How My Student Loans Taught Me to Save

Dear fellow millennials, as an elder member of your generation, born in 1981, I feel it’s my responsibility to share a nugget of wisdom when it comes to saving.

First, let’s acknowledge that saving money is not fun, especially for something as far off as retirement. Saving for retirement can feel like lighting money on fire or throwing it into a black hole. Sure, there’s technically a balance in an account somewhere, but retirement as a concept is relatively abstract and it may not seem all that important to you right now given all the other possible financial demands in the present.

So, if the idea of saving for retirement isn’t your thing, figure out a financial goal that excites you and consider prioritizing saving for the goal.

Now, you should absolutely still save up to the employer match in your retirement plan, assuming you’re covered by one (free money!). But, beyond that, the amount you save is going to probably be worth a lot more than the return you earn on those dollars.

The key to saving for goals is finding something that empowers you to set aside funds that you wouldn’t otherwise. What financial goal makes you willing to put off going on that vacation, buying that new thing, going to that fancy restaurant, and so on? In the case of me and my wife, there’s one thing that’s pushed us to save like crazy: student loan debt.

I know what you’re thinking, “This random retirement investment research guy doesn’t have any idea what it’s like to have student loans. He’s too busy flying around on his private jet drinking hand-crafted cocktails.”

Well, sadly, I’ve never actually flown on a private jet (although I do enjoy a good cocktail). My wife and I did have student loan debt totaling $430,000 at its peak, though. It’s sadly become sort of a millennial rite of passage.

You might think as an investment-focused guy I’d be investing extra savings in exciting technology stocks and paying the loans off over the next 50 years or so. You’d be wrong. We’ve been directing a ridiculous sum of money to pay down these loans, money we arguably could have been saving for retirement.

Here’s the thing, though. Even if the interest rate on our student loans was 0%--so far, we’ve been able to refinance them a few times and get it down to under 2%--I’d still be all about paying them down.

I get this isn’t necessarily the “rational” approach, since we could likely earn a higher return investing the funds in the stock market. But it’s not really about the interest rate as much as it’s that we hate having student loans.

While we’ve never really had a (serious) desire to quit our jobs and move to some exotic beach or join a startup, back when our student loans were at their peak it would have been financially impossible to do so if we were so inclined. As many of you know, student loans can be dream crushers.

For all their misery, student loans have made my wife and I excellent savers. Having a substantial amount of student loan debt created a desire in us to save that probably wouldn’t exist otherwise.

When we do manage to finally slay our student loan dragon, which will be sooner than later, we plan on redirecting those savings toward other thing such as a college fund for our four kids or shifting our focus to retirement.

Becoming a good saver isn’t easy, and if you’re having trouble it would probably be wise to focus on something you really care about. That thing doesn’t have be the “right” thing or “smart” thing, financially speaking, it just has to be the thing that empowers you to become a better saver.

Eventually, you can start saving for retirement, but everyone needs to start somewhere!