What my parents taught me about money

Following on from yesterday’s post about how my parents bought a home, I thought I’d share some of the attitudes to money that have shaped me and the financial position I am in today.

Basically, both of my parents are pretty cautious people. That is to say: they don’t smoke, they drink socially but never have alcohol in the house and we kids always had a stable home. As I said yesterday, my dad wasn’t a big earner when I was a kid, but they found ways to ensure they bought their own home and gave us pretty much anything we needed.

Note that above I said `needed’. We kids had heaps of toys and `stuff’ (more than we needed) but probably not heaps when you compared it to friends of ours. We didn’t have a pool or a computer, or a lot of dolls. I’m not complaining now and I didn’t then. If I wanted to play with any of those things, I just went to my friends’ homes. At the same time, my parents would buy me special things now and again, often for no specific reason. While birthday gifts were nice, they weren’t overly expensive. But, as an example, they made sure I went to see the World Expo in our capital city. I flew down as a lone child passenger and stayed with extended family. Another example was that when I was about 17, Michael Jackson came to Australia and my parents bought me gold seats and paid for my air ticket to see his concert … just out of the blue because they knew I was such a big fan. So you can see, I was hardly deprived. And remember, my parents had been separated for more than a decade when this occurred!

Part of the reason they could do stuff like this was that they actually maintained low credit levels, and didn’t splash out very often. At first, when they were in their 20s, it was because they had to (at mortgage rates of 16%, everybody had to). But over time, this didn’t change. They bought older cars, and usually with cash. My dad had a credit card limit of $500 until he got it raised this year! (By comparison, note how much owe!)

Mum is a little looser with cash and credit, in that she will trust her instinct on things. For example, she bought a duplex at a good time, and has made improvements to it slowly. She views that as her superannuation (as well as the compulsory retirement savings system we have her in Australia). She has also done things to improve our lives through her investments. For exmaple, she let my husband and I live in one side of the duplex for a very low rent for several years. She always sees investments as things that needs to meet the needs of her family now and in the future.

Mostly, my parents taught me I could do whatever I wanted and achieve whatever I wanted … but it was always up to me. They never said that, but there wasn’t a lot of spare cash around. So at 15 I started working in a restaurant 3-4 nights a week while at school. They taught me to work hard, that people weren’t paying me to be lazy (not that they even had to say that, I just knew it from the way they raised me).

In my final year of high school we were offered the chance to go to the USA for 3.5 weeks, partly for an exchange (two weeks with a family) and to see the sites of LA. I signed up and `paid off’ my trip in instalments. However, when I made a bad purchase in Tijuana at the start of my trip (a leather jacket I’ve never worn in sunny Australia!), mum wired me some more cash and without giving me the slightest hard time about it. In a way, while it would have been easier to have parents who could just pay for the trip, it meant more to me because I financed it and achieved it for myself. Meanwhile I was also paying for my school lunches and buying most other things I needed, such as clothes.

I didn’t have my finances all figured out though. When it came to car buying, I found a great car for $4000. The problem was that I didn’t think ahead to save for a car, did I? Luckily, dad was enthusiastic. He lent me the $4000 and I paid him back at the rate of $50 a week, then $100 a week when I finished school. I was responsible for putting the cash in his account myself. I fell of the wagon for a while and wasn’t paying. Eventually he got angry with me about it, so I made sure I paid him off quickly and in full. Thanks to dad, my first really big purchase was interest-free. 

When I got my own credit card (after purchasing a stereo that I paid off interest-free in the first few months), my parents were concerned. That was only because they didn’t trust my boyfriend at the time not to encourage me to spend up on it. In the end they were half right (he liked to spend, but so did I).

Over time my credit card limit has slowly increased, but I don’t think I was totally irresponsible. I never saw a need to have more than one card. I always paid more than the minimum balance. And I was never tempted by store cards.

But I have always been a person who carries a balance on her card. As I’ve said in a previous post, I actually successfully cleared my credit card down to under $500 (from abut $3000) once before, but suddenly had a brain explosion and spent up big-time on a holiday. I think it was a reaction to excessive frugality that went beyond healthy debt reduction. However, I wish I’d thought about it a lot more before I went ahead with it. I have found that saving and paying off debt works better for me than putting every dollar into debt reduction because I always feel poor. It probably doesn’t make sense to others, but this is the first time I have felt on top of my debt reduction efforts.

Basically, my parents are cautious, and they’ve taught me to be a little bit cautious too. Here are probably the biggest tips I’ve gained from them:

1) Generally, don’t let other people drive your car unless you can afford to lose it (they didn’t even let me drive theirs!). This was probably more relevant when I was a teenager, but I always think twice before I let someone drive my car.

2) You can’t afford a car if you can’t insure it (ditto for other major assets).

3) Credit is okay but don’t let it get on top of you (this part I wasn’t really listening to before, however this attitude might have stopped me from getting further into debt than I already am!).

My parents are great, and I’m glad I learnt what I have from them.

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