My mom passed away 10 years ago. She never had the chance to meet her granddaughter, but she did leave a valuable inheritance for my daughter and our entire family for generations to come.
Before you jump to the wrong conclusion, Mom wasn't rich. Like many people her age, she had a decent-sized nest egg that she fussed and worried over in her retirement years, especially when after her 70th birthday her battle with cancer forced her to stay at home. As it turned out, her savings proved sufficient to cover her own expenses with something left over for my brother and me.
The most valuable thing Mom passed along was not the money, but the lessons she taught us about money and its importance in living a well-balanced life. These are lessons we'll pass along to our children and hopefully they'll do the same.
Inheriting good sense
A kid and his money are soon parted, especially when there are toys and other temptations to be had.
And so it was in our household. But Mom let me make my own financial mistakes as a child, and by doing so she achieved the far greater goal of giving me a healthy skepticism about overhyped products and the people who tried to sell them to me.
From Star Wars figures to deferred-load mutual funds, Mom somehow got me to appreciate my own ability to manage my money and was more and more confident in me as time went by.
As the years go by, I never stop learning new things about money and investing. It's that desire for knowledge that is my mother's greatest gift. If you have the drive to learn, you can do anything you want with your money.
From my mom to you (or yours)
I fondly think back on many things my mom used to pound into my brain. Let me share some of her wisdom:
Save, save, save. From having your kids gather pennies and nickels to setting up their very first savings account, teaching your kids the power of not spending their money right away will pay dividends throughout their lives.
Steer clear of fees. Mom never liked the idea that her broker was making more money on her account than she was. If you agree, learn to use discount brokers and no-load mutual funds to keep more of your money. Your broker won't like it, but your family will love it.
Be conservative. Playing it safe may not be the most glamorous way to manage your finances, and it doesn't always produce the best returns. But if you can save enough, you don't need to gamble as much on whether aggressive stock investments will pay off. Moreover, planning for a less favorable rate of return may help you through unanticipated tough times, such as the meltdown in the financial markets five years ago.
Stay out of debt. Except for her mortgage, Mom didn't believe in debt. Her idea was that if you couldn't pay cash, you just hadn't saved enough yet. Although avoiding credit entirely is a no-no in today's financial world, in which having a good credit score is essential for everything from finding a place to live to getting your next job, not taking on unnecessary debt is still good advice.
It's simple advice, but it can have a profound effect on your family. My daughter may never realize where those lessons originally came from, but I know she'll get a lot out of what my mom taught me.
Thanks, Mom, and happy Mother's Day.
Old-School Money Tricks That Still Work
Money Lessons From Mom
With the various incentives to use credit and debit cards, cash can often seem like an afterthought. After all, obtaining, tracking, and toting it can seem more hassle than it's worth. But if credit-card swiping is turning into mindless spending with month-end statement shock, it might be time to switch from plastic back to paper.
A once-weekly withdrawal from a no-fee ATM can help keep spending on everything from incidentals to luxury items in check. Want to take it up a notch? Try budgeting and paying cash for purchases larger than the daily latte: groceries, gas, mass transit tickets, or an evening out.
Bank of America offers its customers the chance to Keep the Change. The premise is simple. For every purchase a customer makes with his or her debit card, Bank of America will round up to the nearest dollar, and deposit the difference into your savings account. The bank will even match the difference for the first three months, up to $250. The catch? B of A charges a $12 monthly maintenance fee for customers who don't use direct deposit or maintain a $1,500 minimum balance.
The old-school alternative? A mason jar and a daily ritual of emptying pockets and purses of any loose change left over after paying for items with cash.
There's something inherently charming about the old Holiday Club and Vacation Club accounts. They call to mind days when every $5 received in a birthday card was squirreled away; when banks still gave out toasters, and lined their counters with jars of lollipops.
It might sound quaint, but the discipline works. Socking away a few dollars a week over the course of several months to help fund a vacation or holiday shopping adds up. The cash out at the end of the term is like winning the lottery -- one lump sum comprised of tiny, barely noticeable amounts throughout the year.
Previous generations knew their banker by name, knew his or her children's names; they swapped stories, were part of the same community. While it's temping and convenient to complete most banking transactions online or rush in and out of a branch when needed, what's lost is a personal connection that email alerts and social-media posts simply can't replace.
There are tangible benefits to getting to know local branch staff. Having a face-to-face connection with bank staff can be helpful in resolving charge disputes, being kept abreast of rate changes, and getting information on specially tailored products.
Before the days of the large international bank, most people had their financial needs met at the corner savings and loan. If big banking has lost its appeal, seek out smaller, local banks, many of which aren't publicly traded, or credit unions, which are not-for-profit. The difference between these two types of banks and large, publicly traded ones is that banks that don't have to appease shareholders can focus on its customers first.
According to the Independent Community Bankers of America, local banks focus on "personal service, local credit decisions and ownership, and reinvestment in the community." And according to the Credit Union National Association, credit unions exist to provide financial literacy for their members, serve the needs of their members regardless of means, and offer lower rates than traditional large banking models.
While no one would recommend stashing savings under a mattress or issuing I.O.U.s for groceries, adopting some old-fashioned tactics for financial management might be just the ticket to thriving in the modern world.