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Post a CommentToday’s guest post is from Broke Grad Student founding member and catalyst of the College Money Network. Please subscribe to his blog to receive the latest. This part of our “Back To School Shuffle” series, where we will be sharing articles on a variety of back to school topics and giving away an iPod Shuffle and other prizes.
As we grow older, we start to realize how much information our parents hide from us when we’re young. That’s right, Mom and Dad, the birds and the bees didn’t fool me. Okay, maybe it did for a little while, but just like everyone else, I figured it out.
There are certain topics that every parent dreads having to discuss with their children. Without a doubt, sex is the at the top of the list (it’s so awkward that we just call it “the talk”), but the only other topic I remember my parents avoiding like the plague is money. As I’ve grown older, I’ve started to realize why parents don’t like to talk about money, and it’s as simple as these five things.
1. Parents don’t know everything about money.
Parents don’t want to admit to their kids that they don’t know everything they should know about money. When I was a little kid, I was pretty sure my parents knew everything. How else would they have been able to keep answering my endless succession of whys? The truth is your parents may not have taught you about money management because they never learned it themselves.
2. The only way to learn is by making mistakes.
You can read, write, ask, and talk about money all you want, but until you actually do something with your money, you won’t learn anything. Knowledge is only half the battle. Knowing everything about a Roth IRA won’t do you any good if you never open one, and even if you do open one, there’s still a chance that you could lose your money. Learn from your financial successes and failures, and use the experience to help you fight the other half of the battle.
3. Never lend money to your friends.
No, I’m not talking about lending a few bucks to a friend to cover lunch. That’s fine in small doses. I’m talking about what to do when a friend says they have a great idea for a business and need some financial help to get started. Or maybe they found an awesome car but need to borrow some money to pay for it. The answer is simple — no. The only reason you should ever say “yes” is if you can honestly say that you wouldn’t mind never seeing your money again. Otherwise, don’t expect your friendship to last if/when they don’t pay you back.
4. Stuff does not equal wealth.
Just because someone has a lot of nice stuff — a luxury car, designer clothes, a big house, a boat for the weekends, etc. — doesn’t mean that they’re rich. In fact, it might just mean that they spend all of their money on stuff that they may not even be able to afford, which means they’re actually broke. Why don’t our parents teach us this? Because it’s natural to want to keep up with the Joneses, and they may be guilty of overspending themselves.
5. There are trade-offs to everything, including making a lot of money.
I have a rich uncle, and when I was growing up, my parents used to encourage me to talk to him to learn his money secrets. When I went to college, I became friends with someone whose parents are rich. Both cases are stories of self-made millionaires, and after hearing their stories, I’ve realized that there are definitely trade-offs involved. Forget about free time if you start your own business. It’s a 24-hour job. My parents may not be millionaires, but my dad always had the time to coach my little league baseball teams when I was growing up. That wouldn’t have been possible if he had been running a business at the same time. Nothing in life comes for free.
Photo Credit: pipitdapo
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Agree there are tradeoffs, the biggest includes time. It’s true parents don’t know everything about money and we learn by making mistakes, but hopefully good guidance can help us prevent those fatal financial mistakes because they can be difficult to overcome.
I hope to change this for my children! I think making your children a part of the family spending plan is important. Even if it’s a small portion, they should understand “money doesn’t grow on trees” and it has to be managed wisely. Giving them some amount to manage goes a long way in helping them learn and provides the opportunity to teach them sound money management principles when they make mistakes.
There genuinely are tradeoffs. I’m not close to my parents and barely know them because they’ve spent my entire life working hard. I was raised by nannies, babysitters, and family friends as I went through school. My dad, now that he’s retired, is much closer to me than my mother, who is still working. It’s nice to be upper middle class, but it would also be great to know my parents.
I really enjoyed this topic. Some of those tips I learned the hard way. Lending money can strain a friendship. I’m trying to get off the ’stuff’ kicks and focus on enjoying the experiences.
The moment I turned around my financial life in college was the day I realized my parents had no idea how to handle their money. It was disheartening to read PF blogs and feel educated but have my 50-year old parents burning cash and living off my grandfather.
So I did what any good son would do. Referred both of them to ING, and hopefully they’re turning things around.
Great post! When I was younger, we didn’t have much money. So we didn’t have a lot of stuff. At least, that’s the connection I made. My parents didn’t really delineate that for me, and I wish they had. But I learned it on my own, later, and looking back I realize that my parents did teach by example. As a kid, though, sometimes you need your parents to point out when they are teaching by example…
I think your first point is very, very, very pertinent and one that many other similar posts often leave out.
The older I get, the more I understand why my parents made some of the mistakes they made… this of course makes me appreciate what they DID teach me even more.
I also really like point #4. Stuff does NOT make people rich… actually, I find the opposite to be more true. The less stuff I have, the less I am beholden to, which means the more freedom I have. To me… freedom = riches!
Thanks for the insight Laura.
this is a really nice post. i find it really interesting that most of the important things in life we learn by ourselves and not from those talks from parents. most of the things that i know about relationships, money, adulthood, i have had to figure out myself and watch what they did and not what they said. Anyways, i guess thats what makes life interesting and worth living. what would be the fun of living a life exactly like the way that your parents told you it would be?? great post
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Great article. I couldn’t agree more with learning from your financial mistakes. I am grateful for most mistakes I have made in the past. I can trace much success from lessons learned. BTW, my company wants to know why you save and invest.
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