What financial advice do you wish your parents had given you?

By Slow Dad - January 27, 2017

Knowing what they know now, what financial advice would have made the biggest difference to your life if you had been taught it as a kid?
I recently conducted a survey of people interested in Financial Independence to ask them the question: “knowing what they know now, what one financial thought or concept would have made the biggest difference to your life if you had been taught it as a kid?”.

It was a safe bet that many people pursuing the dream of Financial Independence didn’t learn all they wish they had from their parents and teachers growing up, so I was intrigued by the very varied responses. They are presented below, ordered by the frequency of the theme appearing in the survey results.
Knowing what they know now, what one financial thought or concept would have made the biggest difference to your life if you had been taught it as a kid?
Knowing what they know now, what one financial thought or concept would have made the biggest difference to your life if you had been taught it as a kid?

1. The high cost of waiting

Missing out on the magic of compounding investment returns. The longer you are at it, the larger your wealth.

2. Opportunity cost

An answer closely related the first one, this time focusing on the high cost of dithering, analysis paralysis, holding out for the day that property becomes more affordable, and attempting to time the market.

3. Boundless generosity hurts

Many parents love helping out their kids, and find it hard to say no when asked for assistance. Hitting up the “bank of Mum and Dad” occurs so often that it has become clichéd.

The kids often don’t stop to consider the long term financial impact to their parents of asking them to pay for university or donate a house deposit. Instead many adopt an entitled perspective that they are receiving an advance on their inheritance.

This becomes a problem when the parents can’t really afford to part with the money, and in doing so they jeopardise their own financial futures.

This is an important point for those 4% safe withdrawal rate devotees. A 4% rulesuccess” is defined as not having run out of money within 30 years of commencing retirement, which will seldom have factored in parting with large sums of capital to help out their offspring.

4. Money makes more money

A common refrain from kids growing up in frugal households was that their parents scrimped and saved, but never understood that nobody ever saved their way to becoming rich.

Investing money is the path to wealth.
  • Investing in education to improve earning potential. 
  • Investing in index funds or real estate for passive income streams and capital growth. 
  • Investing in retirement accounts to provide pension income in old age. 
  • Investing in health and term life insurance to provide financial security should misfortune strike.

5. Don’t buy things to impress other people

Humongous McMansions? Designer clothes? German luxury cars? Holiday houses? Boats?

If possessing these things genuinely makes you happy then by all means be happy.

However if you are buying them to look the part, fit in, or show off to your neighbours/co-workers/relatives then you’re just wasting your money by being a dickhead.

6. Make full use of tax exempt investment accounts like ISAs and Roth IRAs

These accounts are great because any income or capital growth they generate are tax free, yet unlike a pension account their contents are readily accessible should the need arise.

7. Credit cards are for stupid people

Carrying a credit card balance is like cutting a hole in the bottom of your wallet. Using 0% balance transfers to put off the inevitable isn’t clever, because eventually you’ll need to pay the bill.

8. Never become financial dependent on a spouse inside a marriage.

Nobody should have to ask permission to spend their own money.

Everyone should know how to pay bills, access bank accounts, and manage their own finances.

With half of all marriages ending in divorce, and the remainder ending when one spouse dies, there is a fair chance at some stage you will need to know how to manage your own money.

9. It isn’t what my parents taught me, it is what I wish someone had taught my parents!

Setting a bad example was a recurring theme.
  • Living pay cheque to pay cheque.
  • Borrowing money to buy a car or pay for a holiday.
  • Using bankruptcy to escape paying debts.
  • Walking away from mortgages that were underwater.
Definitely the kinds of behaviours you’d want your kids to emulate.

10. Refinancing your house does not give you “free” money

Rolling one mortgage over into a newer/longer one, particularly when extracting equity for consumer purchases like overseas holidays and new cars in the process, is a really bad idea.

11. Condoms are cheaper than children

Kids are certainly expensive. Once you have them, be nice to them… they will be the ones who choose your nursing home!

12. The value of money

Many people complained their parents indulged their every whim as a child, which gave them a “money grows on trees” perspective that got them into trouble later in life. They wished they had learned to appreciate the effort required to earn the money to pay for those things, before they became the ones expending that effort.

13. Set goals, make a plan, follow the plan, achieve the goals

Most people drift aimlessly through life, lurching from one direction to the next buffeted by whatever external factors they encounter. People who identify what they want, and put together even a vague idea of how they will achieve it, are much more likely to succeed.

14. The most valuable thing you can buy is your freedom

Freedom to choose how we spend our time. Ultimately that is what Financial Independence is all about.

So what?

Lots of sage advice and hard won wisdom there. I’d like to thank the survey participants and advise you all to learn from their mistakes, so that you don’t repeat them.

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