The passing on of knowledge through generations is one of the great blessings of parenthood. There are many challenges, of course, but being granted the opportunity to mould a small human into a productive, happy and empathetic citizen of the world is a great honour.
In the personal finance blogosphere there seem to be two main types of people – those brought up in a money-wise family and taught how to handle money from a young age. They succeed earlier on in life. And then there’s me. A reformed credit card addict with a penchant for expensive handbags and a travel addiction. Although my Mum taught me to budget for my core expenses, saving money was never really discussed and getting loans for the things you wanted was completely normal when I was growing up. Now that I’ve got my act together I reckon I know a few things about money. That’s not to say I haven’t made mistakes – I’ve made loads – but if the only thing I can pass on to my boys is the benefit of my learnings, I’ll be a happy mother.
So here it is. A condensed list of my knowledge, for my babies. Also, some of this is ‘do as I say, not as I do’ kind of stuff. Because I’m your Mum. I have that right.
1. Save a % of your income from the very first paycheck you earn.
The first and most important lesson. Start with 20% and work your way up to 50%. If you emerge from your schooling with the habit of saving half of what you earn firmly entrenched, your life will be a much smoother ride.
And yes, I do mean save 20% (at least) from your very first after school job. No dollar you earn later in life will be as powerful as the dollars you earn when you are young. Young dollars have longer amounts of time for compound interest and investment returns to work their magic. Doing this will allow you to take advantage of many opportunities in your life. Travel, quitting a crappy job, taking the time you need to recuperate from illness, all of these things are aided greatly by being a lifelong saver and having a healthy cash balance.
2. You can’t beat the market
Many people will try and some may succeed, but your time is better spent elsewhere. Invest in index funds as a regular contributor – automate your deposits – and your wealth will accumulate over time, whilst you are focussed on other ventures.
3. Buy real estate in an area with growth prospects
If you are going to buy a house – either your home or a rental investment – make sure the prospects for the area are good. Don’t make the same mistakes as Mummy did. Please don’t fall for that “a home is an emotional purchase” bollocks. Whilst there is emotion involved, any house can be made into a home. And if life takes a turn for the worst and you need to sell, you don’t want to be stuck with an unsaleable asset.
Related post: Real Estate Investment – Oh, the Mistakes I’ve Made
4. Build a broad vocabulary and learn to write well
Read the dictionary. Each day pick a new word and use it in context. Stringing a sentence together is a skill. Throughout your life, you will write essays and papers and memos and emails and perhaps a book. Doing it well could be the difference between a thriving career and being outsourced offshore.
5. Read widely and frequently
For interest, self-improvement and enjoyment. Getting swept up in the compelling narrative of a well-written piece of fiction is one of life’s greatest (and cheapest) pleasures. Read novels, poetry, biographies of smart people, great people, read anything that interests you. Always remember the local library is a magical hub of concentrated knowledge, with endless opportunities for self-improvement. And being a member costs nothing.
6. Be curious – always ask Why & How
Asking questions will get you everywhere. Understanding why a company does what it does, or why a process or procedure is the way it is, means when you come up with an idea for improvements you will have the background knowledge to execute properly.
7. When everything seems too much, go for a walk
Without music or distraction. Just you, the fresh air and your thoughts. I promise everything will feel better after a walk.
8. Work every job like you own the business
Cut costs – even if you only manage the stationery cupboard, manage it like it’s coming out of your salary. Negotiate savings on products and minimise usage. Then report on what you’ve achieved.
Don’t ever utter the words ‘it’s not in my job description’ when asked to complete a task. Business owners do what needs to be done. Standout employees do the same. They are usually remembered and rewarded for doing so.
9. Learn from people who are smarter than you
In your life, you will come across many smart people. Try to learn from them. People in high-level roles like to identify and nurture talent. Offer to buy your CEO lunch and ask how they started out. Use your teachers and mentors. If you don’t have direct access to such people read the biographies of people you respect.
10. Know the difference between good and bad debt
Some people think there is no such thing as good debt, but as a real estate investor, I have to disagree. Debt, when used correctly, can help make you richer. You can leverage into real estate investments and to build share portfolios.
Bad debt enables you to purchase something you can’t afford to pay for with cash. Beware the fleeting excitement that comes with a new car purchase or cool new trainers when not paid for with cash.
Good debt: can make you richer (when used correctly)
Bad debt: Always makes you poorer
It’s more complex than that but if you ask yourself will using debt to buying this car, pair of trainers, holiday ultimately build my wealth and you cannot answer yes, then you better be able to pay cash.
11. Always sleep on big purchases
To assess whether something is a want or a need. Don’t fall for the hard sell. Have a policy and be prepared to quote it to a pushy salesperson. Mine is this “As I’m not going to use your (high-interest bearing) finance deal, I need to go away and do the sums to make sure my cash reserves can handle this purchase”. Then smile and walk away.
12. Don’t be afraid to seize opportunity
Sometimes opportunities come up and decisions need to be made quickly. Always take an hour, go for a walk and then trust your instinct. Here’s when having a healthy savings account proves it’s worth.
13. If you don’t know how to do something, say Yes, then learn how
With a disclaimer: If you don’t know how to do something – but think you could learn – say Yes. There is nothing like a deadline or pressure from a client to make you learn a new skill.
14. Don’t ever stop travelling
I urge you to backpack around the world for a few years before you have kids. It will alter your worldview in a way that’ll benefit your entire life. Then when you have kids, take them along with you. Just make sure they visit their grandparents often 🙂 Or invite us along.
15. Don’t waste your time trying to be popular – make friends with people who interest you or make you laugh. They are the best kind.
Know that the best friends you will have will be from school or university. Perhaps work. Make sure you appreciate them. It is infinitely harder to make friends with people when you are older and not forced to spend your days with large groups of people outside of your family unit.
16. Recognise and appreciate your privilege
You have access to quality free education, hugely subsidised healthcare and clean water to drink. You will always have food on the table and a roof over your head. There are (so many!) books on our shelves and toys to play with. When you are older there is money for you to pursue any activity you choose. This makes you luckier than almost anyone else on the planet. Don’t squander your privilege.
17. Work hard but love your work – don’t stay in a job you hate
Your time is finite. Don’t waste your potential doing something you hate.
18. You are not better than anybody, and no one is better than you
Don’t ever assume that someone’s value or intelligence is defined by the clothes they wear, the job they do or the area they live in. Treat everyone with respect. Smile and say Hello.
19. Get a college degree
If you are unsure what path to take I recommend an Arts degree. Even if it doesn’t lead to a job it will make you a more critical thinker, a skill that will serve you well throughout life. You can do study part-time while you work if you must, but please know this – Mummy is not ok with you skipping uni!
20. Give, whatever you can, whenever you can.
If you can’t give money, give time. But it’s almost always best to give money.
21. There is no such thing as overnight success
It’s usually years of work without pay, wanting to quit and then powering through the pain period. I like to think of a running analogy a friend of mine told me when I was struggling with my training. “When you get to that point where you really want to quit (when you don’t think you can take one more step) it’s then that success is right around the corner” (or in the case of running, that was when the fat would start to melt off).
22. Avoid sugar – dentists are expensive.
When you feel a little pain in your tooth get it checked right away before a $100 filling becomes a $1000 root canal. Mummy learnt that one the hard way.
23. Live on as little as comfortable
I hope some of my habits will rub off on you. But I promise if you save a large percentage of your income, and minimise your living expenses, the world will be wide open to you.
Related post: The Opposite of Living Beyond Your Means
24. Find a partner with similar views on money
You don’t have to think exactly the same way, but you need to complement each other. Talk regularly about your budget and your financial goals. Life will be easier and more enjoyable if you agree on the money stuff. Mummy & Daddy’s life became exponentially more enjoyable when we combined our money and started to work towards joint financial goals.
This is just the beginning…
My darlings, there is much to learn, and no doubt this list will continue to grow. If I can teach you to be frugal yet generous individuals, with kind hearts and sharp minds, I will consider myself a parenting success.
So, dear readers, what do you think? Anything I’ve missed? Tips for raising awesome kids? All advice and criticism welcome.