The Financial Advice Your Parents Gave You Is… Outdated. Here’s What to Do Instead
Pound the pavement. Just go and deliver your resume in person. Get out there and shake some hands, why don’t ya!
We’ve all heard these financial pearls of wisdom from our parents (and not always because we asked). Despite their best intentions, a lot of these tips from our elders are, well… outdated. To say the least.
Here are six pieces of advice from our parents that simply don’t apply to us anymore — and some smarter options.
1. Work Your Way Through College
Working your way through college used to be an option — back when tuition cost a reasonable amount. That was a long time ago, though.
Most colleges’ tuitions have easily doubled or tripled since the 1980s and ’90s. Working a job while you attend college can help pay the bills, but it won’t pay for college. That’s why so many of us are saddled with student loans.
Once you graduate, refinancing could help you pay off your loans faster and save money in the long run. By combining multiple loans into one, you’ll replace your federal and private loans with a single private loan.
In addition to simplifying the repayment process, refinancing can reduce your interest rate and lower your monthly payments.
2. Keep Your Money in a Savings Account
This is standard parental advice: Open a savings account. That’s the best way to save money.
Yeah, OK, fine. The problem is, with interest rates so low, a savings account these days will pay you pretty much zero interest. You may as well stick some cash under your mattress.
However, a debit card and digital account called Aspiration lets you earn up to 5% cash back and up to 16 times the average interest on the money in your account.
Not too shabby! You just have to get with the times and move beyond using a brick-and-mortar bank.
Enter your email address here to get a free Aspiration Spend and Save account. After you confirm your email, securely link your bank account so they can start helping you get extra cash. Your money is FDIC-insured and they use a military-grade encryption which is nerd talk for “this is totally safe.”
3. Always Buy a House — It’s a Great Investment
This is an oldie but a goodie. I can still hear my parents: Why are you still renting? When are you going to buy a house? It’s a great investment!
The problem is, buying a house isn’t for everyone, especially with the price of homes being so astronomically high these days.
It’s easy to make a compelling case for either choice. Renters don’t have to worry about the housing market or mortgages; buyers get tax breaks and a way to invest in their future.
There’s no one right answer, because every financial and living situation is unique and people’s priorities change over time. Where you plan to live — and how long you plan to live there — is a huge factor in whether it makes more sense to rent or buy a home.
4. Buy Savings Bonds
What are savings bonds? You might remember them as something boring your grandparents used to give you for your birthday.
Savings bonds are an old-school, super-low-risk kind of investment. Most savings bonds earn interest for 30 years. But the problem is, they won’t really earn you much money. For example, series EE bonds have a low interest rate of 0.1%.
These days, you’re better off investing your money in stocks. Sure, the stock market can be a little volatile, with stock prices going up and down. But historically, investing in the stock market will earn you a 7% profit over time.
Whether you’ve got $5, $100 or $800 to spare, you can start investing with Robinhood. Both investing beginners and pros love it because it doesn’t charge commission fees, and you can buy and sell stocks for free — no limits. Plus, it’s super easy to use.
What’s best? When you download the app and fund your account (it takes no more than a few minutes), Robinhood drops a share of free stock into your account. It’s random, though, so that stock could be worth anywhere from $2.50 to $200 — a nice boost to help you build your investments.
Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder. His dad gave him sound financial advice: “Never bet against the house.”