There is significant evidence that it is harder to save today than it was for our parents and grandparents. Tax rates are higher, housing costs are out of reach for many first time home buyers, tuition costs more, and post-secondary education is the cost of entry into much of the job market now. Having said all that, there are some money lessons we can learn from our parents and grandparents on how to manage money and put away something for your future.
Here are five money lessons we can learn from our previous generations:
1. 10% of Yours is Yours to Keep
A little tougher today but even setting aside 5%, from a young age is a good goal. Can’t manage 5% yet? Then start with 1%. Starting early, no matter how small, creates the mindset that you should be saving. Having an emergency fund to rely on means you’ll avoid credit, and related interest fees. Put the money in a separate bank account, one that you tell yourself you can’t use unless doing so meets your long-term financial goals.
2. Don’t Buy What You Can’t Pay For
Even your parents likely took out a mortgage for a home, and today it’s highly likely you will need a car loan. However, this saying still holds up well when it comes to anything except pure necessities. If you can’t pay cash for a new TV, boat, furniture or the like, do without.
3. Make What You Have Last Longer
Take care of what you do own, and keep everything well maintained. Failing to change the oil in your car regularly or change the furnace filter might save money in the short-term, but you’ll end up having to replace things sooner or end up with a bigger repair bill. In today’s world this saying goes a little further than household fixtures. You don’t have to keep up with the latest trends like having the newest cell phone on the market. There is no crime in keeping your cell phone for six or seven years if it’s still working.
4. Vacations, and Life, Happens at Home
Previous generations saved a lot of money by spending time at home. They ate in more, dined out less. They vacationed at home or nearby. They watched TV at home or enjoyed the yard, went out less for their entertainment. While it’s great that we have so many more opportunities than our parents did to get out and enjoy life, practice moderation. So set a budget and live within it.
5. Live Modestly
Those who look like they’re rich probably aren’t (those who don’t, just might be). This is an interesting take on the keeping up with the Jones’ syndrome. Stop worrying about how your financial situation looks to those around you. If you drive an old car but have savings in the bank you are better off than the neighbour who has a 48-month lease an expensive SUV. Your wardrobe or your electronics don’t have to follow the latest trends. Trends benefit the seller, not the buyer.
You are in charge of our money. Every time a modest millionaire chose to buy something, go somewhere or do something, they factored in the cost. Thinking about money shouldn’t consume your life, but it should be part of your decision making process. Your parents and grandparents knew this – you should too.