If there's one thing financial advisers can do to serve our greater community, it's to impress upon young people the importance of spending less than they earn and saving for the future. Unfortunately, bland lectures from graying, well-meaning advisers or wise uncles usually have little impact on our tweeting 25-year-old targets. The answer? It may be to scare them.
The mathematical benefit of saving while young is indisputable. Let's say you're 25 and save $5,000 a year. You do this for 10 years and then upon getting married and having kids you stop putting money away for good. Compare this with your friend who doesn't start saving $5,000 a year until age 35. They far outlast your meager 10-year record by keeping it up for 30 years.
You've heard me say this before. We can show young people spreadsheets and articles all day, but with many it fails to sink in. But now there's an app that trumps the impact of a dry spreadsheet. A very scary app.
Merrill Lynch has performed an admirable service with its Face Retirement app available at faceretirement.merilledge.com. With a snapshot and information about your gender and age, the app shows what you will look like 15, 20 and 30 years from now and offers helpful projections of what things will cost later in life.
As you flip through increasingly older versions of yourself, your first instinct may be to reach for the moisturizer (or Photoshop) to counteract 30 more years of sunny and dry Front Range living. But it has a real purpose. Having 20-year-olds see their retirement-age selves may motivate them to place higher value on their futures.
A Stanford University study had college-age subjects look at current photos of themselves while other participants interacted with realistic renderings of their 70-year-old versions. Those who looked at their older selves exhibited "lower discounting of future rewards and higher contributions to saving accounts." This means they started thinking more about their futures.
If you're in your 20s or 30s or love someone who is, I encourage you to use this app to look at the future you. After you're done sharing how you look at age 77 with your Facebook friends, you may decide to kick an extra percent or two into your 401(k). Your financial future depends on it.
David Gardner is a certified financial planner with a practice in Boulder. He can be reached at yellowstonefinancial.com.