I was provoked at the All Staff as I sat and listened to Cris Borden talk about our 403(b) Plan since it obviously stimulated me to also make a pitch for the Flex Benefit Plan that Hale Kipa offers our employees. I was struck by a question that has percolated for me for most of my career in human services. I am going to frame this in a somewhat prickly way, in part because I want to unfreeze thinking that many may have about financial literacy and how we handle or think about money.
Let me start with a mental model, if you will, of a particular perspective I carry around about the world and that is that the people who have money are the most careful about how they spend it. Let me see if I can explain that and I will use myself as an example, to the extent that I am representative of anything. I am an individual who obviously makes more than many people and yet I am a comparison shopper. I know which supermarkets have the best prices for which products and while I have some brand loyalty, I also, whenever possible, buy generics. I am conscientious about knowing that if I am going to buy local produce that I am going to pay slightly more, but there is a conscious and intentional reason I elect to do that. I am a coupon clipper, and I use that word less in the anachronistic term of actually paper coupons, although I certainly do that because they come in the Sunday Star Advertiser, but because they are also available online. Whenever I get the opportunity to receive discounts, I will typically take advantage of them. I would always prefer to purchase something that is on sale, but I am wary of the price that is listed and often check to see if it really is a sale price or someone is just telling me it is a sale price as opposed to that is the reality of it. I shop for fees when it comes to my banking services and I go over every bill we receive. I review my credit card bill every month and check off and look at every item that was charged and we have a conversation about what categories of spending have increased or decreased and why. I am aware of interest rates in that I have a savings account. I try to pay very close attention to making certain that I am paying all of my bills on time and I would never carry a credit card balance because of the terribly onerous interest rates that are charged on credit cards.
I am, and have been, enrolled in Hale Kipa’s Flex Benefit Plan and I am a contributor to the 403(b). I contribute to the 403(b) in part because, as I mentioned in my thank you to the people who attended the All Staff, I am acutely aware of how many baby boomers were prepared to retire in 2007 who could not when their retirements were decimated by the downturn in the economy. But I think that it is very important to note that most people who are executives in the field of human service contribute to retirement plans because they do not believe that social security will be adequate when they retire. Cris Borden made the point that the younger you are and the earlier you start contributing to a retirement plan, the better off you will be in the long term. And regardless of whether you 15 or 20 years down the road have an emergency and need to access part of it, you will have significantly more money than you put in by virtue of the compounding factor over time of the appreciated value of the returns you are getting on your retirement investments.
I have taken advantage of the Hale Kipa Flex Benefit Plan since it was first offered to me because I have out of pocket medical costs. While I do not have dependent child care, which would make it an absolute no-brainer for me, if I were paying someone for taking care of my dependent children, my out of pocket medical costs, primarily co-pays on prescriptions drugs or visits to the doctor, always exceed the total amount that I commit to the Flex Benefit Plan. After taxes are taken out, one dollar of my salary only leaves me with about 75 cents to actually spend. Therefore I am getting about a 33% return by putting that money aside twice a month as a payroll deduction since it is being taken out as pre-taxed dollars. If I pay the costs out of my normal weekly expenses instead of using the Flex benefit Plan, that is after the taxes have already been removed, that dollar is now the equivalent of 75 cents.
Those are examples for me of what I think reflect financial literacy. And so for years I have wondered how people who do not practice those kinds of activities teach our youth and families financial literacy. How do we share with them all of the various tips and techniques that could ultimately give them more disposable income and better financial control over their lives?
Many years ago, in another incarnation, I taught financial literacy to Independent and Transitional Living adolescents and I was flabbergasted that most of the staff that were working with the youth were not practicing any financial literacy or control over their own financial health. I believe that it is a responsibility to know how to maximize whatever you are earning and I would encourage you to do whatever you can to become an informed and knowledgeable consumer. The more you know, the better you will be able to manage your money and the better you manage the money, the more money you will have available to do those things that matter to you. This is really about making choices because there are tradeoff choices we make every day. But if you do not put yourself in a position to maximize the impact of whatever you make, at whatever job you have, you will always find yourself in budgetary distress living moment to moment and unfortunately that is my fear about the youth and families that we serve. We need to teach them how to maximize the assets they have available to them.