Don’t go outside with a wet head, you’ll catch a cold. Eat your vegetables – yes, even the peas. Don’t talk to strangers. Always tell the truth...
Parents have been giving the same advice to their children for years and yes, these tidbits have their place. But what about when it comes to financial matters? So often, we learn good financial habits the hard way – by doing everything wrong the first time around. And sometimes those mistakes can take years to correct.
We recently conducted an informal survey and asked:
“What is the one piece of financial advice you wish your parents had given you?”
Here are the top six answers:
- Money is best spent on experiences, not things. Yes, you need things (food, clothing, shelter, etc.) but do you really need the latest gadget or that trendiest pair of Tom’s? It might feel really fantastic for a short time but that fancy electronic gadget is going out of date as you read this and those Tom’s will be out of style next year.
Instead, consider spending your money on an experience – a weekend getaway with family, a live performance at the PAC or a concert. Yes, it’s still spending money, but you will have the memories forever.
- Avoid impulse purchases. If you decide you really must have that new bicycle or patio set, sleep on it - at least a night or two. And do the math.
What if you took that $2,000 you want to spend on a new bike and invested it? How much money would you earn over the course of the year? What if you charged that $2,000 to your credit card? How much interest would you pay over the course of the year? Sometimes you’ll decide it’s really not worth it, but sometimes you’ll find yourself riding a sweet new Trek down the street.
- Make your money work for you. Everyone will tell you it’s a good idea to save money, but consider making your money work for you as well. Although it’s always a great idea to be able to access your savings in an emergency, consider investing your money in an account that pays better dividends.
If you feel confident that you won’t need to dip into your savings in the immediate future, consider a share certificate or even a money market account. These accounts allow you to save but the interest earned tends to be greater than your traditional savings account.
- Know the power of a budget. Learn how to create a realistic budget and then how to live within it. There are endless websites devoted to creating a workable budget - read them. Having a budget you can live with will help you. It’s one of the simplest things to do yet one of the hardest things to master.
- Live within your means – don’t spend money you don’t have
- Plan for emergencies
- Be ready for adventures
- Use credit cards sparingly. Credit cards can be a wonderful tool to help build your credit and see you through an emergency, but there is also a dark side. The average interest rate on a credit card is 13%. According to nerdwallet.com, the average American household owes $7,327 on their credit cards. Let that number sink in - $7,327!
If you use a credit card, consider treating it as a debit card. When you charge something, set aside the funds right then to pay the bill when it arrives.
- Save. Save. Save. Without a doubt, the number one thing everyone wished their parents had taught them was to save more money. It seems so hard to save money when you are living paycheck to paycheck but if you start the habit at an early age, it becomes second nature. And there are endless ways to save:
- Have a set amount deposited into an account each pay period. And make it an account you don’t have easy access to.
- Perhaps use a branch that is not conveniently located to you.
- If your employer offers a retirement plan – take advantage of it. Even 3% of your paycheck can make a huge impact when you factor in compounding interest.
- If your employer does not offer a retirement plan (or you’re not eligible to participate) open a Roth account. Make a deposit of $20 each pay period and watch your money grow.
No matter how you do it – find a way to save money!