Lessons learned

Lessons learned

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05.18.2023

In university quads around the nation, advice is flowing. Graduation season is a time of reflection, and from piggy banks to commencement speeches to weddings, we’re taking a moment to think back on words of advice from all generations, and the financial lessons learned along the way.  
 
It’s never too early (or late) to put those lessons into a plan of action.  

–  The Editors

Nom nom: McDonald’s has been rolling out its “hottest, juiciest, tastiest burger yet”* in select West Coast locations, and so far reviewers agree.* Inflation has been a mixed bag for the franchise: while higher restaurant prices have consumers opting for lower-cost options, the rising cost of a Big Mac * is now an average of $5.15, up 22% pre-pandemic. Americans continue to hold a strong appetite – snack sales reached $181 billion last year (an 11% increase), according to The Wall Street Journal.* 
 
One Peloton sore spot: We interrupt this ride to bring you a recall: Peloton has received reports that the seat of the original model can break off during use,* and has advised customers to stop using their bikes until a replacement seat can be installed. Last year’s recall of the Peloton Tread+* is reported to have cost the company $165 million.*  

“I Don’t,” actually: Welcome to wedding season, or as it’s more commonly known, “$$$ season.” According to a Bankrate report,* the quarter of Americans RSVP’ing this year plan to spend an average of $611 per event. Before regretfully declining,* guests can consider creating a monthly budget to help prepare for event costs. One wise vow: Avoid outsized credit card debt unless you want to pay interest ’til death do you part.  

Word of advice: take your time 

During his commencement speech for Northern Arizona University's Class of 2023, Bill Gates reflected on the five things* he wished someone had told him when he was 21. Gates not only famously dropped out of college to launch Microsoft, he’s also known for turning down offers to speak at university commencements. 

Gates says NAU stood out to him for its focus on equity, including admitting any Arizona student* with a GPA above 3.0 and offering free tuition to those coming from families making below $65,000 a year.  

During his speech, the billionaire spoke about the value of friendships as the foundation of future business connections, finding work that solves a problem, and the importance of work/life balance. 
 
Gates told the audience, “I didn't believe in weekends. I pushed everyone around me to work very long hours. Don’t wait as long as I did to learn this lesson. Take time to nurture your relationships, to celebrate your successes, and to recover from your losses. Take a break when you need to.” 
 
In other Microsoft news, the tech giant was recently granted approval by the European Union to acquire Activision Blizzard Inc. for $68.7 billion

Influx of I Bonds 

Purchasing I Bonds is growing in popularity as the Federal Reserve continues its fight against inflation.  

During times of high inflation, assets held in cash can lose value as the spending power of the dollar drops. I Bonds are unique in that they are specifically designed to combat inflation by carrying two interest rates: a fixed rate that stays the same over the 30-year life of the loan, and a variable rate adjusted twice a year. When inflation rises, so does the variable rate (and return) on I Bonds.  
 
For example, I Bonds purchased through October 31, 2023, offer a fixed rate of 0.9% and a variable rate of 4.3%. While this is a drop from the 6.89% offered between November 2022-April 2023, over the long term, these frequent adjustments can help individuals protect their savings from inflation without exposing their cash to the risks of market volatility. And if it makes sense for your financial plan, I Bonds can be sold after they’ve been held for one year without penalty.  
 
If you're saving up for something over the short term, meaning five years or less, like a new car, a kitchen overhaul, or a family vacation, you may want to check out I Bonds. Make sure to explore other short-term investment options, such as CDs and high-yield savings accounts, before making a decision.1 

The kids are alright...  
 
Our readers sounded off about the financial conversations had around the (brunch) table growing up. Just 14% of respondents said they were taught how to budget, compared to 66% who say they learned “money doesn’t buy happiness.” 

Starting money conversations early can set your kids up for financial success; experts have several suggestions for how to help build smart money habits from a young age.  

  1. Money Talks count. A trip to the supermarket can be an opportunity to discuss wants vs. needs.* You need to pick up bread and eggs first, and if there’s room in the cart you can visit the ice cream aisle.  

  1. Use multiple piggy banks or coin jars to help your kids create give/save/spend funds.* Encourage them to split their allowance and any extra birthday money across these three goals. 

  1. For older kids, you may want to consider helping them open a secured credit card, which helps them learn about responsible credit use and can help them start building a good credit score for their adult years. 

1Bond prices generally fall when interest rates rise (and vice versa) and are subject to risks, including changes in credit quality, market valuations, inflation, liquidity, and default. High-yield bonds have a greater risk of default. 

The interest from Treasury inflation-protected securities (TIPS) is adjusted periodically according to the Consumer Price Index. The return from TIPS may understate the actual rate of inflation due to changes in the bond’s underlying price.  

Certificates of deposit offered through an FDIC-insured institution are insured up to $250,000 per depositor and typically offer a fixed rate of return. Early withdrawal penalties may apply. 
 
*Empower Retirement, LLC and its affiliates are not affiliated with the author or responsible for the third-party content provided from links to external material. 

As of May 16, 2023, Empower Advisory Group, LLC (“EAG”) holds shares of MSFT in advisory client accounts and do not hold PTON or MCD. 

The Currency editors

Staff contributors

The CurrencyTM, a publication from Empower, covers the latest financial news and views shaping how we live, work, and play. We keep you current on ways to plan, save, and invest for life.

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