Why Time is the Ultimate Financial Wellness Gift
December 21, 2015Do you really need more stuff for the holidays? If you are like most working Americans, “stuff” is not a problem. Time is where you are falling short.
In fact, most of us need more time to manage all our stuff. We certainly need time to manage our finances – time to take care of record-keeping and bills, time to process complex financial information and time to manage investments. That’s why, for my 2015 Financial Wellness Holiday Gift Guide, I am focusing on gifts that leverage or liberate time:
Gift #1: The Time Posse. As a busy, working mother, this is by far my favorite holiday gift, inspired by my wise friend Maria Ruffer. Here’s how it works: Get together a group of friends – a Time Posse – who agree to together work as a team for a set number of hours on a project of the recipient’s choosing. This could be a challenging project where your friend has expressed frustration or a desire for extra time to finish such as sorting receipts for tax time, filing, setting up a home office, cleaning out a closet, etc. It could also be dedicated to a project that requires many helping hands such as preparing for and holding a garage sale
Talk about a real multiplier effect! A “time posse” of five friends could focus on giving a three hour gift to just one recipient – a total of 15 person hours of effort –or agree to give time to each other instead of a traditional present – leveraging the talents of the group for 75 total person hours of effort. The financial cost of the gift is zero. There is also a significant benefit that is harder to quantify: the ability for the recipient to check a time-consuming project off the list in a single day.
How do you present the gift? Design a simple gift certificate describing the gift, with instructions for redeeming the certificate. For extra effect, consider presenting it in an elegant card or frame it. My prediction is that this is a gift that will be well-received. In fact, it’s on my letter to Santa….
Gift #2: The Time Value of Money. When asked to name the greatest invention in human history, Albert Einstein replied, “compound interest.” Consider giving a child or grandchild the gift of tax-free compound returns. For younger children, you can set up a low/no fee Section 529 college savings account. Multiple members of the family, as well as friends, can contribute. Use this tool for comparing Section 529 plans from different states to find one with no fees and access to low cost index fund investments.
For young adults who have some employment income from a part-time or full-time job, consider contributing to a Roth IRA for them. For 2015, you may contribute up to $5,500 or the amount that the child has earned in employment income for that year, whichever is less. Roth IRA contributions are after-tax, and earnings grow tax-free for retirement if held until after age 59 ½.
Additionally, the process of setting up a Roth IRA, choosing a mutual fund investment and monitoring it over time is an excellent financial teaching tool. For teenagers, you will have to set up a “custodial” Roth IRA that they can take over when they turn eighteen. For young adults, you can help them set up their own accounts at a discount brokerage firm. Look for no fee account options with access to low fee index funds.
What’s the miracle of compound returns? A low $250 contribution to a sixteen year old’s Roth IRA which returns 8% per year would grow to $11,725 over a fifty year period. Use this IRA calculator to show your young adult the possible future value of your gift.
Gift #3: Time Saving Knowledge. As Stephen Covey wisely said, “Begin with the end in mind.” Developing financial knowledge helps you prepare for financial events. Want to become a millionaire, invest in real estate, or retire comfortably? You might be far away from that goal, but learning about how to get there is a financial GPS that will help you achieve your goals more quickly.
Feeling stuck, overwhelmed by debt or in between jobs? Read success stories of people who have been in your shoes and turned the situation around to prosper. There are so many excellent financial planning and investment books that make good gifts of time saving knowledge.
Looking for one you might consider? A gift of a pre-order of our CEO Liz Davidson’s new book, What Your Financial Advisor Isn’t Telling You: The Ten Essential Truths You Need to Know About Your Money comes with access to a free, unbiased financial education webcast. Text your receipt to [email protected] and get a gift certificate for the webcast.
Are you planning to give the gift of time this holiday season? Let me know how it turns out. Tweet me at @cynthiameyer_FF or email me at [email protected].