Turn 65 Get Money

“Grandpa is retired. What do you think retirement is?”, I asked my 12 year old niece.

“It’s like when, umm, you turn 65 and you get money.”

Technically, she’s still 11, but we’ve still got some work to do.

How do you teach a twelve (eleven) year old all there is to know about money without them losing consciousness 3 minutes into your lecture?  Challenge accepted.

First, let’s review what “retirement” really means.  Retirement is simply the point at which you no longer need to work for money. Maybe you still work because you want to, but you don’t need to because you’ve saved lots and lots of money. When you save money, you can lend it to the bank and the bank will pay it back to you plus some more in interest!  If you lend them enough, the interest they pay you can get big enough to pay all of your bills!


Simple really.  Even a four year old (grown man) could illustrate it.

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Now, here’s the tough question, how do you get that big pile of cash?  Because, it’s going to need to be pretty big.  Exactly how big depends on what kind of lifestyle you want to maintain, so let’s begin with how you get cash into the bank. We call this “saving”.

To save money, we need to make money.  To make money we need to provide some kind of good or service to others.  Adults refer to this as “work”.

“Gah, wooooork. That stinks!  No one told me there would be work involved!”

Yes, work. We all wanted to be an astronauts, but somehow we went to college and learned about computers or advertising or manufacturing or accounting instead.  Now we get paid lots of money to sit (or stand) behind a desk 40 hours out of the week.  The faster we save, the sooner we can get ourselves out of this mess and into a golf cart.  Don’t worry, you’re learn to love golf.  I don’t think you’re allowed to do anything else.

Let’s have Max (me) draw us another picture about the flow of money to help explain more.

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Step #1 – Get Money
Step #2 – Spend Money

Here’s where things get complex and people tend to get a little crazy.  Listen carefully, because you don’t want to get caught up in this hot mess.

We’ve talked about one way to make money, “work”.  Really, there are lots of ways to make money, but we’ll start with that.  On the flip side of the equation, there are three basic categories of things you can spend money on:

A. “Needs” or Necessities.
B. “Wants” or Stupid Stuff.
C. “Savings” or Investments of some kind.

That’s right, Stupid Stuff.  What do you think falls into the category of Stupid Stuff?

“Like, ummm….  “,  time passes,  “Maybe like clothes and things?”

Good!  Clothes and things!  That’s a good start.  But maybe we do sort of need clothes.  At least some basic coverings.  Perhaps some clean socks.  This is hard, isn’t it.

To make it a little easier, let’s invert the lists.  Our Needs are actually quite easy to list, by the strictest definition of the word.

  • Food
  • Water
  • Air
  • Shelter (so we don’t die of exposure, you know).

Prisoners get this, and probably a little more, like time in the “yard” and what not.

But that’s a pretty boring life, so let’s take a look at the Wants list.  Maybe we want…

  • Fancy house to live in.
  • Fancy car to drive to work every day.
  • $7 latté every morning on the way to work.
  • Luxurious Caribbean vacation every winter.
  • Golf every weekend (but we’re not retired yet!)
  • Beer, and lots of it!
  • Big screen LCD WIFI Ultra HDTV.
  • Cable service for the TV.
  • Internet service for the Internet!
  • Hulu+ AND Netflix because they don’t both have all the shows we want to watch.
  • That cool thing we saw on kickstarter.com.
  • A garage door opener for our fancy car.
  • A house cleaning service because we are too busy working.

And this is where we tend go wrong.  We think things are going to make us happier and we confuse the want of the thing with a need that we must fulfill.  When in reality, we don’t really need many of these things to be happy.  And the few things that are really important, like a house and food, we use too much of our money on.  And we start borrowing money from the bank to pay for things instead of letting the bank borrow money from us!

Don’t get me wrong.  I’m a big fan of stuff.  I love stuff.  I’d like all that stuff.  Wait, that’s not true.  I don’t want all that stuff.  I’d rather have the money.  But enough about me.

Do you want to retire someday?


Do you want to work for 45 years after college?


So what should you do?


Now she’s getting it.