The light at the end of the tunnel is nearing for America’s summer interns. Full-time offers will be tendered, sighs of relief exhaled and paychecks cashed. Interns who receive offers will be bright-eyed with lofty visions of moonshot careers at their new place of employment. As these interns begin to accept the end of college and pivot towards the start of the rest of their lives, we strongly encourage them to start considering a long-term financial plan.
Sure, it is tempting to put most of your extra cash earned this summer in your checking account for drinks, trips to visit friends or to buy yourself something nice. The decidedly less glamorous option is to put a chunk of that cash into a Roth or Traditional individual retirement account (IRA). But, almost certainly, that is the option for which your future self would pat you on the back. (For related reading, see: The Conflicts of Interest Around 401(k) Plans.)
Early Planning Is a Tough Sell
We know this is a tough sell for most college students. Salaries and long-term financial security aren't big concerns for today’s generation as it has been before. Even on Wall Street, where compensation is high, interns seek other qualities in a company. For example, interns at investment bank Jefferies said they valued relatable leadership, a family atmosphere and inclusion. So we get that saving for retirement may not be where your mind is at—especially if you received an offer and want to celebrate. (Which, by all means, you should.)
We aren’t here to suggest you start living a life of austerity now that college is almost over. But you must consider that right now is the best time in your life to put a bit of money away for retirement. The power of compound interest means that the earlier you start saving, the greater your returns will be. It doesn’t matter how small the amount—money invested in the stock market can grow exponentially over time because it compounds year over year.
In our experience, many college-aged people don’t know where to start, even if they are interested in opening an IRA. The choice between, for example, a Roth or Traditional IRA can be opaque and intimidating. And then, once an account has been opened, where do you actually invest the money? How can it be monitored? (For related reading, see: 6 Questions to Ask a Financial Advisor.)
To pile on top of that, as you graduate and find a new pad, start work and are presented with options for employer-sponsored retirement plans, you might be forced to consider trade-offs. Should you work on paying off your student loans or invest that money into growing your retirement account? Or, you might ask yourself, why invest at all when I can just keep my earnings in cash?
All of this “adulting” can be overwhelming, and unfortunately often leads to poor financial decisions. (For some guidance, we highly recommend John Oliver’s take on saving and financial advice.) But one thing you can be confident of is that starting to save now has almost no downside. If you aren’t totally sure of your ability to open an account and invest on your own, follow John Oliver’s advice and contact a low-cost, fiduciary financial advisor who can work with you to grow your investment.
We recognize that putting a chunk of your income towards retirement at such a young age isn’t sexy. But it has enormous benefit and will set you on a path of financial wellness. It’s the right thing to do. (For related reading, see: The Top Tip for Financial Success: "Start Planning Early")
The views expressed in this post are as of the date of the posting, and are subject to change based on market and other conditions. This article contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.
Please note that nothing in this post should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants, or attorneys regarding your individual circumstances and needs. No advice may be rendered by Sherman Wealth unless a client service agreement is in place.