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Savvy Strategies for Explaining the Recession and Other Sticky Money Issues to Your Kids

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Erika Rasmusson Janes on Jul 27, 2010 at 4:15PM

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The Necessity of Saving for Retirement

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a Erika Rasmusson Janes on Aug 27, 2010 at 4:26PM

The Necessity of Saving for Retirement

Why it’s sticky: To your kids, retirement is a far-off concept that involves complicated things like Social Security, 401(k) accounts, and IRAs.

How to explain it: The importance of saving for the golden years needs to be impressed upon kids at a very early age, Pond says. Say it simply: “It’s essential that Mom and Dad put money away every month for retirement, and that means spending less now so we can afford to retire.” When they get older, explain that investing in things like traditional and Roth IRAs, 401(k) accounts, and Social Security will help you (and them) be able to afford to stop working one day. Pond also feels it’s important to let children know that Social Security may not work the same way when they’re older. “The retirement age could be lifted, and the way they calculate inflation adjustments could be changed,” he says. “It won’t go away, but it isn’t going to be enough to provide a financially comfortable and happy retirement.” And that means saving will probably be even more important for your kids’ future.

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