In my early adult years, I made some REALLY bad money decisions. I imagine many of us can relate to that on some level. I think back to those days and wonder “why I was so dumb with my money?”
The easy answer is to go with the “young and dumb” trope. It took me some time to realize it was deeper than that, more fundamental. A lot of my money issues as a young adult were borne out of my childhood experiences with money, borne out of my “money memories” from those formative days.
My parents divorced when I was young and my father had to raise four young children on his own. Raising a large family with two parents is tough enough, doing so as a single parent is exceedingly tough. In fact, single parenthood is one of the primary factors for those living in poverty. We were no different.
We grew up dirt poor in a rough and tumble inner-city neighborhood (oh, the stories!) surrounded by chaos and people looking to get by. Money problems played a key role in the struggle.
Given those circumstances, even the most financially savvy among us would have a difficult time making ends meet. Unfortunately, my father was far from financially savvy. Money was always a struggle, always a topic of conversation. Actually, “conversation” is overstating it. Money was always talked about but it was never discussed.
My father would constantly bitch and complain about money. About how we never had enough, how the fat cats at the company were getting rich while keeping everyone else poor, how the government wasn’t doing enough for workers like him and on and on.
He always spoke about money in a negative way. He put down people who bought “fancy houses” and “foreign cars” (he was a steelworker in the 80’s so, you know). He was convinced that everyone around him was fixated on and worshiped money. He was never able to see the self-deception, he was never able to see how fixated on money he was.
He always spoke about our money situation as if it was beyond his control, as if he wasn’t an active participant. The multiple bankruptcies? Not his fault. Never having any savings to fall back on? Not his fault. No retirement savings? Not his fault. Always having to “borrow” money from his mother and not be able to pay it back? Not his fault.
My father never formally sat me down to teach me about how money works but he taught me many of the money lessons I would take with me into young adulthood. And with my father, most of my learnings were of the what not to do variety.
One of my later learnings was many of my “life” decisions were really “money” decisions masquerading as life.
For example, I’ll always remember the time when I cut the top knuckle of my middle finger trying to retrieve a baseball from a broken window. It was a really bad cut, bad enough to where I could literally see the bone.
If that happened to one of my girls, we would’ve whisked her off to the hospital post-haste to get proper medical care. Stitches, physical therapy, plastic surgery – whatever she needed, she would get.
But, that’s not what happened to me. I ran home, into the bathroom with blood dripping all over me, and provided my own medical care. The first step was to stop the bleeding and clean the wound. Then, I “butterflied” the wound with tape in lieu of stitches. Finally, I created a makeshift splint out of a popsicle stick and taped it to my the palm of my hand and my middle finger so I couldn’t bend my it and break the cut back open.
I was lucky. No ligaments were affected and the cut eventually healed although it was tender for a number of years thereafter. I even have a nice scar to serve as a reminder.
What I didn’t do was approach my father about going to the hospital. We didn’t do that, go to the hospital. It was too expensive, we “couldn’t afford it.” If I was stupid enough to cut my hand, I had to be tough enough to deal with the consequences. Didn’t matter if I was 13 years old at the time.
It wasn’t until many, many years later did I realize the connection between money and that life experience (and others like it). If my father was a better steward of his money, I would have received proper medical care instead of serving as my own doctor. It was obvious how his poor money habits affected my health and wellness. What wasn’t so obvious was how they affected my views towards money.
While my father was fixated on money, I grew up with an indifferent almost cavalier attitude toward it. A part of me understood the importance of it. After all, I was buying most of my own clothes since I was 12 years old using birthday and Christmas money.
But, a larger part of me didn’t know anything about money, didn’t respect it. My money troubles started when I went off to college and had access to a broader (and more dangerous) financial world. They continued and compounded once I graduated and got into the workforce.
I made soooo many money mistakes in my early years. I want to say I’ve made them all and learned them the hard way.
I borrowed my way through college without having a clue as to what that meant. When I didn’t have money in college, I took out a bunch of credit cards and maxed them all out.
When I started working I didn’t save into my 401k plan for a number of years and then only at minimal levels.
I tried to buy a fancy car but the bank was smarter than I was and denied me the loan.
I quit my job as a manager at a regional bank to work as an assistant golf pro at a country club making next to no money. Why? I don’t exactly remember. Maybe I was trying to “find myself?”
During the dot.com boom (and subsequent bust), I mistook speculating for investing.
I didn’t start saving for my girls’ college education early enough.
And the list goes on and on.
Growing up poor and then mismanaging your money as a young adult teaches you valuable lessons. Some are obvious – credit card debt is bad, investing as early as possible is good. Others are less obvious – investing and speculating aren’t the same thing, college debt isn’t always “good debt.”
Despite the challenges, I’m grateful for my upbringing as it’s provided me with amazing perspective and a well-rounded view of the world. If you’ve never been under the pressures of figuring out how you’re going to pay your gas bill, put food on the table and make your car payment while refusing to answer the phone because “it’s probably a debt collector” … it’s hard to know just how much money can debilitate you.
My experience with money has been a tale of two lives. In one life, I was uneducated, undisciplined, and out of control. In the other life, I’m the complete opposite. Educated at the highest levels, structured and well-thought-out, forward-thinking, and in control.
These experiences have been incredibly beneficial for this reason: it’s taught me how emotional money is and how those emotions often hold sway as we make our day-to-day financial decisions.
The first half of my financial life has been filled with all of the “what not to do’s.” The second half has been filled with the “what to do’s.”
Both are important as I teach my girls the importance of money.
How do you learn without a teacher?
Ultimately, we don’t want our children to make the same mistakes we did. We know how difficult it is to walk that walk. But, what are we doing to ensure our children walk down a more enlightened path?
Kids learn in a lot of ways. In the classroom. From their peers. From their coaches. Most importantly, they learn from their parents – both by listening and watching. In fact, most early learning comes from observation.
Have you ever thought about what your kids might be learning as they observe your financial choices?
Without saying a word, you are teaching your kids about money. The house you live in, the car you drive, the clothes you wear, the foods you eat, where you vacation, if you vacation – they all teach your children about money.
Do you buy name brand clothing? Cereal from a bag or a box? Aldi’s or Whole Foods?
New cars vs used cars? Do you cook your own food or order in religiously? Clean your own house or hire it out?
These everyday financial decisions create the field of vision for your kids’ world. If you scoff at buying cereal from a bag, your kids will likely do the same. If you celebrate buying eggs for 29 cents a dozen at Aldi’s versus $1.50 a dozen at Whole Foods, that teaches your kids something.
What you do is a powerful way to lead your children, to give them permission.
We give permission in two ways:
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- Explicitly – by verbally saying “yes, you can …”
- Implicitly – by not saying anything at all thereby implying it’s “okay” because you didn’t say no or stop them
Learning from observing is implicit but it’s powerful. Being a good example means more than any lecture will ever be.
I can attest to that. My father never sat me down to talk about money but I’ve learned a great many things from the man. Sure, they were mostly what “not to do” but they were learnings nonetheless. Hopefully, you can teach your kids what “to do” by being a good example for them to follow.
If you are a good financial example for your kids to follow and can bolster that by facilitating conversations about money, it’s an amazingly effective combination for raising financially savvy children and young adults.
I could write an entire white paper about raising financially saving children but will limit my comments to three foundational elements:
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- Money is a scarce resource and should be treated as such. Our money, our parents’ money, the government’s money. We should never be flippant when it comes to money or take it for granted.
- Money, in and of itself, is neither good nor bad. What we do with it and how we conduct ourselves in pursuit of it is a reflection on us not money.
- Money is emotional and most of our bad decisions with money stem from some emotional element money is used to fill. We buy the big house to show others how successful we are, we buy a bunch of new clothes in response to a difficult break-up, we go on amazing trips so we can post photos on FB and IG so everyone can see how free-spirited we are. It’s amazing how much farther our money goes when we’re not spending it emotionally.
It’s easy to dismiss these three as philosophical and psychological ramblings. I disagree. Understanding the psychology of money is THE missing ingredient to good money management.
It is important to stop and reflect on how your past can influence the way you feel about finances. Have you talked to your family about your good and bad financial decisions and how it affects your emotions about money? What are some financial decisions you made that were more emotionally driven than anything else?
Go ahead. Ask. It is a great place to start the conversation.