Giving your kids life advice is a basic requirement of being a parent. You have to teach them how to drive, do laundry, and cook basic meals.
However, before you start giving them financial advice, it’s important to remember that times have changed. Advice that would have been helpful when you were their age may no longer apply.
Here are 12 pieces of financial advice to avoid giving your kids.
Back in the day, going to college was your golden ticket to getting a good job. But nowadays, going to college should be a thoughtful decision — not a knee-jerk one.
Getting a degree should be something you do because you have a specific career in mind. And if you don’t know what you want to do, it may be better to take a gap year than jump into school immediately.
Also, some older folks don’t appreciate that working in the trades is a valid career path. You can earn a handsome salary without incurring tens of thousands in student loans.
There are few things older folks like more than to tell their children to pay down their mortgage debt as fast as possible. It makes sense — back in the 80s, mortgage interest rates were in the double digits. It was logical to pay down the mortgage quickly.
However, nowadays, mortgage rates are lower than what you’d earn in the stock market (about 10% a year). It’s better to put any extra funds in a retirement account to build a nest egg for the future.
When you’re older, keeping your money in a safe place is important. However, that’s not good advice when you’re young.
When you’re young, you should focus on putting your money where it can grow for you — in the stock market. A savings account is not the best place to hold your money — at least not for the long term. You can put your emergency fund in a savings account or any money you might need in the next few years. However, money you don't need for several decades should be invested.
Many Boomers still believe that buying a home is a requirement for financial success and security. But with housing prices and interest rates still relatively high, buying a home isn’t right for everyone.
Plus, when you're young you need more flexibility if you decide to move, switch careers, or want to go back to school. Being shackled with a mortgage in your 20s is like getting married in your teens — it’s rarely a good idea.
One of the more insidious pieces of advice that you can get is to pay down your debts before starting to invest. That’s usually wrong.
The average annual return for the S&P 500 is about 10%. If your interest rates are lower than that, then you should focus on investing, not decreasing your debt.
Many older consumers don't understand the value that a credit card can provide. Nowadays, rewards cards include countless perks that can save you money, especially if you’re a frequent traveler.
Your parents may think using a credit card is the easiest way to get into debt. However, using credit cards is smart - if you’re a responsible consumer. They also provide more fraud protection.
It used to be that if you went to a name-brand school with an amazing reputation, it would be easy to land a job after graduation.
However, where you go to school doesn't always matter. If you are taking out substantially more in student loans, then you’re not making a wise financial decision.
Taking out $100,000 in loans to attend Harvard isn’t a guarantee of long-term financial success.
Back in the day, you could work at the same company for decades and be rewarded with a generous pension when you retired. But, since the 1980s, companies have slashed their pension programs so there’s little reward in working at the same place for a long time.
Research shows that the best way to get a substantial raise is to get a job with a new company. And employers don't expect you to work at the same place your whole life. You don’t have to get a new job every year, but switching every few years is normal and financially prudent.
Boomers love their whole life insurance policies. They feel like a safe choice, especially in contrast to investing in the stock market.
But whole life policies are expensive — and usually unnecessary for young people. Instead, pick a term life policy. You’ll save hundreds on premiums, and you can use the difference to invest in the stock market.
For many boomers, getting a master’s degree automatically led to a higher salary and a promotion. But going back to school can cost tens of thousands of dollars and may not always be worth it.
Wait to see if you actually need a master’s instead of applying to grad school right after graduating. Sometimes your company may even pay for your master’s. Other times, they may be fine with you getting a certificate instead of a full advanced degree.
Years ago, being a stay-at-home mom meant your family could still reasonably rely on one salary. But nowadays, staying at home can have dire consequences.
Returning parents often find it hard to restart their careers, which can result in them having to start at the bottom again. This can also result in them losing out on future retirement savings and Social Security benefits.
Stay-at-home parents should still find ways to be part of the workforce, even if that means working a few hours a week, consulting, or having a side hustle.
If you have a hobby, you’ve probably heard people tell you to turn it into a side hustle. And while you might make a few bucks, you’ll also likely turn something you enjoy into something that reminds you of work.
That’s not to say you shouldn’t leverage your skills to start a business or side hustle. However, don’t think you need to start a quilting Etsy storefront just because you like sewing.
