4 things I learnt from my parents about money
I don’t remember many direct money conversations with my parents, yet I learnt so much from witnessing how they managed their money. Here are just 4 important lessons I learnt from them.
1. Set yourself a ‘money mission’
I lived in the same house from birth until I officially left home at 22 (although I did go to University for 3 years). My parents could have moved to a bigger house as they did get promotions and pay rises but they chose not to as they didn't need to (it was a modern detached house which they were able to extend). I believe my parents were different from many other people in terms of their mindset towards money as they had set themselves a ‘money mission’. Their mission was to pay off their mortgage as soon as possible (especially as they had experience of mortgage rates being over 12% pa). With their money mission set, they found a lifestyle where they could do the things they wanted (taking holidays and upgrading their car every couple of years) but always made sure they could save to meet their mission. As they wanted to complete their mission, they focused on ways to achieve this. Clearly saving rather than spending was a key driver but they also made their money work for them by investing some in the stock market and looking out for good deals when buying something new or renewing contracts. My parents managed to complete their mission many years ago. This meant that as soon as my sister and I were old enough to leave home (about a year after I finished university) they retired to Spain, completely mortgage free and with savings in the bank. They now have the same standard of living they enjoyed in the UK, but without working and with great weather all year round. They wouldn’t have been able to do this if they had moved to a bigger house and taken on a bigger mortgage or, if they had started going on 5* holidays and buying lots of designer clothes. Witnessing my parents achieve their money mission had a big impact on me. As soon as my wife and I got to a standard of living which we felt was comfortable, we made sure we didn’t just start spending more when we got promotions and bonuses. We focused on building up our savings and investing so we could have all that we needed but also to benefit from more time to ourselves and with our two precious kids. We don’t buy lots of fancy clothes (although we have some), we don’t eat at fancy restaurants (although we do as a treat), we don’t routinely holiday in 5* hotels. All this means we have enough to be super happy and importantly we are able to save towards financial freedom. 2. Focus on yourself, not others
In order for my parents to achieve their money mission set out above, they also ignored what other people were doing with their money. As I have written about in ‘Keeping up with the Jones’ in previous blogs, many people get caught up in the Rat-Race as they focus on what other people are spending their money on and then overspend trying to keep up with them. My parents never spoke about other people’s money. They cared more about their own money mission. They knew other people had different money missions or, in most cases, didn't have a money mission at all. Their belief was that if people are on a different mission then what's the point in comparing. For example, a marathon runner would not compare their process and outcomes to that of a sprinter, even though they are both runners. When I was growing up I saw some of their friends move to bigger houses and start driving fancy cars but this just didn’t bother my parents. Now it is clear why. My parents have now been retired for over 15 years whilst their friends are still working as they have to earn more money to be able to maintain their bigger house and fancier cars. Whilst I still find it hard to ignore what other people are doing with their money, I know that reacting to it would hinder our ability to meet our own money mission.
3. Money is just a tool
There are lots of people out there that have a lot more money than my parents do. I doubt many of these people are as happy as my parents are. If someone gave my parents loads of money today, I’m not sure what they would do with it to make themselves happier (although I'm sure they'd find ways to spend it!). My parents’ focus was on what they wanted to do in life and they used money (via their money mission) to achieve that. Whilst their ‘money mission’ was to have a certain amount so they could be mortgage free and with a certain income from savings, this was to achieve their actual mission which was to be ‘free’ and do whatever they wanted, when they wanted. Money was only ever a tool to achieve their mission. Like other tools, it’s not about who has the best or most tools, it’s about what you make with the tools you have that’s important. It is very easy to think of money as something more than just a tool. Many people go through life without a purpose for their money and just expect happiness to appear. Having more money alone is not going to make you happy, it’s about what you do with your money that will make you happy. This is a great lesson I learnt from my parents. 4. Wants vs Needs
My parents provided my sister and I with everything we ‘needed’ as we grew up. They were generous at birthdays and Christmas and we always got what we had hoped for. If, however, there was something we wanted during the year then we’d have to wait until our birthday or Christmas (delayed gratification) or buy it ourselves. My sister and I were given pocket money each week until we got our first part-time jobs when we were aged 15/16. This meant we had to make choices with our money from an early age. If we spent it, it was gone and we wouldn’t be able to get all the things we wanted. We had to learn to prioritise our purchases when we received pocket money. When I started working, this was a great motivator for me to work harder. I’d do double shifts and work evenings to be able to have enough money to get the things I wanted. I believe this lesson has helped me as I’ve grown up. I appreciate the value of things and feel proud that I worked hard for everything I have. I have not wasted (too) much money on things I didn’t really need. I want my girls to learn this lesson too so we help them save up for the things they want with their pocket money. They love the feeling they get when they finally reach their goal. Also, importantly, they sometimes realise that whilst they were excited about something initially, when they realise they have to save they change their minds and think of something else that is worth saving for. Summary Kids learn so much about money from their parents, whether their parents realise it or not. I was lucky to learn some great money lessons from my parents. It’s now our job as parents to make sure the next generation learn wisely too. Here is a quick recap of four key money lessons I learnt from my parents:
Set yourself a money mission - focusing on a mission helps reduce overspending
Focus on yourself, not others - everyone has a different money mission so there is no point in comparing
Money is just a tool - it's not about having the best or most tools, it's about what you do with those tools that makes you happy
Wants versus needs - if you 'want' something' then you need to work hard, prioritise and save up
My blogs are here to help you, as parents, gain confidence and knowledge about money so you can teach your kids. Thank you for reading! (Subscribe here to get your free ebook ‘How to teach your kids to become Financial Superheroes’) Will Related blogs: How to the teach your kids about: Keeping up with the Jones’