Father's Day gift: a father's advice to his son about saving

CPA Tom Corley e-mails his son about the importance of acquiring the habits of saving and spending wisely.

Arben Celi/Reuters/File
A father plays with his son on a beach facing the Adriatic sea, near the city of Durres, in April. One of a father's gifts can be sound advice about saving and spending money.

At age 9, Tom Corley saw his multimillionaire family go broke overnight after a fire destroyed the family business. He went on to head an accounting firm and write a book, “Rich Habits – The Daily Success Habits of Wealthy Individuals.”  Recently, after his son graduated from college and set off on his own, Mr. Corley wrote him this e-mail (with formatting added):


Hi Son. I’ve been meaning to talk to you about saving and budgeting since you moved into your apartment. I wanted to give you some financial advice that I wish someone had given me at age 23:

1. Live below your means – Set aside 20% of every paycheck. Live within that 80%. Do this no matter how much money you make. Surviving on this 80% forces you to live below your means. This enables you to accumulate wealth. This is a Rich Habit. Most have the Poverty Habit of living beyond their means. This is why so many in America are in debt with credit cards, student loans, auto loans and mortgages that exceed the value of their homes.

2. If you get a raise or bonus, set aside 20% of that raise or bonus in addition to the 20% on your regular pay. Same principle as in #1. This ensures that you stick to your savings strategy no matter how much money you make. Not doing this may lull you into increasing your standard of living through the purchase of more expensive things like a bigger apartment, an expensive home, an expensive new car, a boat etc.

3. Max out your contributions to your company retirement plan. If the company matches your contributions, great. That’s free money. Not doing this is a Poverty Habit and means you are foregoing retirement savings and the free money from your employer.

4. Know what you spend every month. Create a monthly budget and track what you spend every day in that month. Not doing this means you really have no control over your expenses and could cause you to spend more than you make.

5. The power of compounding is your friend and will help you accumulate more wealth. If you invested just $250 a month for the next 40 years you would have $500,362 (using a 5% return on investment) when you hit age 64. The power of compounding turned $120,000 into nearly $500,000. $600 per month will turn in to $1,200,900. Of course your net pay is going to rise during your career. If you stick to Rule #1 and #2, your savings will increase with your earnings.

Son, every young person thinks if they work hard they’re going to hit it big and make a lot of money but the reality is very few ever do. The bulk of wealthy people are wealthy because they were taught how to manage money by their parents or they learned about money from some mentor in life. Those who learn these Rich Habits accumulate much more wealth than their peers. Most of the wealthy don’t make a lot of money but they do save a lot of money. Wealthy people know where their money goes. They budget their expenses. This gives them total control over how they spend their money. In order to be wealthy you have to accumulate wealth, not wait until you make a lot of money. Focus on accumulating wealth and if you get a big payday one day – great. It’s icing on the cake. If you stick to the 80% Rule above you will save a lot of money and you will be wealthy by age 45. You will be one of the few among your friends and colleagues because most parents don’t teach their kids the importance of saving, so nobody saves. Accumulating wealth is not about hitting it out of the park. It’s about getting singles. You get enough singles and you will win the game.

I love you



– Tom Corley is a certified public accountant, certified financial planner, and president of Cerefice and Company in Rahway, N.J. His financial self-help book is a byproduct of his five-year study of the daily activities of 233 wealthy people and 128 people living in poverty

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