My parents taught me many important lessons on money, and were the primary sources for my financial education. I’m grateful for the principles, values, and habits they instilled in me from an early age.
Thanks to my mom and dad, I always understood the importance of saving, working hard to earn more (in order to save more!), and the value of a dollar. Because of the way I was raised, I didn’t even realize spending more money than you actually had — with the help of credit cards — was something you actually could do.
But there’s one area of my education in which my parents came up short. They didn’t teach me anything about investing.
Why My Parents Didn’t Teach Me About Investing
I can’t be too upset, because they never needed to know much about it themselves. My dad is a soon-to-be retired firefighter enrolled in a generous pension plan. After working for the same county for 30 years, he’ll retire at age 50 and continue receiving most of his salary. And my mom has worked for the same, very successful, family-run business for the last 20 years. While she doesn’t have a pension, she does have a good 401k plan that came with a company match.
From learning about other people’s career and retirement situations, I feel like my parents are pretty unique. It’s like they were the last people who boarded the golden age of retirement train, where working for the same organization your entire career equaled a retirement plan that was taken care of for you.
While they understood the basics of investing — and shared enough with me that I understood it was important to save for retirement and take advantage of employer-sponsored retirement accounts — they only knew what they had to as it applied to them.
My situation when it came to this area of financial education, however, wasn’t unique at all. Most people report having learned what they know about money from their parents. There was no formal financial literacy class in grade school or college, and our culture brands money as a taboo topic of conversation outside our closest circles.
So if we don’t learn all there is to know about money in the real world from our parents, the responsibility to pick up this information and knowledge falls 100% to us. And that can be overwhelming! Where can we start?
Taking Charge of My Own Financial Education
The best way to get started learning about money is to ask questions — and then seek the answers.
In my experience, I didn’t even think about “investing” — whatever that meant — until I was getting close to graduating from college. I graduated in 2011, so for the last year or so there had been a lot of media coverage on the stock market, housing market, and how the crash of 2008 left people in a retirement crisis.
It was hard to miss all the noise on this, and even though I was only 21, the hype was enough to make me nervous. If people working 30 years in high-powered and high-paying jobs couldn’t manage to save up for their retirements, how could I? What was the point of giving my money to brokers on Wall Street if they got the guaranteed return by managing the money, but I was gambling by betting on those same people to figure out how to beat the market year after year after year?
How could average Joes manage to get ahead? It seemed like normal people were barely able to keep up, financially speaking.
The result of this exposure to financial news and commentary was that, from a young age and before I even started my career, I wanted to know more about investing. I wanted to know what I had to do in order to make sure I wasn’t one of those people I knew or heard about who had lost everything and were now looking at working for the rest of their lives.
So I started asking questions. I started running Google searches. I wanted to figure this investing stuff out.
Seeking Help from Professionals
When I started trying to figure out what I needed to do then to find financial security and success down the road, I thought all I needed to do was save as much as I could. I quickly realized that sitting on stacks of cash would never be enough — and that I needed to put money in the market to earn a return and harness the power of compound interest if I wanted to build wealth.
This was an awesome step forward to take: I understood the importance of investing and starting ASAP. But I felt really confused by how to do it.
I felt that working with someone like a financial advisor would be the smartest thing to do. And working with the right professionals can provide an awesome return on your investment. Yes, they charge for access to their knowledge and advice, but they can help you do more with your money through good recommendations than trying to go it alone.
Much depends on finding the right person to work with.
Unfortunately, learning about the financial planning industry itself was a step in boosting my financial education that I failed to take. At the time, I didn’t realize that there were such things as fee-only advisors and fee-based advisors. I 100% trusted the advisor that I ended up working with, because he had done wonderful things for the finances of a family member.
But the fees I ended up paying were, I would later understand, absolutely ridiculous: somewhere in the range of 4%!
Thankfully, I kept researching and trying to learn more about investing and finance in general.
(This isn’t to say all financial advisors are “bad.” Again, the right professional can work with you to get your finances on the right track. If you are interested in working with an advisor, I’d suggest finding someone who is fee-only and focuses on financial planning instead of investment management.)
Asking questions is something you should never stop doing if you want to continue to learn. Even after we set up some accounts managed by a financial advisor, I kept reading online and I kept searching for new information.
Eventually I came across Mr. Money Mustache and the forums he hosts on his site. My first impression: skepticism and irritation. After reading MMM’s story of how he reached financial independence, I was so turned off. Easy to be frugal and invest huge portions of your income when you make well into the six figures! I thought.
We made so little at the time that frugality really didn’t help us much. It took more digging into the MMM site and forums before I became a convert and started listening to what was being said and shared. I realized that frugality was only part of the equation; making more money mattered too!
This was my introduction to things like Vanguard and index funds — and, more importantly, the empowering concept that investing wasn’t as complicated or impossible as I had previously believed.
If I was willing to learn, this was something I could do myself. Amazing!
After hanging around MMM for a few months, I emailed our current financial advisor and told him I wanted to move money that was in a joint savings account over to Vanguard. He didn’t like that very much, but had no response when I asked why should I be paying massive fees to be put in actively managed accounts that were unlikely to outperform the market over time.
It was the beginning of handling our own investments, and it kicked off a lot more reading and learning over the next year. It even lead to me starting my own personal finance blog to share my experiences, knowledge, and thoughts on money.
We’ve come a long way from not knowing anything about investing, to understanding why it’s important, to making mistakes by entrusting our assets to someone who didn’t work in our best interest, to continuing to learn and starting a whole new journey of figuring out how to manage our investments ourselves (and how to do it succesfully).
We still have a lot to learn and we’ll keep asking questions. No one ever has financial education 100% figured out and understood.
But that’s how we can take charge of our own education: understand that there’s always more to learn, and go seek out what we don’t yet know. Challenge what we think we do know. Don’t be afraid to ask for help, but never defer to one person’s opinion without first examining other alternatives and understanding the motives behind the advice.
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And if you make a mistake? Don’t panic. Examine what happened and understand why it was a bad decision or an error. Then learn from it and continue on.