Friday, March 28, 2008

Summer Savings

I have a cousin that's five years younger than me. We grew up 30 minutes from each other and spent a lot of our childhood's together. For the longest time I thought of her as an irritating little sister. At varying ages she bit, repeated everything I said, and told the world's worst jokes. Eventually she grew up and in the years since we've become good friends.

As an older sibling/loved one I think that a part of my job is to tell her all of the things I wish someone had told me and how I do the things I do. Usually I forget what it is that I've told her until a year or two later she say something like I'm so glad you told me to do X.

Currently she's a junior, 1.25 years from graduating. During our last conversation I told her she should be saving at least 50% of her salary from her summer internship. She thought for a second, thought that was reasonable and agreed without much convincing. I explained that once she when she gets around to moving out there will be lots of little expenses she never thought of. That she should fund her Roth IRA each year possible. Also, that she needs to build up an emergency fund.

She got quiet then and explained her plans for summer 2009- traveling to Europe. Before she could finish her sentence I upped the number to 90%. For a moment she seemed stunned. I adjusted and said that outside of transportation to work, any household expenses she should give her mom, and 2-3 activities she should be saving everything.

Among my reasons:
-the value of the dollar vs the euro
-plane tickets are expensive
-having the financial time to choose the right job
-benefits of early retirement savings
-having to build a professional wardrobe
-the great financial position she is in (living rent and grocery bill free)
-if she wants to have a summer of fun she needs to work for it
-that she can avoid the credit card debt most of her peers are racking up

In the end she was on board.

A year from now I'm not sure what her bank account will look like. Hopefully she'll save every spare penny. Even if she doesn't save as aggressively as I suggested she'll likely save more than she would have otherwise.

wereindebt is running a group writing project about saving and encouraging saving.

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