6 terrific things my mom taught me about money
Mary, my mom, is an excellent lady. She's smart, kind, independent and good looking (though I'm partial to the last one since I look just like her).
She's also very smart about money, having worked in the financial services industry since the mid-1990s, which is also when she became a single mom.
I'm lucky in that she started passing that knowledge on to me from a young age, even if I didn't always follow it. At least not right away.
So in honor of Mother’s Day 2012, I’d like to share the six most important things about money I learned from my mom.
Lesson 1. ”Bank it!” Every time I told my mom that I'd gotten a bonus, a tax refund or a raise, the first thing out of her mouth was always "Bank it!" Being told to put my little windfall into savings wasn’t exactly the advice I was looking for. “Why can’t I go buy something fun?" I'd ask. But it was the right advice.
Lesson 2. ”Get the boring mortgage." When I started hunting for a house, my mother told me I should pay for it with a plain old vanilla 30-year, fixed-rate mortgage. This was during the go-go days of the housing bubble when every lender was pushing “creative financing” that was outrageously reckless. But thanks to my mom, I avoided my own personal financial crisis by rejecting 0% down, adjustable-rate mortgages.
Lesson 3. Boring is good in other ways, too. I drive a 10-year-old Honda Civic, not because I love the car, but because it's reliable and paid for, so I can save more money instead of making a car payment. I have an aggressive investment portfolio to match my young age, but I still have a lot of money socked away in a savings account just in case I need cash. Even the house I bought with that vanilla mortgage isn't fancy. It's small and something I can more than afford. It's not sexy money, but given the roller coaster of the past few years? My mom was right. Be boring.
Lesson 4. "Invest in yourself." When I was on the fence about getting my master's degree, my mother encouraged me to do it, especially since I could finance the then-small, in-state tuition with low-interest government loans. She took college night classes but never earned her degree. So if there's anything you want a parent to push on you, it's affordable education, which she did. I'm not saying a master's degree is necessary for everyone, but I know I'd never have become a writer without it.
Lesson 5. "Invest in your future." I don't know of many parents who are telling their 22-year-olds to open a 401(k) plan. But my mom knew that saving for retirement is a lifelong endeavor best started young. I wish I had taken her advice when I was 22 instead of 29. She was right. I could have had a little bit taken out of my paycheck, or dropped a couple hundred bucks a year into a Roth IRA once I was self-employed. I'm in great financial shape now, but I'd have had a much better jump if I'd just listened to my mother.
Lesson 6. "Saving for college is a retirement problem." I learned this lesson when I was picking between two colleges. I chose to attend the one that offered the most financial aid, because I knew that every dollar my parents spent on my education was one less dollar they’d have for retirement. Although I had a lifetime to pay back student loans, my parents had only a few years to rebuild their savings after a difficult divorce. I know that, if I ever have children, my retirement will always come first.