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Dad’s Financial Lessons

by Mike

The following is a guest post from Squirrelers, a personal finance blog about squirreling away money, living well, and giving generously. The post is part of a Yakezie Blog Swap, where each participating blog hosts a guest post that answers the question: “What is the single best financial tool/advice you were ever given or found”  [You can read my post over at LiveRealnow.net]

Do you remember the song “Parents Just Don’t Understand”?

It was a song from DJ Jazzy Jeff and the Fresh Prince, back in the day. A long time ago, to be sure, but for me it brings back memories of a lesson from my father from a few years later.  At the time, I was thinking that he just didn’t get it.

Later, I would come to realize that he did get it. Some parents do understand!

The lesson, as you might have guessed, involved money. You see, my father was telling me that when I work, I should be sure to save at least 20% of my income, so I could eventually retire well.

“Why?” I asked. “Isn’t social security for old people’s retirement? Besides, isn’t that way more than most people would save anyway?”

I remember him looking at me quizzically at first, then he smiled, and told me that I’ll be on my own for retirement and that nobody can take care of me but myself. Of course, I wondered what social security is for in that case, but he told me not to count on it. Rather, he said to try to take responsibility for myself.

I remember asking him an interesting question: what if I’m married and my wife likes to spend lots of money? (Keep in mind I was much younger then, before getting offendedJ  Besides, the same can hold true of a husband who likes to spend a lot as well).

His answer:  have it automatically taken out of your paycheck.

That way, when you’re at home, you learn to live on what you have. It becomes habit. Saving extra can happen, but it’s a bit easier to psychologically rationalize saving a little bit than saving a lot. If you like to spend, you won’t feel like you’re depriving yourself. Save automatically, and neither of you won’t notice it. It will be for your family’s future.

Keep in mind, his main point was not about how to manage finances with your spouse. That’s a whole new topic, and it became a part of this due to my question to him. Rather, his lesson was to:

1. Not to rely on assistance, rely on yourself

2. Don’t spend all your money; rather, save 20% at the minimum, right off the bat

3. Do it automatically, so you learn to live without it

At first, when younger, I did not really follow this advice. With my first job, I didn’t immediately set up a 401(k) plan when eligible. I didn’t realize compounding was so important, and I didn’t make much anyway – so I didn’t think I could save much. Later, after realizing how hard it could be to make a living, I decided that I didn’t want to be working until I was super old unless I had to.

Eventually, I decided to start saving automatically, and then became a big believer.  I wish it all came together for me earlier, but hey – sometimes when younger, we think that parents just don’t understand.

But many do. I’m glad I eventually listened, even if it took me until adulthood to do so.  :)

{ 8 comments… read them below or add one }

Miss T @ Prairie EcoThrifter

It’s funny how when we are younger we would much rather do our own thing and ignore the advice of our parents, but yet when we get older we find ourselves heeding the very wisdom we were given. I am a firm believer that how we saw our parents manage money growing up has a huge influence on how we manage our money as adults. I think your dad had some great advice and I am glad to hear you are using it.
Miss T @ Prairie EcoThrifter´s last blog post ..PEP for Week of January 10-14-11-Seeking Balance Edition

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Squirrelers

Miss T – I too believe that parents have a huge influence on how we handle finances, for better or worse. We may not have listened to them at one point, but those memories stay with us and form the foundation of our basic views on the subject. Eventually, we come to an approach that’s our own – even if still anchored in much of what we learned when younger.

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krantcents

Sound advice! The automatically is the best part because if it is not there you won’t spend it. Parenting is a little like teaching, we never know what gets through. It is nice to know it does.
krantcents´s last blog post ..My 2011 New Year’s Resolutions

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retirebyforty

My dad was adamant that I started contributing to 401k right away. I’m glad I listened. :)
retirebyforty´s last blog post ..Best Financial Advice

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Evan

Evan at 30 years old It kills me to say that sometimes parents know what they are talking about!
Evan´s last blog post ..The Past Wasn’t As Good As You Remember it So Get Over It

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Everyday Tips

You stubborn Squirrel! :)

My advice was similar- save for retirement with that first paycheck. (Read all the excitement over at thesavedquarter.com)

Anyway, your dad was a smart guy! We have no idea where Social Security will or won’t be when we retire, but he was smart to prepare you NOT to count on it. I wish more parents would have taught their kids accountability. Then maybe our country wouldn’t be in the mess it is in.
Everyday Tips´s last blog post ..The Best Financial Advice I Never Received

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Financial Samurai

Oh how I wish I listened to my parents on some stock advice growing up. I woulda been rich! :)
Financial Samurai´s last blog post ..Hoping For Something To Break In Order To Buy Something New

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Financial Adviser Courses

Your dad is cool! I guess parents should know the basic of finances so that they could give their children the proper way of handling finances!

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