With indications that current college students will need to accumulate well over one million dollars simply to remain in the middle class during their later years, pursuing financial freedom from an early age makes eminent sense. However, many teens or twenty-somethings tune out around talk about investing for retirement.
Framing investment conversations that college students tune into can be as simple as avoiding the word “retirement.” You can also use more enticing verbiage like “financial freedom” or “not being broke” or “not having to work all of your life.”
Once you have their attention, help them understand how inflation will affect them over their lifetime. Ask them to consider the Grand Canyon and how it was slowly formed over millions of years. Similarly, inflation is virtually invisible and occurs one tiny uptick at a time: you don’t notice it on a daily basis, but over time the results are dramatic. For instance, with inflation running at an annual 3% clip, in 50 years the dollars people earn (and spend) will be worth less than a quarter of what they are worth today!
Young people relate to the rising cost of a college education so this can be something they can personally relate to. For instance, the chart below illustrates the rise in college tuition at a few top schools from 1985 to 2015.
While the cost increases for the above example took place over a 30-year period, the results are nevertheless staggering. Tuition costs at USC rose from $9,618 to $49,464, an overall increase of over 400%! This is in line with other private universities.
According to the National Center for Education Statistics, the primary federal entity that tracks the cost of education, the average tuition at private colleges during the 1985-86 school year was $8,885. By the 2015-16 school year, the average cost of tuition rose to $39,011, a whopping 339% increase over the 30-year span. The numbers for public colleges reflect an even greater rise of 369% during this same 30-year period.