5 Stupid Things My Parents Taught Me About Money
I don't want to offend anyone, so I'll start by saying this: My family has pretty good financial habits, and I was lucky to have learned a lot of them. They work hard, they avoid debt, they save up for things and, as a general rule, they stay out of financial trouble.
That said, I think my parents got a few things wrong. (Sorry, Mom.) Here are five stupid things my parents taught me about money. (See also: 7 Lessons That Frugal Parents Teach Their Kids)
"Money Doesn't Grow on Trees"
"Money doesn't grow on trees" is a cliche thought up by some cleverly annoying person somewhere to denote the idea that cash isn't that easy to come by. And it isn't. Working eight hours a day to earn it is hard. Making it last is hard. And saving it can be really hard, especially when you aren't making a whole lot of it (or maybe even if you are). It also suggests that once your money's gone, it's gone, and you have to go through the whole laborious process of bringing it in again.
Even so, I think this phrase gets it wrong. Does that mean I think money actually does grow on trees? Why, yes. Yes it does. Those trees are stocks and bonds. Pick the right ones, and money will grow and grow. Maybe in a messed up, sideways, meandering sort of way sometimes, but it does grow. (See also: Investment Advice for Ages 11 to 20)
"A Fool and His Money Are Soon Parted"
This is another phrase I heard a lot as a kid — as in, possibly every time any money came into my possession. I get it. Blowing through your money at warp speed is generally bad news. It suggests lack of planning, thought, and self control. And those are really important skills. But it also made me feel like spending my money — at all, ever — was a bad thing. (See also: Buying New Things Without the Guilt)
Fortunately for me, it takes a lot more than that to keep a teenaged girl from the mall. That message was, however, enough to create guilt every time I pulled out my wallet. And that's the part that's stupid, because guilt and money are not a good match. Money should be empowering. You should save it because you want to and spend it for the same reason: because you know it's the right move for your life. Because you know that it'll get you ahead (or get you what you want right now). And because you want to drive your financial destiny, not be a victim to it. Spending money foolishly is foolish, but spending can also be productive, joyful, strategic, indulgent, and, yes, smart.
"Don't Talk About It"
If you ask anyone in my family what they earn, what they owe or how much they've saved, you may as well ask them for a detailed account of how their sex life is going. In my family, you don't talk about your finances. According to my parents that just isn't anyone's business (including mine). It's really that personal.
Sorry, but that's stupid.
I don't print my net worth on my business cards, but I'm not that embarrassed discussing money with a friend or family member. In fact, I think that avoiding talk about our finances is a big reason we often get into so much trouble. We struggle to keep up with our friends' lifestyles; little do we know how many of them are deep in debt and struggling to stay afloat. We can't bear to divulge how much we earn, and then grasp at straws trying to figure out how much we should be getting paid for our work. We can't bear to admit we've made financial mistakes, and so we allow our friends and family to make the very same ones.
I was taught not to talk about money. Instead, I ended up writing about it. And, because I've been open about what I've done right and what I've gotten wrong, other people have been open with me. As a result, I think I've learned a lot more than if I'd kept my mouth shut.
"There Is Nothing Worse Than Debt"
Kids are tiny, super-sensitive detectors of any and all inequity, which in my case meant spotting the things other people had that my family didn't. My parents had a ready response: Not everyone owns all the cool stuff they have. That seemed like splitting hairs to me at the time. After all, if you had something awesome and could use it whenever you wanted, what did it matter? What was clear was that having a bunch of stuff you didn't actually own was bad. Really bad. Period.
I'm not into debt. I didn't even have credit card until after I graduated from university. But debt isn't the root of all evil. In the right situation, leverage can be a good thing. The key is to understand the difference between the kind of debt that leaves you with a lot of junk and big bills and the kind that can act as a financial springboard. That might mean using debt for a house, for more education, or even to start a business. Even more productive kinds of debt have to be used very, very judiciously. But in the right situation, it can be a great tool. That's a lesson I definitely never got.
"Insurance Is Essential"
I don't think my parents ever taught me about insurance, but that doesn't mean I didn't learn a few things — namely that insurance was important because you just never knew what kind of perils could befall you. It was protection. It was peace of mind. And even now, my mom's pretty appalled at how little insurance I have. (See also: How Much Life Insurance Do I Need?)
In many cases, though, insurance is a really stupid way to spend money. Insurance companies are experts. They're willing and ready to take your money and essentially make a bet that they won't have to deliver nearly as much in return. It's how they stay in business. That isn't to say that insurance companies are doing anything wrong, or even that insurance is bad. But it's only a reasonable expense if the risk you're insuring is big enough to warrant paying for each and every month. Life insurance? If you have dependents, you need it; cashing in is (hopefully) a long shot, but the risk of not having it is too big to even imagine. Insurance on most other things? Run the numbers and see for yourself. In most cases, you're paying hundreds every year to insure a remote and relatively inexpensive risk. Now that just doesn't add up.
What Are Your Kids Learning?
My parents didn't sit me down and teach me a lot of specific lessons about money, but I still learned a lot from the way they lived (and paid for) their lives. As a general rule, I hope to teach my kids some of the same things my parents taught me — and some things they didn't. I guess I should also leave some room for discussions and arguments at the dinner table. After all, I'm bound to get a few things wrong. Right, mom?
What stupid things about money did your parents teach you?
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I laughed when I read the "don't talk about it" one because that was a big one growing up. I remember when my friends and I were in High School and we started our first jobs. We thought we shouldn't discuss how much we all made, but we decided too anyway since we were all curious. I think by the time I left High School, I could tell you how much every store in the mall paid. I found it so helpful talking about it, because I knew which jobs were worth it and which ones weren't. Talking about it can definitely help, especially at a young age.
I second the "don't talk about it" thought process. Americans are ridiculous when it comes to that. I can actually see that as a positive thing because if you aren't doing all that hot, you can get help from someone who does it better.
Yes! Especially when you consider how much debt many people are in.
My family went all in with the "don't talk about it" approach.
Finances were never discuessed, and therefore, I never really knew much about finances until I started making money myself.
I was raised under the belief that you needed to find a profession for life and to stick with it!
I am now a little older and wiser and I talk about money and have decided to throw in the towel and say "enough is enough" with the traditional career path.
Oh yes. I could have added that one too. I don't know if the idea that you should stick with one career is wrong so much as a bit of a relic from a time when there were things like pensions to hang on for!
I agree with the "Don't talk about it." When young people are starting out, it is helpful for them to know how much one needs to be making in order to save, pay bills, have a family, retire, etc.
Awesome post - its so important to teach our kids the right things about money, but hard when we have it all wrong, or are just starting to figure it out.
This is a very interesting take on many very common phrases about money. I was always overly cautious in my youth with money. Hit a period in my life where I was a bit frivolous, now I’m back on track. I’d hope to teach my kids that it’s important to work hard, save, but never be afraid to ask financial questions.
Most of what you write I agree with. Your feelings about insurance are misguided. Term insurance should only be purchased if that is all you can afford. Whole life costs more to get but if it is with a good company it can serve as another part of a diversified portfolio, and protect your family.
I have had a policy in effect for 14 years next month. I have paid in $84,000 and it has a cash value of $103,000. If I died tomorrow my wife would receive $346,000. The policy has not cost me anything, in fact, it is making me money.
I'm not an insurance expert and I think life insurance can be a different case because what you're insuring against (your life) will have a major impact that would be hard to prepare for in other ways. I think a lot of other insurance, however, buys only peace of mind, and costs way more than you'll ever get.
Agree with everything but the insurance. If I had to guess, you've never been in a life-threatening car accident, or health problem.
Once you've seen the potential costs and damage it can do to your finances (assuming you even survive), the cost of insurance pales in comparison.
It's not just peace of mind you buy with insurance, it's the ability to save yourself in the absolute worst case scenario. Certainly, over a long enough timeframe, if for example you only have one major car accident, say in your 30s, you've spent much more on insurance than you've benefited from. However, if you didn't have the insurance and your finances were completely demolished in your 30s, you may never recover enough to earn the money you were counting on to offset the "cost" of insurance over that long timeframe.
If you've been there, you understand. I'll be interested in hearing your opinions on insurance in 10-15 years once you've experienced disaster-averted for yourself.
Thanks for the comment. As I say in my article, some insurance is essential - that's the kind that protects you from things you could never pay for. But I think people insure a lot more things than they need to, like loans and credit cards and airline tickets and cheap old cars. What they're paying for is peace of mind. And I think that's stupid:-) As for health insurance, I live in Canada. For the most part, I can get patched up for free. For those in the U.S., that one's definitely essential too.
I think the unwise thing to tell your kids is that "money is empowering." The phrase is reminiscent of some very very bad philosophies!
I agree. But how you use/manage it should be: ie. you control it rather than being a slave to it.
Ok, that I can agree with, Tara. :)