My family moved to Pikeville in 1980. My sisters were born in Florida. Dad was told that in order to meet people in Pikeville they needed to bank at a certain bank, attend a certain church, and even vote for a certain political party. I wasn’t born until 1982, so I can’t verify the story.
How often do we make our financial decisions with this type of bias? Basically, the purchase of any product or service can be influenced by the experiences of family or friends, so sales professionals are encouraged to build relationships. I’m all for building relationships with clients. I hope families use my company’s services for generations long after I’m gone. However, I do think we need to be open to opportunities that may be better for our individual goals. I am definitely old-fashioned, but what worked in the past may not work for you.
My generation (ages 25-45) watched our parents experience inflation in the 1980’s, the 1990’s tech bubble, the tragedy of 9/11, the recession of the 2000’s, and now COVID-19. Portfolios lost money during these events and our parents suffered. Maybe we began to fear the markets while hearing their frustrations. Although our parents talked when the market declined, they were probably silent when the market increased. Bragging was considered rude, so our parents were less likely to tell us about market gains. When all stock market conversations involved negative experiences, I understand why we fear investing. Fear is good to a point because it protects us, but when it hinders our progress it becomes a problem.
Investing must be a part of our future plan. In the 1980’s, interest rates were higher, so our parents could still gain if they took their money out of the market and put it into a savings account. Unfortunately, current interest rates are below the rate of inflation. Therefore, while your money is safe in a savings account, it is actually losing purchasing power each day. Yes, investing has risk of loss, but a savings account almost certainly has a loss of value in the current environment. Savings accounts have their place, but they may not be the best option for retirement planning.
Furthermore, we have been encouraged to take government jobs because they are one of the few careers where employees still receive a pension. Those benefits ease our fears about the future, but remember there are still risks of funding cuts with each election. Of course, if your dream is a government job, then absolutely pursue that goal. However, we shouldn’t take a job only to comfort our fear.
Other retirement options are not guaranteed like a pension, but I believe we’ll all need personal retirement accounts. Cost of living continues to rise while salaries barely move, so it’s safe to assume we’ll need more in retirement. Accepting this fact allows us to plan for it. The future will come whether we are prepared for it or not. Don’t be left behind! Let’s make a plan!