When it comes to money, lessons from grandparents never get old.
Nick Jackson, a certified financial planner with Flinders Wealth, is just one expert keen to hark back during COVID-19 to get ahead.
He told nestegg.com.au “the tried and tested lessons you probably heard from your grandparents still ring true”.
“Spend less than you earn, have a buffer for a rainy day, (and) borrow less than you can afford,” he advises.
“These things might sound cliched, but when an event like COVID happens, if you’ve built in these shock absorbers to your finances, you can not only survive, but thrive.
“In this situation, what you can control are your expenses – look at cutting costs, try getting better deals with service providers and speak to your bank about lowering your interest rates on any loans or debt.”
Even though many of us can’t go to restaurants or pubs during the pandemic, there’s still a need for financial discipline: Uber Eats bills and online shopping might be “going through the roof”.
“How much of our cash goes to non-discretionary expenses versus discretionary?” he asks.
Mr Jackson says there’s no way of avoiding budgets because it’s “important to understand your spending habits”.
“Bank accounts are pretty good these days [at] showing you a breakdown of your spending – compare a recent monthly statement during lockdown to one from six months ago,” he advises.
“Maybe there are some permanent spending changes you can make to help you save or redirect to items or experiences you value more than others.”
Good examples: what we can learn from our grandparents
Pay cash
My grandmother never owned a credit card. She paid cash for everything and tracked every nickel in little paper passbooks. We found dozens of them when she died. She was meticulous. She was frugal. And she was always in the black.
Take care of your stuff
Today, we live in a throw-away culture where it’s easy and relatively cheap to replace most things we own. Not so for our grandparents. Every item was considered an investment and, therefore, everything was diligently cleaned, waxed, oiled, painted, patched, and repaired. Their stuff lasted forever — and that saved money.
Hone practical skills
My grandfather farmed, raised livestock, built his own house, repaired machinery, and – I kid you not – divined for water using the twigs of a willow tree. With that level of skill, I wonder if he ever needed to hire anyone to do anything. Today, developing frugal skills is still a great way to build self-reliance and save money.
Get creative
Folks who grew up during the Great Depression had to channel their inner creativity to survive. Their ingenuity helped them feed their families, earn an income, keep their kids clothed, and maybe stash a few bucks on the side. It’s the same today; discovering ways to boost creativity can still positively impact our budgets and keep us engaged and inspired.
It’s better to own
With few exceptions, it’s better to own than rent, especially during tough economic times. Access to money-producing assets (land, a house, a paid-off car, and the like) helped many generations survive and build wealth.
Always shop around
Always look at every deal available before making a purchasing decision, no matter what you’re getting. Many of us are pretty good at doing this when it comes to general shopping such as looking for specials at supermarkets or a department store. It’s easier to get lax about it when it comes to more complicated financial products like home loans or insurance.
Build an emergency fund
Some people are very good savers, but then they make the mistake of tying up all their cash in assets such as stocks. This can cause problems if you have to dip into your savings, buy on credit or sell stocks to pay for a big unexpected bill, undercutting the interest you’re earning and feeling like you’re taking a backwards step.
Be diligent with setting up an emergency fund and ensure you have an adequate level of cash flow for your needs.
Good advice: what grandparents can pass on
Debt is a form of slavery
Remind your grandchildren to keep their overheads lower than their income, and to pocket the difference. And urge them not to let every bump in income become a boost in lifestyle.
Pay yourself first
Tell your grandchildren to automate savings and make that an unwavering part of their routine. Doing so puts the twin forces of time and compounding interest on their side.
Forget about impressing the Joneses
Buying new cars, big houses and designer handbags might impress others, but these goods often mask high debt and a precarious relationship with credit. Don’t confuse easy access to credit with real wealth. Real wealth is usually the product of responsible spending, maximising the value of every dollar and trading glitz for modesty and security.
Save early
Saving is a long-term proposition. No matter how modest the amount, starting the savings habit early pays off. A broader time horizon means more years to:
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- benefit from compounding interest
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- experience upswings in the market
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- recover from downturns in the market
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- refine your investment style.
Craft clear financial goals
Financial goals can be too broad — buy a house, save for retirement, and keep paying our bills. To succeed financially, goals need to be specific. For example, it’s fine to aim at buying a home. But what kind of house suits your needs and lifestyle? What size of down payment would leave you with a comfortable mortgage? Grandchildren who can answer these questions in detail will have better-defined goals that, in turn, can motivate them to make better financial decisions.
Set your own spending limits and stick to them
In life, there is no shortage of companies trying to get you to spend — from credit card lenders increasing your credit limit to banks steering you toward the largest mortgage for which you qualify. Don’t let these companies set your grandchildren’s personal spending ceiling. Instead, encourage them to decide for themselves what they can afford, what they’re comfortable with and what their priorities are. Tell them to remember that they are in charge of making money and they decide how it gets used.
What are the best money hints you received from your elders? What financial advice would you pass on to younger people? Why not share your experience in the comments section below?
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