Like many movie-goers this summer, I recently watched Meryl Streep sashay across my local cinema screen in an outfit that resembled the spawn of a disco ball and a feather boa. Ms. Streep is one of the stars of this summer's requisite wacky musical, Mama Mia. The film is an explosion of Abba-flavored kitsch, complete with tone-deaf serenades by former 007 Pierce Brosnan and abundant sequined strutting by Ms. Streep and her trio of fabulous friends.
But what stands out in Mama Mia more than the glitter and infectious pop is the mother-daughter relationship. Meryl Streep is a business owner who has single handedly run her dream inn on limited means. Though she appears happy with the financial decisions she has made, she wants a better future for her daughter. She encourages her daughter to travel, pursue a career and delay wedded bliss so as to procure some financial and personal independence.
Mothers have a wealth of financial planning information that they can offer their daughters as well as the other young women in their lives. Helping a young woman develop a strong financial plan is a lifetime gift. So, today, we're taking a cue from those strong mother-daughter ties in Mama Mia and offering you WISER's top five list of Things Mothers can Tell Their Daughters about Retirement:
1) Start Saving: Women tend to live longer and earn less than men. Wage discrimination makes it harder for women to set aside funds for retirement, but their longer lifespan makes it important to set aside more money than men. Make a financial plan that includes regular contributions to a retirement account early in your career, and stick to your plan.
2) Saving Early Pays Off...literally: Compound interest makes it easier to accrue assets, but you need to start saving early to get the full benefits of compound interest. Consider this: a young woman saving $1,000 a year for ten years, from age 20 until age 30, and then saving nothing from age 30 to 58, will have $112,289 at age 58. A woman who starts saving at age 40, and saves $1,000 a year for ten years will have only $29,018 at age 58.
3) Develop Good Habits: Get in the habit of having a household budget, developing long and short-term financial goals, saving money regularly and planning for a secure retirement.
4) Protect Your Credit Rating: Pay all of your bills on time, do not charge more than you can afford to pay comfortably and avoid costly predatory loans. Women with poor credit ratings pay much higher interest rates on everything from mortgages to credit cards to personal loans. These costly loans and credit card accounts drain you financially and will keep you from acquiring assets you’ll need for a secure future, including a secure retirement.
5) Make Sure You Participate in a Retirement Plan: If you are covered by a retirement plan at work, sign up for it and contribute as much as you can. If your employer will match some of your savings, don’t pass it up. If you don’t have access to a retirement plan at work, consider finding a job with better benefits. You can also open an IRA and contribute the maximum amount each year. Many women find that having regular contributions deducted from their checking accounts is an easier way to stick to a savings plan. Save first in tax-favored accounts—the tax savings will boost your overall savings.