I’m going to go ahead and make a bold statement.
Though we all played some role in the most recent recession, the economists who failed to see the drop until it was too late probably should have listened to their mums.
My mum was the source of most of the financial lessons in my life.
Now, I probably wasn’t the easiest of kids. At 15, I had fully immersed myself in the hardcore music scene, listening to bands with lyrics drenched in socialist thought. By 16, I’d chewed my way through any left-leaning literature I could get my hands on that spouted the evils of capitalism. But there my mum was, never questioning my beliefs – instead she cut the labels out of my Gap shirts and even avoided the stores I felt did business in bad faith.
Holding Fast to Personal Finance Values
Throughout this phase of my life, there was one belief of mine my mum didn’t buy into – the notion that the banking systems were silly.
And I’m glad she didn’t.
Having worked as a bank teller until I was eight, my mum carefully cultivated our attitude towards personal finance from a very young age. Now, I’m nearly 30, and have never been afraid of financial decision-making.
In a tribute to Mother’s Day, I’d like to share with you some of the kernels of wisdom my mum instilled in me.
The 30/70 Split
I remember being both terrified and excited when my mum and I opened my first bank account. Growing up in a small town, all the tellers knew my name – so there was this elevated importance of having not one but two savings accounts.
My mum called it the 30/70 split.
For every bit of money I made through refereeing hockey or cleaning a hair salon, I would put away 30 per cent in my short-term savings and 70 per cent in my long-term. Now keep in mind, at 12 years old, it’s tough to tell your kid they’re saving for college, so instead the “long-term” savings account would be used for bigger purchases like rollerblades or a Nintendo 64. But the point was, it taught me that distinction.
Each week when mum did her banking, she would get our books updated and I watched as the interest (in penny form) accumulated.
When it comes to savings, every little bit counts. Having a bank account for those month-to-month expenses, and a separate one for those long-term expense like mid-winter getaways or a down payment is key.
Growing Up With GICs
By 14, I was easing into my first part-time job. As my long-term savings account grew to $500, back we went to the bank to buy my first Guaranteed Investment Certificate (GIC).
With the higher interest, I was content to let my money sit while the pennies turned into dollars.
Anytime I felt like I wanted at that money, my mum was there to remind me that it would help me pay for school and would only grow the longer I waited.
The point – be savvy about your money. There are so many options out there for where to put your savings. Familiarize yourself with the different types of investments or savings accounts and find one that works for you.
Having a Plan
At 22, I’d graduated school and moved from campus to downtown. Eager to start my journalism career, I was looking to get my foot in the door at any newspaper or magazine that would have me. However, living on campus had given me a skewed viewpoint about cost of living.
My mum asked if I wanted to sit down and hash out a financial plan. Well into adulthood, I was obviously stubborn at the idea – the last thing I wanted was my mum telling me how to run my finances.
After drafting up my own plan, which pegged the cost of living per month in Toronto at $750 – mum kindly suggested that maybe I should factor groceries, transit and entertainment expenses into my budget.
There’s nothing wrong with being in control of your own finances. But sometimes an extra set of eyes helps. Needless to say, mum made a pretty good case for working with a financial planner.
Debt is a Natural Thing
Debt creeps me out. My palms get sweaty and I start factoring the cost of a coffee purchased on my visa into my overall financial picture. But mum gave me one of my greatest assets when it comes to my personal finances – an understanding that debt is a very natural thing in this day and age.
In her defense, she wasn’t arguing I should go out, crack open a line of credit and blow it on that fancy foosball table I’ve been eyeing.
But some of the important things in life – buying your first house, a car or raising children – might put you in debt. The point is, take a deep breath, understand it’s natural and formulate a plan to pay it off.
I’m very grateful for the lessons my mum has given me and I hope you can find some wisdom in my mum’s words.
This post is also available in: French