The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Cgbg on September 14, 2017, 01:25:42 PM
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My oldest returned to college a few weeks ago - sophomore year, engineering, full ride.
He came home for the summer and worked at an engineering consulting firm as an intern. They paid him well and loved his work. During his last week, they asked him to stay on the books as an employee and he could telecommute from across the country at his leisure - working as many or few hours a week/month as he wants.
Seems they have an auto enrollment for their 401k, and currently it diverts a mere 2% of his (small) salary to a fidelity account, escalating to 3% in a few months. There is a match but I'm unsure of the details. He is likely to work for them through at least the end of his junior year.
Money does not burn a hole in this kid's pockets. He really hasn't spent any of his summer earnings and since he's on a full ride, he doesn't really need to tap any of it.
I'm pretty sure I could convince him to up his contribution but what is reasonable? DH and I max out our 401k/457 plans but that probably won't work here since kidlet is working but part time-ish. (I'd love to say ALL OF IT but that probably won't fly.)
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Does he expect to return to full-time hours this summer? If so, maxing out the account in 2018 seems like a good goal since he has his school paid for already. For 2017, maybe suggest trying out a 50% contribution and see how it goes? If his checking account balance starts going up, sounds like time to increase the 401(k) contributions.
For someone in school with a much lower income than they expect after graduation, Roth contributions are often the way to go.
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My son is 19 and going to community college, hoping to go to a state college later this year or next. I had him set up a Roth. Out of the money he earned, he paid so little in taxes, that Roth was definitely the way to go. I offered to put some in to match part of his contribution as an extra "this is the right thing to do" push.