5 Personal Finance Lies Your Parents Told You - picture of senior having serious talk with adult daughter

5 Personal Finance Lies Your Parents Told You

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When it comes to personal finance advice, it’s only natural to turn to your parents first. Most young people don’t receive any kind of personal finance education in school, and your parents have the benefit of age and experience to guide them in financial matters.

But if you’re relying on your parents for financial advice, you may be surprised to learn that, in many ways, they don’t know what they’re talking about. It’s not that your parents lie to you about finances intentionally; it’s just that the economic landscape has changed considerably since they were your age.  Let’s take a look at some of parental words of wisdom that you may want to take with a grain of salt.

Avoid Credit Cards at All Costs

If you’re very young, your parents probably have what they see as a good reason to caution you against credit card spending. They may be worried that you won’t be able to handle this financial tool appropriately, and that you’ll wind up mired in consumer debt that you won’t be able to free yourself from.

But credit cards are not inherently bad. When you use a credit card wisely, it can help you build up a good credit history, which is something you’ll need when you graduate and want to get an apartment or take out a car loan. You may find that it’s difficult or impossible to do these things with no credit history at all.

Not only that, but today’s credit cards now come with the benefit of lucrative rewards in some cases. And, if earned responsibly, those rewards can lead to free vacations, discounted airfare, and even cash back.

Put Student Loan Repayment Before Retirement Savings

Your parents are in an enviable position when it comes to retirement — there’s no question that Social Security benefits will still be around for them when they reach retirement age, and they might even be able to claim a corporate pension or other retirement benefits. But if you’re a Millennial or a member of Generation Z, you’re going to have to finance significantly more of your own retirement than your parents or grandparents did.

It’s easy to see why your parents want you to pay off your student loans first given the fact that the average new college grad now carries more than $23,000 in student loan debt. But if you’re a new college grad, you’re in your prime retirement savings years — letting these years slip by without taking advantage of them to save for the future could cost you $396,039 at age 65 — and that’s if you’re able to max out your 401(k) contributions every year from age 32 to 65. Definitely make your student loans a priority, but start saving for your retirement right away, too.

Buy Your Own Home Instead of Renting

For decades, home ownership was the best financial decision most families could make. Your parents took out a mortgage, bought a home and accumulated equity, and it helped them achieve financial security. But that doesn’t mean the same course of action will make sense for you.

For one thing, it takes a lot of money just to get a mortgage. Once you’ve purchased your home, you’ll pay hundreds or thousands of dollars a year beyond your monthly mortgage payments for insurance, maintenance and updates. If you’re living on a low income, renting may make more sense financially and it will still allow you the freedom to relocate if a better job opportunity beckons in another city. Don’t buy a home unless you’re ready for the financial responsibility, and you plan to live in it for at least five years.

Don’t Invest in the Stock Market

Investing in the stock market is scary because there’s always the potential that you could lose money. But not investing is just as risky, because traditional bank account interest rates can no longer keep pace with inflation, the way they could when your parents were younger. In today’s world, investing in the stock market is an important thing to do if you want to increase your wealth.

If you don’t invest in the stock market, you’ll never be able to save enough for retirement — you’ll lose interest and dividends income you could have made, and your money will depreciate with time. Make wise investment decisions instead of just sticking your money in a savings account.

Give a Company Your Loyalty and You Will Be Rewarded

The days when companies rewarded loyal employees with job security and pension plans are long gone, if they ever existed. These days, you may find more job security in freelance contract work than in a traditional corporate sphere. If you work for a company and you’re laid off, there goes your whole paycheck. If you work for several companies as a freelance contractor, and you lose one client, you’ll still have others to fall back on while you look for another client to fill in the gap.

You may be surprised to learn that some of the financial advice your parents have given you may be flawed. Times have changed, and what worked for your parents may not work for you. Don’t follow your parents’ advice blindly; do your own research and come up with a financial plan that works for you.

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64 Comments

  1. I just giggled through this article (the nervous kind) because I’ve definitely been told or shown these things by my parents. And although I know better now, it can be oh-so-difficult to let go of the things our parents teach us. The one thing I do have down and don’t struggle with is sticking with one company. Right now I’m at a company that doesn’t care much for it’s people, loyal or otherwise. (60+ hours of work expected a week – unpaid overtime. And they don’t pay well to start with) It’s easy to laugh in the face of anyone who thinks a company will take care of you if you’re a hard worker.

    1. Ugh, that sounds awful. No one should have to work for free.

      1. Is it unpaid overtime or are you salaried? I’m salaried and work north of 60 hours a week. The hours aren’t ideal but I’m not working for free. Knew what I signed up for. I understand if this was sprung on you though, that’s terrible.

        Jay

  2. Another lie: “There’s no such thing as too much formal education”

    Formal education has opportunity costs, both in time, money, and happiness. And there reaches a time where the marginal benefits don’t exceed those costs. Much better to stop there than keep going just for the sake of having more formal credentials.

    1. YES! Another great one. I see this with so many people I know. Formal education is always seen as a success by some, even when there is no ROI.

  3. Sadly, I think in many families finances are not discussed at all. That was the case in my family. Although to be truthful, my single mother had her hands full with just raising two kids and keeping a job. But I think that the fact that she “never had time” to learn that much or become that interested in her own finances has probably had a big impact on where she is right now. And it’s impacted me too I think- I was never very good with money until I met my hubby and learned from him basically.

    1. Nothing wrong with that. Greg and I learned from each other in some ways as well.

  4. My parents like cd’s and whole life insurance policies! They have no debt and don’t spend much so it’s okay for them but would be terrible for someone just starting out.

    1. You guys may not even live there for long so I don’t see why you would buy at all!

  5. Ben @ The Wealth Gospel says:

    The home one drives me the most crazy. My brother got a condo with his wife right after they got married…right before the housing bubble burst. They’ve been stuck in it ever since and just barely sold it last month. But my dad has been bugging him for years telling him his wife “deserves a house.” I’m glad he waited until now because otherwise they would’ve lost a good $10k on the condo if they had sold it to get into a house when my dad told him to.

  6. My parents never told me any of these lies. They have always been very upfront about managing finances and investing. I guess I am lucky that way.

    As far as student loans, you need to do the math. If your loans are at the 6.8% level (like many federal student loans) then you are much better off paying them down than saving for retirement. I am not saying not to save for retirement, but you might only be able to save up to the level of the company match.

    1. I agree about doing the math. Unfortunately, many of today’s young people need a decade or more to repay their loans.

  7. No lies from my parents, I just think it’s evolution of finance and careers over time. I think that its more important then ever for the individual to be educated and agile with these topics to stay on top of the changing times. We are working hard to teach our 3 children the basics each and every day.

    1. Me too =) I just want to teach my children common sense concepts about money so they can easily understand the rest.

  8. My mom and I were just having this convo last night. She said “Wow, we didn’t teach you all anything about money did we?”. The truth is, they didn’t. They managed their money poorly which led to most of us kids (there are 8) repeating the same path at a young age. Luckily, there is so much info readily available (like great blogs!) that we all have wised up and I think our financial futures look much different than her present reality.

    1. That’s great! Yes, the internet can be a great tool for those who need some advice or help.

  9. My mom didn’t give me specific instructions when it came what I should put my money in. She had no clue of the difference between a GIC, mutual fund or stock. She just tried to drill it into my head to save. I was stupid enough to ignore her nugget of wisdom for years and paid for it!

    1. Me too! I ignored a lot of good advice but eventually came around =)

  10. You don’t know my parents! I have early memories of poring over Investors Daily with my father on Saturday mornings. We followed Exxon stock specifically, which was highly illustrative because it kept rising and splitting and doing all sorts of fancy things to teach me about how stocks work. Always pay off your credit card each month, but use them because they give you float and protection (even before the days of rewards). Pay for both your retirement *and* your children’s education even if it means living like Jacob in ERE (here I think we could have gotten a microwave earlier and I still think they need a dishwasher and dryer). We also rented when it made sense and bought after my mom got tenure. And no illusions about company loyalty.

    So I have my parents to thank for always being in such good shape financially, even when the income wasn’t there yet.

    1. I think that is great! We would all be better off with parents like that.

      My parents taught me about frugality and living within my means. Those lessons have been very helpful to me and I hope to impart that knowledge to my daughters so they can do the same. It makes life much easier and far less stressful.

    1. That is a hard one. We save for our children’ college but only in small increments. It seems like a good balance to me.

  11. I heard a few of these from my parents, but the one that has always stuck out to me is that there’s nothing wrong with being in debt. I just want to shake the parent that tells me that. The sad thing is they just don’t get it and have no desire to get it. Makes you wonder why I had no problem being in debt for years. 😉

    1. That’s an ugly one! Debt sucks. Every parent should know that. Unfortunately, it is just the norm for a lot of people.

  12. My parents didn’t tell me any of this kind of stuff. They had a couple businesses when I was growing up and they definitely weren’t afraid of debt or credit cards. Actually, they didn’t really give me any financial advice and I’m happy about that. If I would have taken there advice God knows where I’d be know.

    1. Sometimes it is better to get no advice than bad advice! =/

  13. I didn’t hear many of these from my parents, but then again, they have been lifelong entrepreneurs. They always told me to chase what I wanted and work hard doing it.

  14. I think back in the day, company loyalty did exist, but as we all know that doesn’t anymore, so our parents weren’t 100% wrong about that one. One “lie” they told me is you don’t talk about money. Well sure maybe not go around telling everyone your salary, but being able to openly discuss finances could help so many people, especially if you are young and impressionable.

    1. I think it did at one time too…a long time ago. Now it doesn’t exist unless you work for a really small company. And even then….

  15. My parents always harp on the part about not getting any credit cards, and they kind of taken back when I told them I had three separate cards for different rewards. They are definitely more of if the available credit is there, they will use it. I always pay my balance off in full each month!

    They are also all about the buying your own home one too, even though home prices in our area are pretty crazy. With my student loan debt there’s no way I could save up for a down payment now. I’d rather be independent sooner rather than later, so the down payment will have to wait until while I am renting.

    1. Yeah, my parents are coming around to the idea of credit card rewards too. They have always been cautious, which is a good thing.

  16. This is a great list. My parents always gave us (and still do) excellent advice on frugality and how to save, but they really didn’t teach us about investing and the power of compounding interest in a 401K. I think they’re surprised at how much time and research Mr. FW and I put into our finances–very different from how they operate. But, they’re enjoying a very financially stable retirement largely because they’ve been so frugal all their lives.

  17. I don’t think our parents actually lied to us. It was just the financial reality of their time. My mom lived through the depression and most of her financial beliefs and actions were all formed because of that period of time. The stock market was bad because it crashed and people lost money, homes and lives back then. She couldn’t proclaim the local banks to be bad, even though many of them closed, because they were local and made up of local people that my parents and grandparents knew. They never grew up with credit cards so their experience with them was limited to hearing about how people declared bankruptcy because of that debt. Their advice was good for the times they lived in. They simply didn’t adapt to the new reality of world economy.

    1. I agree with you, Kathy. Times have changed but that doesn’t necessarily mean our parents have changed with them. A lot of older folks cling to things they’ve believed for years, whether they are still true or not.

  18. Giving a company your loyalty. TOP ON MY LIST! A company will always protect their business over your well being. My work experience has put a particularly bad taste in my mouth.

    1. Yep, it is so sad but true. I know a lot of people in “stable jobs” who have lost them in the last few years. Companies always put profits over people.

  19. Great article! I grew up with my parents viewing money very differently, which has led to many of their marriage woes. I learned to pick sides, so to speak, at a young age and followed the parent with the better example. To this day, I still go to the one with better financial views any time I need advice. I’ve even passed along a few of your posts to BOTH of them, as they can each get something out of your insight. 🙂

    1. Uh-oh! I will lay the smack-down on them if you want!

  20. I agree with Kathy re The Depression forming my parents’ beliefs. Neither of my parents every had a credit card. Heck, I can remember when people started using credit cards to buy groceries–that was considered a big no-no. As for investing, most companies had some form of pension plan when I started working and there definitely was a sense of people staying in one place for their entire career. Just wasn’t as cut throat as it now appears to be.

    Other than, “spend less than you make and save, save, save”, my parents never talked about money at all. We were very different within our own family. Our kids knew everything. Just much easier when we had to say NO. Still, I wish they would teach a personal finance class in schools. Sometimes this kind of info seems more credible coming from someone other than a parent.

    1. Yep, the times have certainly changed. And, like you said, what was once good advice no longer is!

  21. These are so true. My parents told me all of these, and they never understood why I wanted to quit my day job and work for myself. All my mom could see was that I worked at a job for years and that was security. But I knew, that this job didn’t care who I was. There was always someone to replace me around the corner if needed.

    1. I honestly think that job security no longer exists!

  22. My parents didn’t tell me any of these lies. The thing they did – or I should say didn’t do – is talk about finances. I really wish my parents would have talked about why they decide to spend money on some things and not others, as well as what some of their long-term financial goals were. Instead I started to read business and finance books to fill the gap.

  23. Very good article Holly! It is so true that times have changed drastically since our parents were kids and this means that they can be out of touch when it comes to giving advice on lots of things in life, including finances.

  24. I remember before, my father always told me that I should never use a credit card. That’s why until now I still never use a credit card, but as of now, I think I should sign up for my very first credit card.

  25. I didn’t receive any negative lessons like this from my parents, they were always pretty frugal. But I remember asking my Dad how much money he made once and my parents said “Oh, we don’t talk about that”, because they knew I would go and blab it to my friends whose parents were their friends. So that shows that friends did not talk about money then either and there was some Joneseying going on.

  26. My in-laws always told me that I should buy a condo or a house, but for me, I would rather build my own house. 🙂 I already have a little house design that would be perfect for us.

  27. I don’t think I was taught any of these things except for the buy your home instead of renting lesson, or really anything about personal finance for that matter. It’s a good thing I took my PF education into my own hands as I got older!

  28. I don’t recall any financial lies. They really never gave advice as much as demonstrated what their values and judgment. I think this is the best way to pass on your principles by living them.

  29. I didn’t get any of these ~ we really didn’t talk finances and in some ways I think that is worse. My mom did say — go to school, get an education….and do better than “this”. Usually said when she was financially stressed or there was an obvious lack. That did stick with me…

  30. It’s interesting for me, because my parents didn’t have a good grasp on their finances, so they made a lot of these mistakes, but they never cautioned me against it until after I started learning for myself. Then they would say things like “don’t use credit cards” and I would counter with telling them the responsible way to use credit cards and the benefits. It’s funny. Great article!

  31. Definitely the last one is a lie by our parents. I however have never used a credit card. I need to research them much more before I actually use one. My fear is if I start using them I will get into a debt I can’t get out of!

  32. I had to nod my head to everyone of these because I have heard them all. Some of them I have even done. Mom and Dad don’t lie right?

    Now that I am wising up to these things, it makes me wonder why anyone would ever fall victim to this thinking.

  33. I couldn’t help but agree more. Although I didn’t have my parents that get too much involved in my decisions about money and finances, I have heard these issues from many people. We are now in the Information Age where we need to be smart enough to process our educational learning and apply them to life.

  34. Most of the wealthy people invest in the stock market if not all, and why is your parents telling you not to invest in the stock market, maybe they are burnt badly before. Investing in the stock market if done right will bring you a lot of wealth, if not it will hurt you badly. So you need to learn the right way to invest in the stock market before picking it up.

  35. My dad’s fave is give a company loyalty. He worked for 25 years at the same place and thinks that should be the way for me. Sadly he doesn’t realize that the work world has changed dramatically and most people switch every 3 years now. I’d put buy a house a close 2nd but my parents actually started out renting until they could afford a home. My dad’s motto is don’t buy if you can’t afford it. Straight forward.

  36. Buying a home instead of renting was one that I wish I didn’t listen to my parents on. “Home values always rise” except when the real estate market takes a nose dive after you buy because you listened to your parents.

    My parents actually never pushed the company loyalty one on me though, my dad had worked for a number of companies that had no problems cutting employee’s loose because a cheaper option came along.

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