But you can provide some broad lessons learned from your years of saving to prepare for retirement.
  2. Review what an employer match is. You might point out that if her employer contributes funds to match some of her retirement contribution, she should ask if there’s a minimum she needs to invest to take advantage of that benefit.
  3. Have a conversation about key financial terms. Embracing the financial speak and connecting it to your own life experience is invaluable dialogue. Some ideas to start with are dollar-cost averaging and compounding.
  4. Talk about budgets and debt. Everyone tackles these differently. Having an open discussion about what has and hasn’t worked for you in the past can provide some guideposts for your mentee.
  5. Discuss the upside of also investing in your passions. Finally, being a money mentor doesn’t mean that you have to be hard-nosed about your counsel. Yes, saving for retirement is vital, but I tell my mentees that it’s ok to set some money aside for life experiences and passions.
We all have it ingrained in us to seek out career mentors and mentees. It’s the same drill, but focused on money matters.
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November 24, 2017