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I am 28, and my sister is 19. That kind of age gap presents positives and negatives.
One clear positive for me is that I always have a young person around to help me make sense of an increasingly confusing world. What’s so great about Vine? Why does everyone dress like they’re going to a music festival 365 days a year? What does it mean to be “on fleek”? Am I on fleek? (I’m definitely not.)
I feel like I can tap into the zeitgeist of the coolest people at any time. That is invaluable. I have a direct, honest pipeline into the mind of a college sophomore. In this regard, my sister does not treat me like a parent, and it’s great. I wasn’t cool in college, but I can be now!
On the flip side, being nine years older automatically thrusts me into the position of being a semi-parent. This can be challenging and frustrating. I feel obligated to pass down my hard-won wisdom regarding fake IDs (not worth it), buying and cooking your own food vs. getting a meal plan (worth it), and investing (sooooooooo worth it).
Unfortunately, it’s that last point that has caused me the most consternation. Starting a few years ago, I got it in my head that my sister should be investing in the stock market. All the research shows that the earlier you start, the better off you are, and most of that research references someone starting when they are in their early 20s. What if she started investing at 15? She’d be so wealthy, so early!
I had to make it happen. So, one day a few years ago, while my sister and I were both living at home, I came back from the library with The Bogleheads Guide to Investing. I marched into her room and presented her with the book.
“It’s time for you start investing! Read this book, it explains everything.”
“Investing. Getting your money to work for you.”
“I don’t have any money.”
“You got, like, $3,000 at your bat mitzvah.”
“I don’t want to spend that.”
“It’s not spending, it’s investing. Let’s say you buy 10 shares of Company X, and their profits improve so that–”
“Yeah? Well, did you know that Albert Einstein said the most powerful force in the world is compound interest?”
[She gives a blank stare, slowly turns back to computer.]
It turns out Einstein is wrong. The most powerful force in the world is the pull a teenage girl feels toward Facebook when she is in a group chat with her friends.
I would repeat this process every few months, with the same result. But recently, after years of trying, I was able to finish my Sisyphean journey and convince my sister to open a Roth IRA. I felt like Jimmy Carter at the Camp David Accords. Maybe even better, since Carter wasn’t worried about Anwar Sadat and Menachem Begin losing focus to Angry Birds.
Here’s what I learned along the way:
Environment is everything. Statistically, kids are likely to take after their parents. This applies to religion, eating habits, exercise habits, and pretty much anything else you can think of. So, it would make sense that it applies to their attitudes about money as well.
If your parents are secretive about their finances, spend a lot of money to keep up with the Joneses, and talk about how they don’t have much in their retirement accounts, then you probably will be the same way. My parents were pretty amazing at raising their kids, but they were not the best financial role models. It’s hard to develop good money habits when you’re in that kind of environment, so I don’t blame my sister for being uninterested in saving.
I realized that half the battle was simply waiting for her environment to change. If I harassed her too much when she was in the comfortable cocoon of her childhood bedroom, she might get so annoyed that she’d shut out my future efforts. Sometimes, you have to just be patient.
Lead by Example
When I still lived with my parents, I once spent $3,000 on a new laptop. My old one still worked fine, but it couldn’t run Starcraft, iTunes and a Web browser all at once. And what if I wanted to start making hip-hop beats? (Yes, this was a legitimate concern at the time … don’t ask.) I needed a computer that could handle top-end music software.
I ended up getting a very fancy computer. I loved, it but it’s never a good idea to spend almost a third of your net worth on a depreciating asset. If someone had told me then that my money would have been better spent buying index funds, I would have ignored them.
But, as I matured, I made it a point to show my sister that I was changing my ways. I have manually fixed that computer up over the years, and it’s still chugging along to this day. I don’t conspicuously consume. When I get a new job, or a raise, I tell my sister about how I’m excited not for the latest electronic DJ gadget (seriously, don’t ask) but for the ability to contribute the max to my 401(k). I would show her how I was doing with my Mint app, trying to get across that not everything about investing is boring and gray.
It might not seem like much, but she clearly looks up to me in other ways, so little steps like this matter. If you can change the direction of a boat by one degree, it will end up on a completely different course after a while.
Find Out What Sparks Their Interest
My sister loves reading, but it became clear that there was a better chance of Warren Buffett converting his portfolio to penny stocks than my sister reading a whole book on investing.
Instead of trying to get her to read novels, I started sending her less technical, more lighthearted, investing-related blog posts. This helped change the tide. The first time she mentioned that she enjoyed something she read in a post I sent her, it was tough not to let flow the tears of joy.
It turns out that blog posts are a lot more handy for someone who likes reading but has a short attention span. While that got the job done in this case, there are a lot of ways you can spark someone’s interest in investing. Is the kid a bleeding-heart type? Maybe they’d invest through services like LendingClub, Prosper, or Kiva, where you can make loans to real people who might not have access to it through traditional means.
Would they invest if they had the discipline to set aside the money? Show them how they can carve out money to invest by using a budget or automating their savings. Slick, easy-to-use budgeting software from a site like You Need a Budget or Personal Capital would be perfect for this kind of thing.
Even if investing as a whole bores them, do they get excited thinking about owning a few companies they love? Maybe they’re the kind of person who sees a new Apple product launch announcement and thinks, “I’d buy some of that stock if I could get it right this second on my phone.” A free trading app for their smartphone like Robinhood would be perfect for this person.
Strike While the Iron’s Hot
Once you move out of your parents’ house, it can feel like getting cold water dumped on you. My sister went to college, got a job, saw how much work you have to put in even to make $9 an hour, and slowly, her wheels started turning. My gentle prodding to get her to invest was met with less scoffing and more curiosity.
As I saw this shift happen, I knew I needed to put on the full-court press. I managed to work little tidbits about investing into almost all of our conversations, and I started to make progress!
This kind of tactic early on could have rubbed her the wrong way, but not anymore. Saving was on her mind. But, not surprisingly, she still had plenty of reservations.
The main holdup was that it seemed like a lot of work and she was busy. She has a job, she’s taking a full course load and she’s preparing to go study abroad. Investing seemed intriguing, but wasn’t worth her effort to figure it all out and set it up.
That’s when the next phase of the plan went into effect.
Satisfy the Desire for Instant Gratification
In a world where people are increasingly used to getting what they want, when they want, even taking a few hours a month to manage your finances can seem daunting.
That being the case, once my sister expressed interest in investing, I changed my approach from “you have to invest, figure it out, it’s not that hard” to “give me your information and I will literally do everything for you.” Suddenly, she was totally on board. Once I offered to be her full-scale concierge service, for free, she happily parted with some of her savings and told me to invest it.
While my sister and I are keeping this all in the family, there is a host of tools to help people like me convince their loved ones that investing is not that hard. If I was too busy to manage things on my own, I wouldn’t hesitate to use a service like Betterment or Wealthfront.
Both are low-cost services that make it easy to start investing. Plus they have intuitive, well-designed interfaces that make tracking your money a breeze. Each one has pros and cons, but there is no pro like being able to say, “Pick up your iPhone, dump your money into one of these services and let a bunch of very smart people make you wealthy,” to get an apathetic teenager to pay attention. Just a few minutes of their time and they don’t have to worry about their investments for 40 years? That’s instant gratification.
Of course, nothing is as painless (for my sister, anyway) as the system she and I use, where I have complete access to all my sister’s accounts and do all the grunt work, from transferring money out of her checking account to eventual tax-loss harvesting. This is why I wire a few hundred bucks into my account every month for my troubles. (Don’t worry, I’m kidding. And even if I wasn’t, this post is too long for her to ever read this far.)
The whole thing is a little bit like starting a workout routine. Some people are motivated to go to the gym, even when it’s snowing outside and they have to walk uphill a mile to get there. Others will never turn off Netflix unless you drag them, kicking and screaming, to a spin class.
The same thing applies to investing. Some are born and raised to save and have an intuitive sense of the benefits of compound interest. They will invest on their own. Others need to be coaxed along using the steps I outlined above. In my experience, young people need prodding more often than not, so it’s best to get familiar with how to handle it.
And while it can be tough to see day-to-day gains from working out, it’s always comforting to know that you are taking care of your body in the long term. The same thing applies to investing. Once you can get someone to see that it’s not that hard, they will usually keep at it. As long as it’s relatively painless from the signup period forward, smart people will realize that they’d be silly not to start saving for the future, no matter how old they are.