How do I get my millennial kid to start saving for retirement?

How do I convince my millennial kid to start saving for retirement now?

Beth takes on a tricky new money question—and offers expert advice on how to resolve it and how to talk it over in constructive ways.


The situation

Two years ago, my son graduated from college and started his first “real” job, in the IT department at a regional bank. He’s making decent money, but when I brought up saving for retirement over the holidays, he blew up and said he couldn’t afford to. I know he has student loans—his mother and I couldn’t cover all his college bills—but the payments are only a couple hundred dollars a month. I started saving late for retirement. I don’t want him to end up like me, having to plug away in an office full of workers half my age because I can’t afford to walk away.

—Jim, Birmingham, Alabama

The solution

Jim, you aren’t alone. Four out of ten workers haven’t saved for retirement at all, and even many who have put money away report feeling stressed about their financial futures. It’s very natural that you’d want your son to avoid making the same mistakes you did. That’s part of being a parent. And it sounds like you know that if your son starts putting away money while he’s young, it’ll be one of the smartest things he’ll ever do.

Convincing him to do it, though, isn’t easy. You mention that your attempt occurred around the holidays. The holiday season may feel like an opportunity to have big conversations with our kids, since that’s when we see them. But it’s also a time when emotions and stress can run high. My vote is to choose a casual moment—say, a fishing trip, a sports event, or lunch at your favorite diner—to broach the subject. Once you do, here are some tips for driving your point home:

1. Speak from personal experience. One reason you want your son to start saving now is that you regret waiting until later in your career. Telling him this can send a powerful message. Plus, it gives you a conversational opener that is less likely to put him on the defensive. You don’t have to share all the financial details if you don’t want to—just enough to make your point. And don’t worry your kid more than you have to. There’s a difference between having to wait longer to retire and not being able to afford your mortgage payments when you do. But he should know if you’re working five years longer than you’d originally planned because you didn’t start socking away money earlier.

2. Acknowledge your kid’s expenses. You say your kid is making “decent money,” which may well be true. But it’ll ease the conversation if you let him know that you’re aware of his financial realities—including those student loans. And tell him that you’re proud of him for being so attentive to his bills. However, unless he is truly scraping by, there’s probably money in his monthly budget that he can set aside. Maybe if you name a small figure to start with—say, $40 or $60 out of each paycheck—it’ll help him to see that saving for retirement is more doable than he’d realized.

3. Explain the power of compound interest. Right now your son has one important thing on his side when it comes to savings: time. Break it down for him: When his money is in an account that pays interest, he earns interest not only on the principal, but also on the interest he’s previously earned. Show him just how powerful compound interest can be if you start early and give it enough time, using an online calculator. (There’s a good one at Let’s say you had saved $80 a month out of your paychecks for the 10 years before you actually enrolled in your retirement plan. That’s $960 a year. And let’s say you earned an average interest rate of 7%. After 10 years, you’d have $14,192.26. If you planned to work for, say, another 30 years, that $14,192.26 would have been earning interest the whole time along with the rest of your savings. And you’d be more than $108,000 richer—which might have a significant impact on when you could retire.

4. Painless saving is smart saving. If your son’s company has a retirement plan, encourage him to find out if his savings can be automated. He’ll need to contact the HR department and fill out some paperwork, but once he does, the money will come out of his check automatically. This is key because after a few pay cycles, he will adjust to the slightly smaller paycheck and probably won’t even notice the missing money. Some companies will also automatically escalate the percentage you’re saving for retirement each year. (Although workers can opt out if the pinch gets to be too much.) If your son’s company doesn’t have this feature, he can commit to put, say, half of every raise toward his retirement. If his company matches contributions to a 401(k), your son is literally leaving money on the table if he doesn’t put at least put in enough money to get the full match (typically, 6% of a worker’s salary). If his company doesn’t have a 401(k)—and if it’s a bank, I should hope that it does—he can set up his own retirement plan in an IRA and arrange for his bank to automatically make deposits whenever he gets paid. For more on how to explain investing and encourage your kid to do it, see Chapter 7 of my book Make Your Kid a Money Genius (Even If You’re Not).

If it feels right, check in with him in another month or two to see if he’s gotten that paperwork in to HR. Let him know that you’re not trying to nag him—you just care about his financial future.

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