I punched in my pin number and pressed “account balance.” In the seconds it took for the machine to spit out the receipt, my stomach churned with anxiety.
I was a junior in college, presenting a paper at a conference in Utah. A huge accomplishment, but I wasn’t proud. I was 1,000 miles from home, and I had only $10 in my checking account.
How was I supposed to eat?
Moments before I found the ATM, I had called my parents for money, something I rarely did. My dad had just lost his job. My sister had called me the week before to tell me that the RV my parents loved had been repossessed, and creditors were calling. Still, they sent the money.
My parents taught me many good lessons–the value of education, the love of books and the trick to folding sheets with fitted corners. But when it came to money, my parents’ lessons were lacking, and I’m still trying to unlearn bad habits that have led to over-spending and under-budgeting.
And now, it’s not just about me. I have a young daughter, and I want her to grow up with power over her finances, and not the other way around. As my husband and I begin to plan her financial education, we are focusing on four key areas that are my greatest financial weaknesses.
I hope that they will be her strengths.
Bad Habit #1: Using Your Money While You Have It
Both my parents grew up with a poverty mentality that perpetuated a feast-or-famine attitude toward spending. When your paycheck comes, you spend. When the end of the month comes, you starve. When I married and saw my husband set aside money every month for things like furniture, appliances, auto repairs and even smaller things like haircuts, I was floored. Now, I try to live from the axiom that money stays around as long as you save it.
How we teach it: To teach my daughter to be wise with her finances, we’ve started a savings account for her, and as she grows we’ll give her a specific amount that she’ll be allowed to spend each month within it. We’ve set aside a section of our budget called “Ellis” (our daughter’s name) and as soon as she starts asking for clothes and candy, we will give her a checking account and help her learn to use it. By the time she’s nine, we plan to put her in charge of her own budget. If I buy her shoes or clothes, she’ll have to pay me back.
Bad Habit #2: Believing That No Credit Is Good Credit
My parents have had problems with credit cards, and raised us to believe that all debt was bad. Consequently, when I went to rent an apartment after college, my name couldn’t be on the lease because I had no credit history. Debt is bad when you let it accumulate, but using a credit card and paying off the balance every month is a smart way to built good credit, so when it comes time to rent or own, you won’t be at the mercy of your roommates.
How we teach it: My husband’s parents helped him sign up for a credit card at a young age, which he used to purchase things he needed and paid off every month. We plan to sit down with our daughter each month and show her what purchases we’ve made on our cards, and how we pay them off every month. Our goal is to help her learn how to wisely handle credit, so she won’t misuse it later in life.
Bad Habit #3: Hiding Your Flaws
In college, I lived in a perpetual state of uncertainty. Because my parents’ finances were insecure, I never knew if the money would be there to pay for the next semester. I worked hard to bridge the financial gaps, taking a second job when I could. Finally, my junior year, I walked into the financial aid office and asked for help. The counselors were kind and non-judgmental. I’d been warned by my parents not to discuss finances with the school (or anyone), but talking about it was the best thing I could have done. I learned about additional loans I could take out, and was recommended for a summer job on campus, which helped me take charge of my school payments.
How we teach it: I now love hearing how people save money, as well as their investment strategies and tips and tricks for saving. Talking about money doesn’t have to be shameful. In fact, it’s often very helpful. Hiding your problems doesn’t make them go away. I never want my daughter to think she has to hide her flaws, whether a bad credit score or something else. Honesty is best taught through example: I plan on discussing money openly with our daughter, and including her in our budget decisions.
Bad Habit #4: Buying Now, Paying Later
Right after I graduated college, I wanted to buy a car. My husband (then my fiancé) told me to wait. “Don’t go into debt for a depreciating asset,” he said. “We can make this work.” And we did. We were a one-car family for two years as we saved for a car. To this day, when it comes to furniture and appliances and vacations, we set aside a little every month, so that when it comes time for a big purchase, we’re prepared.
How we teach it: My husband learned this lesson as a child: “If you don’t have money, you don’t get it.” Meaning, you don’t buy that thing you really want just because you want it. By putting our daughter in charge of her finances early on, we hope to instill this virtue in her by letting her see firsthand the true value of money. Outside of gifts, necessities and the occasional treat (we’re suckers), if our daughter doesn’t have the money to buy something she wants, then she simply won’t be able to get it.
Unlearning the bad money lessons my parents taught me hasn’t been easy—I have to constantly rethink purchases and financial decisions, but the good news is, watching my husband, seeing us budget and hearing our plan for their granddaughter has inspired my parents to start saving more and spending less, too.