What Kind of Financial Advice You Should Pass to Future Generations
Giving your children life advice is definitely one of the basic requirements of being a parent. You need to teach them how to drive, do laundry, and cook basic meals. But before you start giving them financial advice, it’s also fairly important to remember that times have changed.
Advice that would have been good in the past, especially when you were their age, might not apply today. So you might find this article helpful, especially since we decided to mention the “bad” advice that might hurt their finances as time goes by. Let us know what you think in the comments section down below!
You can only get a good job if you go to college
Well, back in the day, attending college was indeed your golden ticket to getting a proper job. However, nowadays, going to college should be a thoughtful decision, not just a knee-jerk one. Getting a degree should be something you do because you have a very specific career in mind.
If you don’t know what you want to do for the rest of your life, it’s better to take a gap year than just jump into school right away. Also, for some older folks out there, working in the trades isn’t a valid career path, and that is a blatant misconception. You can easily earn a handsome salary without actually incurring tens of thousands in student loans.
Pay down your mortgage early
There are a couple of things older folks appreciate more than telling their children to pay down their mortgage debt as fast as they can. Well, it only makes sense. Back in the 80s, mortgage interest rates were in the double digits. Paying down the mortgage quickly was quite obvious.
But nowadays, mortgage rates are much lower than what you would earn in the stock market (about 10% a year). It is much better to put any additional funds in a retirement account to build a nest egg for the future.
Keep your money in savings account
When you’re much older, it’s fairly important to keep your money in a safe place. But that’s not good advice when you are still young. When you’re a young adult, what’s important is to focus on putting your money in a place where it can grow for you, which is the stock market.
A savings account is not the ideal place to hold your money, at least not for the long term. You can put your emergency fund in a specific savings account or any money, for that matter, that you might need in the next years. But money you don’t need for many decades should be invested, yes.
Buy a home as soon as you get the chance
So many boomers out there still think that buying a home is required if you want to achieve financial success and security. However, with housing prices and interest rates still on the rise, buying a home isn’t the right decision for everyone.
Besides, when you are very young, you need to be more flexible. What if you decide to move or switch careers? What if you want to go back to school? All in all, being tied to a mortgage in your 20s is like getting married in your teens. It’s rarely the smartest choice.
Focus on paying down debt before you invest in anything
If you ask us, this is one of the most insidious pieces of advice that you can get: paying down your debts before starting to invest. That’s simply wrong. The average annual return for the S&P 500 is around 10%. If your interest rates are much lower than that, then you should focus on investing, not decreasing your debt.
Avoid credit cards
Many older consumers can’t seem to grapple with the concept of value that a credit card can offer. These days, rewards cards also include countless perks that can save you plenty of money, especially if you are a frequent traveler.
Your parents could think that using a credit card is one of the easiest ways to get into debt. However, using credit cards can also be very smart, as long as you are a responsible consumer. They can also provide more fraud protection.
Attend the best college possible, no matter the costs
Before, if you attended a name-brand school with a wonderful reputation, it would be much easier to land a job after graduation. But where you go to school doesn’t always matter. If you take out substantially more in student loans, then you are not really making a wise financial decision. Well, taking out $100,000 in loans to attend Harvard isn’t a bullet-proof guarantee of long-term financial success.
Don’t job-hop
Well, back in the day, you were able to work at the same company for decades and be rewarded with quite a generous pension as soon as you retired. However, since the 1980s, companies decided to slash their pension programs, so there’s truly little reward when it comes to working in the same place for a longer period of time. Research also has shown that the best way to get a major raise is to get a job within a new company.
Moreover, employers don’t expect you to work at the same place your entire life. You don’t even have to get a new job every year, however, switching every couple of years is quite normal and financially prudent.
Buy whole life insurance as an investment
Boomers are arduous lovers of insurance policies. They actually see them as a safe choice, especially compared to investing in the stock market. However, whole-life policies are quite expensive, and they are generally unnecessary for young people. Instead, you can simply plan a term life policy. You might be able to save hundreds on premiums, and you can still use the difference to invest in the stock market.
Always get an advanced degree
For many boomers out there, getting a master’s degree is automatically tied to a higher salary and a promotion. Well, surprise surprise! More often than not, going to school might cost you tens of thousands of dollars, and it’s not always worth the effort.
You should wait and see if you truly need a master’s instead of applying to grad school right after graduating. Sometimes, your company might decide to pay for your master’s. Other times, they could be more than ok with you getting a certificate instead of a full advanced degree.
Quit your job to stay at home with your kids
Many years ago, being a stay-at-home mom meant that an entire family relied on one salary. These days, staying at home can have dire consequences. Returning parents find it quite hard to restart their careers, which can automatically result in them having to start at the bottom again.
This can also result in them losing out on future retirement savings and Social Security benefits. Well, stay-at-home parents might still be able to find ways to be part of the workforce, even if that means working only a few hours a week, consulting, or simply having a side hustle.
Monetize your hobby
If you have a hobby, then you must have heard plenty of advice on how to turn it into a side hustle. While you might be able to make a couple of extra bucks, you will probably turn it into something that reminds you of work.
Of course, this shouldn’t mean that it’s unwise to leverage your skills and start a business, or a side hustle. But don’t automatically jump into making a quilting Etsy storefront only because you’re into sewing.
If you found this article useful, we also recommend checking: How Can You Boost Your Savings After 40? Try These 17 Tips
