In my early 20s, my dad offered me $1,500 with a catch. It annoyed me at the time, but it also taught me the most important savings lesson of my life.

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  • In my early 20s, I lived in New York and made $36,000 a year. Needless to say, most of my money went to essentials; saving for retirement was not high on my to-do list.
  • But my dad was anxious for me to start saving, so he made me a birthday offer: $500 to spend however I wanted, or $1,500 for a Roth IRA.
  • I ultimately chose the $1,500 and it shifted my perspective: I realized how important it was to provide for not only Present Alexis, but Future Alexis, too.
  • Use Blooom to analyze your 401(k) today and see how you can grow your retirement savings »

Everyone has a moment where some missing piece of financial knowledge clicks into place. For me, it was a simple choice my dad set up for me when encouraging me to sign up for a Roth IRA. 

I was just a few years out of college, making $36,000 a year at a writing job I'd recently left the service industry for. I lived in essentially the only apartment in New York City that I could afford without a roommate: a 350-square foot studio in Washington Heights for just over $1,000 a month that I'd ultimately spend seven years in. (I'm sure you get as tired of hearing this as I get of saying it, but that really is a steal for Manhattan.)

Rent ate up such a significant portion of my monthly take-home pay that it made me vaguely myopic about the rest of my expenses. Living alone was crucial to my mental health, so I was willing to dial back anywhere necessary in order to make it work. 

Naturally, one of those areas was retirement savings. 

I was approaching retirement all wrong, much to my dad's chagrin

My dad had been urging me to set up an individual retirement account for a few years at that point, but his advice was falling on deaf ears. If it wasn't an immediate expense, I reasoned, I should move it to the bottom of the list and get to it when I get to it. And nothing felt less immediate than an account I wouldn't crack into for literal decades.

Obviously that's not what any financial expert would refer to as a particularly stellar savings strategy, but like most Americans, I didn't learn this stuff in school — high school or college. I just had the whole adult world of personal finance dropped into my lap upon graduation, with the expectation that I'd figure out what to do with it.

My incorrect assumption was that I had plenty of time to start saving, but thankfully, my dad started to get impatient after a few years. Observing how much of my focus and funds were going toward just keeping my head above water, with no thought of the future, he made me an extremely generous offer designed to change the way I thought about money.

The gift with a catch

My birthday was approaching, and he and my stepmom were planning on gifting me money, he told me. The catch was, the specific amount was up to me. (Sort of.) I could either choose to receive $500, to spend however I wanted, or $1,500 that had to go toward setting up my first retirement account. 

Now, let me just say a few quick things before I move on, because while I don't know what you're thinking while reading this, I do know what I'm thinking while writing it. 

  1. Dang, that's a lot of money! I'm incredibly privileged that my parents were able and willing to offer me either sum. 
  2. I didn't even realize how lucky I was at the time! It was a position of immense privilege to be able to consider which option I wanted to take instead of just jumping at the immediate amount. Not everyone has that.

That said, after some very self-indulgent huffing and puffing, I ultimately chose the $1,500 option. I felt bummed not to get to do something special for my birthday in the short term, but the presence of my parents' safety net gave me the freedom to think beyond my immediate need for cash and into the future. And once I'd done that, it made it pretty impossible to ignore that the number $1,500 is three times larger than $500. (And would be exponentially larger by the time I went to withdraw it in retirement.)

The big lesson I learned about retirement

Since I'd be the one receiving the amount no matter which I chose, it was just a matter of reminding myself that I needed to provide for Future Alexis just as intentionally as I was providing for Present Alexis. It was a full-on perspective shift, and all because my parents illuminated the true nature of the choice I was making every time I chose to spend a dollar instead of saving it.

At the time, their inciting gesture felt equal parts generous and aggravating, but in hindsight, I see just how necessary it was to change my way of thinking. With that first $1,500 as a head start, I set myself a goal of saving the remainder of the $5,000 necessary to max out my new Roth IRA. Armed with my new mindset, I made it happen that year, as I have every year since. 

Without that leg up, I don't know when I would've been incentivized to finally start a retirement account. Hopefully I would've gotten there on my own eventually, but I'm extremely grateful to have gotten the assistance and its accompanying wisdom when I did, as both have informed my savings strategy ever since.

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