Your parents probably taught you how to ride a bike and do other tasks, but there may be things your parents didn't teach you about money. It's important that everyone knows how to manage their finances. Unfortunately, basic credit, budgeting and money management skills aren’t taught in all schools. These lessons might come from our parents but sometimes, our parents aren't that financially savvy. As a result, they might forget to teach important financial lessons. Here are seven things your parents didn't teach you about money.
1. Money Doesn't Buy Happiness
One of the things your parents didn't teach you about money – money doesn't equal happiness. If your parents did teach this lesson, you probably learned at an early age that material possessions and money only provide temporary satisfaction. And the excitement of buying something new wears off quickly. Money can make life easier, but it can't protect us from health problems, death, nor guarantee a happy marriage and friendship.
2. Spend Less than You Earn
Whenever I hear people talking about their money issues, and then discuss new purchases in the same breath, I realize more and more that this is a difficult concept to grasp. However, spending less than you earn is simple mathematics. This is the only way to have disposable income, which makes it possible to increase your savings account, save for retirement and enjoy life without going into debt.
3. Always Use a Contract
Most people know the importance of creating a contract when doing business with strangers. But what about when conducting business with a friend or relative? Misunderstandings over money can occur, and relationships can suffer when this happens. It doesn't matter whether you're lending a friend $50 or $300, always create a contract outlining terms of the agreement. For example, how much are you lending? When is repayment expected? Are you charging interest?
4. It's Okay to Splurge
Splurging is okay in moderation. If you never treat yourself, there's a chance you might overspend later due to frugal burnout. Of course, this isn't a license to buy whatever you want regardless of how much it costs. The key to splurging is only buying what you can afford, using cash, and from an established modest splurge budget.
5. Explore Other Savings Options
Maybe your parents made you save a percentage of your allowance and gift money. However, they might not have discussed the importance of different savings options. Many people rely on a traditional savings account, yet you can get a better return on your money with certificates of deposit, money market accounts and online savings accounts.
6. Friends Can Influence Spending Habits
Whether you're shopping for clothes or electronics, it's always best to shop alone. Your peers can impact your spending habits, and we tend to imitate the shopping habits of others. Therefore, if you go to the mall with the intent of only spending $50, there's a strong chance that you’ll go overboard if your shopping companions are spending hundreds or more. It's important that you spend within budget, and not to keep up with others.
7. Never Pay Full Price
Retail and grocery stores always offer savings, sales and clearance items, so there's never a reason to pay full price. Even if you see an item such as clothes or shoes that you want, give it a few weeks or a couple of months. Chances are that the retailer will have your size later on — at a cheaper price.
The way you manage your finances can have a tremendous impact on your financial future. Even if you don't know much about money management today, you can increase your knowledge and make wise financial decisions. What money lessons did you learn on your own?