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This Week in Your Wallet: October 23, 2012

I often use this space to tell you why and how you should be saving for retirement. This week, I still want to talk about retirement savings, but with a bit of a twist. Surely, you’ve looked into opening Roth IRAs to house your retirement savings, but have you considered introducing your teenage children to the Roth, too?

In a recent SmartMoney article, writer Bill Bischoff notes that while working during the summers is a proud teenage tradition, contributing to a retirement account isn’t quite so conventional. “It should be,” he argues, “because it’s such a good idea.”

I agree with him. As I discussed with my son this past summer (he had his first paying job, working as a camp counselor), there is no age requirement for contributing to a Roth, nor is there a minimum number of hours you must work in order to contribute. The only rule is that you can’t exceed an annual contribution of $5,000. However, since getting your 16-year-old to think about retirement is a feat in and of itself, I don’t think that limit will be a problem.

Getting your kids to save money can be tough, which is why you’ll want to ground this discussion in numbers, and the magic of compound interest. Bischoff provided a few examples in his article:

  • Let’s say your 15-year-old pays $1,000 into a Roth for each of the three years he has his lifeguarding job. Assuming a 5% rate of return, the account would be worth over $25,000 after 45 years. Assuming an 8% return, that number is closer to $89,000.

With all the services and products battling for your kids’ attention, I know that a Roth IRA might be a tough pitch to make. However, I encourage you to, at the very least, have the conversation. If you’re having a decent year yourself, you may even want to consider offering a bit of a sweetener — match some of the money your child agrees to contribute.  It will get your kids thinking about saving and investing as it applies to them, and I bet that seeing what compound interest can do to grow their money will make them more inclined to contribute to an IRA sooner rather than later. And that’s never a bad thing!

And now, here are the other headlines for the week:


Issue #1

If you watched the presidential debate last night, you might have noticed that both candidates kept steering the conversation back towards the economy. That’s because it’s the number one issue on people’s minds this election season. Over at the TODAY show, we’ve decided to start a new series called, appropriately, “Issue #1.” Its goal is to look at the various economic conditions Americans are facing; in this morning’s installment, we took a look at a family in Arizona who is struggling to make ends meet and who is living paycheck to paycheck. It was a sad story, to be sure, but I tried to provide some tips that might help them get back on their feet. My number one piece of advice? Start saving small. It can be hard to save ten to fifteen percent every month, but studies show that if we save just 2%, we hardly notice that the money has slipped into our savings account. Then, as soon as you can, build that 2% to 3% or 4%, and keep going until you hit 10%.

In the meantime, be sure to tune into the TODAY show tomorrow morning around 7:30am. I’ll be talking about the second installment of Issue #1, and I promise — the story you’ll see is happier!


Negotiating after the warranty is up

I don’t think this is officially listed as one of Murphy’s Laws, but it should be. “Your car will break down, days after the warranty is up,” I imagine it would say. Because it’s true. Who among us hasn’t had a problem with an item — not just your car, but your phone, your fridge, your oven — seemingly hours after the regular warranty wears off. This is why we’re so tempted to buy extended warranties: when the warranty ends on a Tuesday, we’re terrified of getting hit with a blown transmission on Wednesday.

The good news, reports the Wall Street Journal, is that there are ways to negotiate when this situation arises. Tailored specifically for car issues, here’s some of what they suggest:

–Search the web for reports of the same problem for the same car model. Also, check the National Highway Traffic Safety Administration recall database for recall notices and technical service bulletins. Then, use this information to negotiate your way to a cost-effective repair.

–Keep repair records. The more you can prove that you took good care of the car, the better.

–Get the dealer on your side. Be polite and persistent, and make it seem like you’ll be a repeat buyer. The dealer will then be more likely to help you reach out to the car manufacturer to find a solution.


Take me out to the ballgame… for cheap!

As I’m sure I’ve told you before, my husband is a big Phillies fan. If you followed the regular season at all, you might know that it was a tough season to stand behind Jimmy Rollins and crew: the team, largely expected to win the National League, barely finished above .500. However, the good news for Phillies fans (and Red Sox fans, and Cubs fans) is that a disappointing 2012 will bring discounted tickets in 2013. The savings are small, reports Time’s Moneyland blog, but it’s certainly better than seeing your home team raise prices after a disappointing season!

Also, as you plot your ticket strategy for next season, don’t forget to check out Groupon, Amazon Local, Travelzoo, and LivingSocial for deals on baseball tickets. This past season, a friend found a really great deal for a game at Citi Field when the Phillies played the Mets. We payed just $29 for seats in the 200-level. That’s practically unheard of these days!

Have a great week!


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