With my own younger sister, I am trying to convey the same information a little at a time. I’m 30, and only got my financial life in order a few years ago. She’s 22 and recently graduated from college. I expressed how I regretted getting started so much later than I could have. I asked her what her plans were, and she said she hadn’t thought about it much. Something along the lines of, “I dunno… I won’t be making much, so just trying to make ends meet.” I urged her to set a limit of 1/3 of take-home income for her rent, and to put 10% into a savings account for emergencies… easy to understand and immediately relevant. I also let her know that forcing herself to live off the rest would be a challenge, but one that would be tremendously rewarding.

Over Thanksgiving, she volunteered that she had opened that savings account, and had a few thousand saved already. (And never got around to opening a credit card account.) I was so proud! She said she was shooting for $5k for an emergency fund, and she should have it early next year. So for Christmas, I’ll get her a book on investing, and we’ll use that as a starting point for what she’ll do after she has established her emergency fund.

This strategy does require regular communication to work. Otherwise, she would get incomplete information. However, it does allow her to ease into the established practices of personal finance. By now, we find these concepts fairly simple and natural, but all at once, they can be a little overwhelming.

Best of luck.

So my cousin, who had played something like a dozen musical instruments in high school, became a musicial and toured with a band. (He just happened to be performing in a college town the first weekend I was there as a freshman.) The band ultimately broke up and my cousin moved West.

He then developed a craft and acquired a booth at a just-starting “Saturday Market”. His wares were a success and he recruited others to sell his crafts to boutiques around the country. Ultimately they were sold in my college town and I got a fuzzy surprise when I recognized the name on the display in the store window. (As his cousin, I am one of a few people who know the origin of the name.)

Of course, this wisdom was relayed to me somewhat later, but it would have served me well in a timely manner as it did my cousin, and it’s generally excellent advice for anybody.

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Maybe she will take your advise immediately, maybe she won’t. But she’ll never ever forget that you wrote her this letter.

I made my 2 senior girls(graduating in 2008) sign a financial pledge. We did this with some hoo ha at home, with their mother as witness etc.

You have opened a door for your goddaughter, with all good intentions.

I am sure only good will come out of this.

Bless you.

Thanks again.

I think some posters didn’t notice the author’s suggestion that she would give one of 2 PF books (separately) as an Xmas gift and that there is a cash gift involved that’s tied to the girl opening a savings account and setting up a monthly deposit. The more she commits to putting away monthly, the larger the gift will be because it’s a (one-time) matching gift. I’d highlight this intention at the beginning of the letter, to make sure the girl notices it and that she doesn’t feel she’s getting shortchanged!

I also agree the letter should be presented *with* the gift of a book (instead of giving one later). Glue an envelope into the book’s cover in such a way that the envelope doesn’t need to be removed to access the letter. That way it has a permanent home and can be kept and treasured forever.

The first advice I really listened to was at my six month anniversary of my first job, when I had the opportunity to open a 401(k), and it was given by a colleague who opened up his online investment account to show me his balance ($850,000!) He told me how long he’d been saving, how he started at only 3% of his salary, and about his plans for early retirement. When he told me to open a retirement savings account that day it was MOTIVATING. His advice changed my behavior because it wasn’t abstract. I keep that in mind on the (very rare) occasions that I decide to pass on financial advice.

[...] Suzanne S. wrote a guest post over at Get Rich Slowly that is lovingly addressed to her goddaughter, a recent college graduate: Debt is your enemy [...]

[...] Letter to a Godchild: Passing on Financial Wisdom I’m going to write a letter much like this to my niece in a few years. (@ get rich slowly) [...]

But perhaps the best way to have this conversation is to invite her into it – ask more than you tell. Something like “One of the hardest lessons I learned was avoiding debt. I didn’t realize that borrowing for that trip ended up doubling the cost! I’d love to know whether you’ve faced decisions like this, and what you did. Have you been looking ahead at some of these decisions, or hearing about choices your friends have made? What sorts of things seem like sensible debts to you?”

Especially for young adults, an invitation to consider future situations and to describe past experiences can be more welcome than a bundle of advice, however sage.

To start off, replacing the expected present with a letter? Would not fly. I`m pretty sure I`d crumple up the letter, and throw it out without reading it, right off the bat. I`m not saying you have to buy the girl a car, or a laptop or something ridiculously expensive, but a token gift would go a long way towards making her read the letter at all (if it were me).

Do you know if your goddaughter knows anything about finances? Because as a college student who religiously reads financial blogs, and budgets, and is responsible for my finances, I would find a letter such as this INCREDIBLY insulting. Now, I know I don`t know everything, but this advice is very low level, which is great if she doesn`t know anything about personal finances… but if she does… well, I`d be insulted. Even if she doesn`t know anything about personal finances, odds are, as a young adult, she will probably find it insulting anyway. Lets face it, most young adults? A lot of us think we are smarter than our elders. I can`t know what she will feel, I can only say how I would react, and maybe how my friends would (and I`m not sure the difference between American and British young people is enough that the reaction would be that different).

Another thing. I, personally, kind of resent your comments specificly regarding the trip vs. debt. I personally, took out a large loan for a study abroad experience. However, I went into the experience knowing what I was getting into, and made a conscious decision to place myself in that position. It may take my longer to pay off my debts when I graduate next year, but these kind of experiences can help you grow as a person, and can be quite invaluable. I would not change anything about my decision to spend a semester in Japan, nor my decision to see Europe last year. The point is, that for you, Las Vegas may not have been an invaluable experience, but your godchild may want to do something that she would consider invaluable, and your letter talk her out of making an informed decision, which worries me.

I know that I am being awfully critical, but I just want to advise a healthy amount of skepticism if you plan on sending a letter like this in any form. She may love it, praise you, and take it as invaluable advice that she will follow diligently for the rest of her life. Or she may be hurt, feel that you don`t care how she feels, feel like you are condescending, and will go off to learn her own lessons, like the rest of us did. Again, sorry to sound mean, but… just… be warned…

One thing I read in a magazine, when I was in my early 20s, was that “in your 20s you learn and in your 30s you earn.” This turned out to be true for me and for most of my friends, too. I think that advocating No Debt Ever is a very dangerous mistake. You can’t fully understand and appreciate virtue until you know what vice entails.

I think it would be a far more effective idea to include a much shorter version of this letter, a pf book, and then [whatever would normally be given as a cash gift] in the form of a long-term CD or other long-term investment. That way they can, as others have also said, revisit the book and letter at their leisure, and also watch the growth of the investment.

My best advice would be to shorten the letter and package it up with a really good book and an offer to always be there to talk one on one.

-Melissa Donovan
Writing FORWARD

While I found it well-intentioned, it also did seem a bit condescending, frankly.

I think it would be more effective if you assumed she already has a good handle on finance (unless you know for a fact that she doesn’t).

For example, “Life is all about socializing and it’s easy to ignore how the drinks, nightclubbing and dinners add up.”

Not for everyone. The last time I was in a bar, I was still in school. My life isn’t all about socializing, and if hers isn’t, either, she’ll tune out for the rest of the letter.

#4 “Don’t wait…to grow up financially.” Ouch. It’s written as if she isn’t grown-up.

I agree with other commentators: Include a great book on finance. It shouldn’t set you back much, but it could really help her. And, even a small check would be appreciated.

You could call it the start of her retirement fund.

[...] quick hello to all readers of Get Rich Slowly who have stumbled across my site thanks to the Letter to a Godchild: Passing on Financial Wisdom [...]

There is no better advice than putting away money from the start, plus you notice after a few months that it is money you dont really miss. My starting point was putting together a budget myself to keep track of expenses and keeping it updated every month. Now I look forward to income not so that I can spend it, but so that I can invest it… and when you have a reasonable amount, it gets fun to diversify, and watch your money evolve with time, whether it be in stocks, bonds or real estate. I am currently 25 and putting away an average of 40% of my salary.

Once she has some money saved up, I highly recommend the alltime classic and timeless “A random walk down wallstreet” by Burton G. Malkiel to learn the basics of investing and the importance of diversification to secure growth.

Best of luck to you and your god daughter!

Dan

Some of the key pillars of personal finance are, unless you’re of a particular mindset, about as interesting as watching paint dry so if you can integrate ideas like paying yourself first (mentioned by Leslie) and illustrate what all this ‘boring’ frugality enables (mentioned by Pippin) I think it would make a stronger impact.

Also the idea about sending a personal finance book along with the letter and offering your counsel I think are particularly good.

For context I graduated from University in the UK just over a year ago.

There I try to impart the best wisdom I have or can find written, verbal or video. It is kind of a life work that will pass on to whom ever in the family wants to do it. I try to get my kids and advisors to write a small post in their area of expertise along the lines of what does anyone need to know about this subject. If they can’t write I set up a call, interview them and post it.

When I was babtised (at 15, not quite the same), my mum’s good friend took me to tea at a local restaurant (not thrifty, but at leeast it wasn’t an expensive dinner!) and told me 2 things …

1. She woudl always be here for me. She was a good friend of my mum, but that she hoped I realised that she’d always be there for me too. She gave me the freedom to realise that I could ask or tell her anything, even if I thought it might shock her a little. I’ve benefited greatly from that over the past 20 years, and her advice when I ask her an honest question has been invaluable.

I woudl think that a similar offer in the financial sense woudl be great. I can’t tell you the dodgy financial advisors I’ve been to looking for the same with regard to money.

2. I was 15, and by memory in that awkward age of puberty where I knew best about everything, and was probably a little horror most of the time. She told me that she loved me, thought I was smart and amamzing, but that there was only so much that she’d take without treating me like a child. She knew that it was a time of change, but she expected me to be reasonable and honest.

From a financial point of view, you can love your god daughter, and understand if she makes the decision to have a few mad weekends when first faced with a pay packet, but that if she’s going to “Grow up”, you’d love to be able to talk to her like a financial adult.

Good luck, and you sound like a great god parent!