Getting my girlfriend excited about saving money!

I was surprised when my door burst open earlier this week and future Mrs. TimeInTheMarket ran in with a sheet in her hand.

“Look,” she said pointing to sheet, “I gained $364 this year!,” she continued with an excited tone to her voice.

I was a bit confused as she had never been one to get excited about money before. We’ve  talked about my portfolio and my desire to retire early in the past but they were never conversations she was too eager to have.

In fact the below cartoon captures her interest in the subject perfectly as resorts to nodding half the time when I start talking finances and eventually just tells me that’s my area of our life to handle, not that I mind!

In any case, she gave me the paper and I was intrigued to see that it was her simple IRA statement. Were we really going to have a conversation about stocks and retirement accounts that I didn’t start?

For some back ground, my fiancee works for a small local engineering firm and her company set up a simple IRA for their employees within the last year.

At the time, they had given her some enrollment forms and data about the funds being offered. The employer also set up some time with a financial advisor for the employees to ask questions.

The Simple IRA was through American Funds and she had come to me for some guidance about what funds to pick and what questions to ask the guy.

I took a look at the funds being offered an saw that they were one of two options and neither were great. It was either funds with a front-end load of 5.75% and a relatively high expense ratio or funds with no front-end load but even higher expense ratios that climbed in the 1.5%+ range. I wasn’t too excited about those prospects especially when compared against my 401k that has some funds with a .02% expense ratio but that’s the reality with some of these small companies.

I armed her with some questions about index funds, the impact of active investing and high expense ratios on returns and whether there’d be any options in the future that allow investing in passively managed funds like Vanguard’s that have low expense ratios.

The answers she got were somewhat encouraging although not entirely satisfying as the plan was to set this up through American Funds, gauge employee interest and then move it to a full service broker with more fund offerings once the plan got enough assets. I’m not sure why they just couldn’t start with something like Vanguard who offer simple IRAs for small businesses but I’m not sure of fee structures or anything like that and my girlfriend wasn’t going to be one to press the issue so we moved past that rather quickly.

I did make a note to have her check back with the guy after a year to see the status of that switch and we’re not too far away from that time frame now but that’s a discussion for another day.

The advisor echoed a suggestion I made of using the funds without the sales load due to that fact since it would take years for the lower expense ratios to offset the front-end load. If the plan is to switch to different funds in a year or two then there’s no way the front-end load funds would make sense especially given the uncertainty of whether or not she’d be at the job for the seven or eight years it would take to break even on the cost structure.

When we first started dating, she had come to me for some retirement advice as I had discussed my studies and interest in finance. That was an exciting prospect as she was the first girlfriend to really show any sort of interest in her future finances. She was truly a girl after my own heart!

I talked to her then about setting up an IRA via Vanguard which she did and to which she has contributed to every year since. Knowing that she had other money set aside that matched her risk profile, I sat down, looked at the crappy expense ratios and picked a stock fund with a less than exciting 1.35% expense ratio for her. Believe it or not, that was one of the better expense ratios of the lot.

She’s less risk averse than I am but there was no point in putting money in a 1% expense ratio bond fund in this account when I had the IRA to work with to cover those bases for her.

We talked about how much she wanted to contribute and decided on the max needed to get the full employer match of 3%. She was already maxing out the IRA and wanted to keep a good cash cushion for a house down payment and I had no desire to disagree with her when I wasn’t at all happy with the options she was working with.

It has been less than a year since then and her excited tone brought all those memories back.

“Nice,” I said looking at her statement which showed all the contributions, dividends and gains for her simple IRA.

“I know right? We’re rich!,” she exclaimed and laughed. I knew part of her was just humoring me because she knew how interested I was in investments but I could also tell that there was some honest excitement there too. It’s certainly easy to get excited about a decent return like that when you’re used to tiny interest payments from your savings account.

Still, this is a girl that had never shown any interest in anything financial before and here she was presenting me her IRA statement with pride. It certainly put a small smile on my face.

The statement itself wasn’t a life altering amount with an account value of $5735.43 but I didn’t want to diminish her success in an way.

“Yay,” I said before giving her a kiss. “I told you the market has been great this year and I bet your IRA is doing awesome too.” We don’t get paper statements through Vanguard and only look at that once a year when we make her contributions but it was as good a time as any to bring that up.

“Look,” I said, pointing to the lump sum employer contribution that showed up in April. “You’ve got almost $6000 here and you’ve put in less than $3500 of your own money.”

“Cool,” she said.

“Yea,” I said, “that’s why putting in money into stuff like this makes total sense because you’ve made a lot more than $364 just by participating this year!”

I gave it back to her and pointed some other things out. I pointed out the dividends that her fund was paying quarterly and how she’s getting more and more shares each time that happens and each time she makes a bi weekly contribution.

She smiled gave me a kiss and left the room and that was it.

It wasn’t anything huge but it was nice to see her show interest in something that is important to me. The money she’s putting in is for her long term benefit and I already knew that but it was good to see that she’s thinking about it and also seeing the results this early.

I certainly could have talked more about % gains and expense ratios and future projections but I know she’s not a numbers girl. I could have made it less numerical and brought up Stacy, her very own dividend employee much like my own employee Steve but it was too early for that too! Maybe sometime later we’ll have that discussion but for now I was just glad to see this level of interest and didn’t want to weight it down with more “boring” talk.

I know money, stock, investing talk isn’t for everyone and I know that she’s not the target audience for in depth investment discussions but these are baby steps that are very cool to see.

There’ll be a time after we get married next year where this portfolio might get merged with mine where I go back to managing everything but I’ll still want her to be aware of what I’m doing and what’s happening with our money so that if she ever needs to take it over, she’s got a good grasp of at least the basics.

In the end, I think it’s important to introduce someone who’s just not all that interested in things like the stock market to investing rather slowly.

My fiancee will never be as into financial discussions as I am and I’m more than OK with that. The important thing to me is that she has a good head of her shoulders and knows the value of saving over spending haphazardly because the rest of the knowledge can come with time.

She already has a good cash cushion via the chunk of change located in a savings account for when we eventually buy a house. The fact that she has maxed her IRA since she started working and is contributing up to the company match in her company plan means she’s already miles ahead of a lot of people her age which is great to see.

She understands that working together when it comes to finances is much better than being apart and I’m happy to be her guide in anything she wants to learn. We’ve already talked about working together in our finances as I can be a bit more risky in my investments and keep less cash on the side for the house because she’s saving more on that end.

I know that if I force number based discussions then it will just simply not interest her and the knowledge won’t find a home anywhere but small conversations like this one are key to letting her learn at her own pace. It’s more important to talk about the over arching concepts than it is to drill down to the numbers.

Whenever I talk to her about stock market rises or dips, it’s usually as simple as this.

The stock market usually goes up, sometimes it will go down but it’s generally only for a short period of time and since your time frame is long, any dips don’t matter since you don’t need the money right now. Keep any money you might need in the next few years in a savings account and invest the rest then forget about it. It’ll go up, it’ll go down but when you’re ready to retire, you’ll have more money than you put in after inflation and you can’t say that if you just leave it in a savings account.

It doesn’t always have to be about numbers. She doesn’t care that the stock market is up X% this year or might be up X% in the next 10 years. She’s up $364 and that’s exciting but in the long scheme of things, it’s a tiny blip on a portfolio that will be up and down varying amounts each time she gets a statement. It’s possible that the next conversation we have will be about how she’s lost $700 and what that means and that will be another learning opportunity and another thing to discuss.

The truth is that finance isn’t for everyone. In fact, most people don’t like it at all from conversations I’ve had with friends and family.

Certain people like her lean towards the scientific or the artistic side but for those of us who are interested in finance and want to share that knowledge then conversations like the one we had this week about her statement are small but important steps. Steps that will eventually lead her to a strong understanding of the impact of the choices she makes with her savings even if at the end of the day, she still finds it pretty boring.

Thanks for reading and let me know how your conversations with your significant other go in your household!