5 money lessons from mom and dad

My parents divorced when I was seven but I am fortunate to have a great relationship with both my mom and dad, not to mention wonderful step-parents who’ve also contributed to my upbringing. Being home for the holidays got me thinking about the many money lessons mom and dad have taught me over the years.

Sometimes I knew a lesson was being imparted and other times I didn’t know until reflecting on it much later, but regardless each has taught me something that I see at work in my current financial philosophy. So without further ado, below are the top 5 money lessons from my parents:

1. Budgeting and frugality - Right before my freshman year of high school, my mom announced that she was no longer going to randomly dole out money to my sister and me. Instead, she would give us $300 for new clothing, entertainment, eating out, etc. for the school year and we’d be responsible for pretty much all other expenses. At first, we were thrilled because the lump sum sounded so much more impressive than the $5 here or $10 there my mom used to hand out.

But I quickly learned that stretching that money throughout the year was not going to be as easy as expected. After buying one outfit at Wet Seal - including the mandatory matching socks, earrings and scrunchie - my stash of cash was not as large as I’d originally thought. My mom’s move not only taught me how to budget, it showed me the value of money because I was forced to take on extra babysitting jobs to pay for my ever-growing list of wants. Working for my money - rather than having it handed to me without effort - suddenly made that list of wants much shorter since I began to weigh whether I wanted something enough to work for it. 

The $300 rule also instilled in me a love for finding a bargain. It became a game of sorts, trying to stretch that money as far as possible by finding high-quality clothing or items at discounted prices. Although I don’t remember my first time shopping at TJ Maxx or Marshalls, I’m sure my love affair with these stores started around the same time my mom cut me off.

2. Money’s not always the most important thing - The summer before my senior year in high school, I found myself shunning babysitting for a more regular job since sporadic babysitting money barely covered my gas and the other things I found important as a teenager. My dad wanted me to look into an internship in journalism since I had expressed an interest in being a writer one day, but all the internships I found were unpaid and I was stubborn.

After I applied for a job at a fast food restaurant, my dad (probably out of desperation) told me he would pay me the same hourly wage if I secured an internship at the local newspaper. Other than that promise, he left it up to me. I had to apply and get the job myself, and luckily after a well-written, creative cover letter to the editor-in-chief, I was offered an internship at the newspaper. Each month, I reported my hours to my dad in memo format and he wrote me a “paycheck.”

Although some people might scoff at the idea of my dad paying me to work, it is because of that first internship that I secured my next internship (at a PR agency), one that was paid. Each subsequent job resulted in a new addition to my resume and a pay increase. As I saw the benefit of hard work and building on my experience, my ambition also increased and gave me the motivation to set new goals for myself.

Now that I’m not a money-hungry teenager, I look back and know without a doubt that - if I had to do it all over - I would take the non-paying internship over a minimum-wage job any day because I understand and appreciate that more experience parlays into better (and higher-paying) jobs in the future.

3. Making mistakes - Although it probably made them cringe, my parents always sat back and let me make my own financial missteps - and deal with the consequences - while growing up. From buying into the Agatha Christie book club because “I’d get five free books” (which ended up costing me $92 when all was said and done) to signing up for a variable annuity IRA because my financial advisor “friend” told me it was a great idea, they’ve let me make my own mistakes.

Although I hate having done these things, they’ve given me a healthy dose of cynicism and curiosity. Instead of taking things at face value, I now look into the true value and the fine print to see if it really works for my needs. I still make mistakes, but I always learn from them and use this knowledge to improve myself and my finances.

4. The power of interest - When I bought my house, my dad loaned me the money for the down payment with a 5-year repayment term. While he charged me interest, he also committed to forgiving half of the loan with the caveat that I had to pay that money to myself via an IRA or my 401k (also due in full in five years).

My dad’s loan arrangement resulted in two lessons. In addition to teaching me the importance of contributing to my retirement (and in the process, the magic of compounding interest) he showed me that something has a higher personal value if you have to work for it. My dad could easily have afforded to give me the down payment outright, but he knew I would have much more of a personal stake if I was required to spend my own hard-earned money. Because of this, I make sure I take care of my house because I’ve already invested so much of my own money and time into it.

5. Diversification - Instead of a new car or a trip around the world, my dad’s present for my college graduation was $2,000 to buy stock in whichever company (or companies) I wanted. To put it mildly, I was underwhelmed. I had always been content putting my money in a savings account and forgetting about it as it slooowwwly grew in value, and I didn’t have the knowledge or the interest in investing. Once I bought stock and saw how its value could rise, though, I wanted to know more. I’ve since read books, signed up for investing newsletters and taken a much more active role in my investing portfolio. Although I’ve also seen how stocks can fall over the years, I recently cashed in that first investment for a 100% profit.

I don’t have children now and quite frankly it is daunting to think that one day I will be responsible for instilling in my children so many important values, from money management to work ethics to personal accountability. I only hope I do half as good a job as my parents.

Related posts:

1. 9 resolutions for 2009
2. In pursuit of alternative income streams
3. Selling myself, selling stock
4. My financial upbringing - a “short” history
5. 2009 resolutions: first month report card

Filed under Career, Finances, Investing, Personal |