The Best Financial Lessons My Parents Taught Me
Though ours is a country that struggles with a general lack of financial literacy and suffers the consequences of not learning about money in a clear and confident way as kids, most of us can look back on our childhoods and pick at least one moment when our parents imparted a valuable financial lesson. These lessons have likely stayed with us for life and helped inform our own decision-making.
GOBankingRates spoke with a number of experts and professionals in the finance space to learn about some of the most cherished money advice they received from (and behaviors they saw modeled by) their parents, and how they put that invaluable wisdom to use today.
Cash Is King
“My parents drilled into me that ‘cash is king,'” said Caroline Tanis, CDFA, a financial advisor, strategist, educator and speaker at Tanis Financial Group. “Having cash on hand allows you to negotiate better deals. You are also prepared for any situation from investing in the market to being prepared for emergencies. As an adult I have opened up accounts for emergency savings and another account to take advantage of different opportunities like market investments or paying for bills in a lump sum to get a discount.”
Not All Debt Is Bad Debt
“[My parents] taught me the difference between good debt (e.g. mortgage debt) and bad debt (e.g. auto loan or credit card debt),” said Marina Vaamonde, the owner and founder of HouseCashin. “Good debt allows you to increase your income and earn more money while bad debt is usually tied to depreciating assets (like cars).”
Vaamonde added that their parents modeled this lesson by limiting their credit card debt, never buying new cars and investing in a few rental properties — a key motivator for Vaamonde.
“I’ve become a real estate investor,” Vaamonde said. “What better way to follow my parents’ advice than to dedicate my career to buying and owning appreciating assets that allow me to earn more money?”
Save Half, Spend Half
“Right after I passed the exams to become a certified financial planner and got a bonus for passing from my employer, my Mom told me to make sure to save some of that bonus,” said Patti Black, a certified financial planner. “It was pretty funny as I was a professional financial advisor at that point, but her advice was still spot on. Now I encourage clients to adopt the 50/50 rule when they receive a bonus or pay raise. Save 50% and spend 50%, but the catch is that the 50% you spend cannot create a new monthly bill. For example, you can spend 50% on a vacation or on some new furniture that you pay for with cash, but not on a new car that you finance over 60 months — and have to pay a higher car insurance bill.”
Don’t Impulse Buy
“My father used to take his time before making a purchase,” said Tracy Acker, the CEO of GetPaydayLoan. “As children, this practice irritated our siblings, but now, when my daughter asks me to buy something, I do the same thing. I recognize that it is more important to consider the necessity of that purchase rather than simply spending money on it.”
Invest Early and Invest Often
“One of the best financial lessons my parents taught me is to invest early and often,” said Harry Turner, founder of The Sovereign Investor. “By doing so, you can take advantage of compound interest and grow your wealth over time. Additionally, investing early gives you a longer time horizon to recover from any potential losses. Finally, by investing regularly, you can dollar-cost average your way into a position and ride out any short-term market volatility. “
Turner’s parents set up savings accounts for all their kids at a young age and put money into them every so often.
“Seeing this money grow firsthand showcased the benefits of their investment mantra, and definitely installed a good discipline in me,” Turner said.
Be Frugal — and Cut Those Coupons — Even If You Can Afford Not To
“Coming from a family who was financially comfortable, I am grateful that I was still taught the value of frugality,” said Sara Lohse of BFG Financial Advisors. “As a kid, I hated having to cut out coupons for my mom with stacks of grocery store circulars burying the dinner table. I was embarrassed that I always had to shop from the sale and clearance section. Hearing ‘maybe for your birthday’ when I asked for something at the store didn’t make sense to me because I knew we could afford it.”
Now, Lohse is grateful for the lesson.
“Being frugal when I have the income to support more spending is how I built my own house at 25,” Lohse said. “It’s how I can sleep soundly knowing that if an unexpected expense comes up, I have an emergency fund with a few thousand dollars in it to cover whatever I need, rather than go into debt.”
Put Money in the Stock Market and Track Its Performance
“My mom was a financial planner (also at Wells Fargo), and taught me about stocks and mutual funds around age 12,” said Sarah Schweppe, managing director, Wells Fargo Advisors. “She helped me start to invest some of my allowance in the market, and we tracked the performance of my investments in the newspaper (this was before you could track investment performance on the internet). She showed me the power of owning great companies and holding investments over a long period of time to leverage compound growth.”
Don’t Keep All Your Eggs in One Basket
“Always have a savings account and a spending account because keeping all your money in one account might make you lose track of cash,” said Jason Porter, a senior investment manager at Scottish Heritage. “We were encouraged to transfer all our remaining money at the end of the month to our savings account. This way we only spend from what we earn in a month while also saving up on the side. Any extra cash from side hustles or investments goes straight into the savings account. This account can only be accessed for vacations, investments, and important expenditures. This was a piece of great advice that has served us well!
Never Rely On Anyone Else To Fund Your Retirement
“My mother always tells me how she tapped her retirement funds to use as a down payment on her first house and how it was a huge mistake,” said Amanda Wallace, MBA, head of insurance operations with MassMutual. “That money could have helped her now for her own retirement. At the time, she was going to be married forever in her ‘forever’ home, but life worked out a little differently. That lesson ensured that I pay myself first, and that I prioritize retirement and financial security over future promises.”
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