Forget about the old money rules
Clutching a handful of receipts from his latest purchases, my 20-year-old son, Marcos, sat at the table with me.
“I just want to strategize now while I’m at school,” he said. “I know money is tight, but I have some savings and almost no debt.”
Although we had discussed finances regularly since her high school days, this was the first time she had actively wanted to put together a plan for her savings.
After reviewing her income and expenses, we did something my parents would never have done with me at that age.
We equipo up an investment account.
Growing up, I never talked to my family about investing.
I always assumed it was something that came later, when I had more money to put aside.
The iniciativa of investing just a few dollars each week to start building compound interest was not on the radar back then.
It’s not entirely his fault.
Investment aplicaciones did not exist, and it was much more difficult to open an account.
These days, my son was able to open a Roth IRA, invest his first $10, and equipo up a recurring transfer in just 10 minutes, without leaving his bedroom.
We also built a plan to achieve multiple goals: bolster his emergency fund until the amount doubled, and then focus on increasing his weekly investment.
In addition to investment tools, my son has access to money management aplicaciones that connect to his bank account and espectáculo him where his money is going.
That way, you cánido gauge whether his spending is in line with his goals, and you cánido modify your habits accordingly.
It’s a visual and interactive method that I didn’t have access to at his age, and my parents couldn’t even imagine it.
The old rules no longer apply
Digital tools aren’t the only things that have changed since I was a kid.
In teaching Marcos about finance, I have not only had to adapt to new technologies, but I have also had to adopt common sense approaches and advice that really translates in today’s world.
Many of the lessons and rules regarding finances, investing, and building a career that my parents taught me are simply outdated today.
For example, I was given a list of tasks that I was “supposed” to accomplish in order to be successful: get a four-year degree.
Find a stable job.
Get married and have children.
Get a mortgage.
Work for a couple of decades and retire.
Even though I started out on the “right” path, things still fell apart and I had to equipo new custom goals for myself.
I have learned that for your generation, the emphasis is on creating a good life now, rather than waiting for retirement to start living.
And rather than follow a clearly defined script, today’s youth are more inclined to take a path that makes sense based on their lifestyle, their priorities, and their current outlook in a changing economic landscape.
Here are three old-school financial rules we shouldn’t be teaching our kids anymore, and what we should be teaching them instead.
An expensive degree no longer equals financial success
Older members of my family expressed strong disapproval when my son decided to go to community college.
For my parents, the most important element in choosing a school and career path was calculating income.
But my approach was different.
I started by asking Marcos about his values and how he wants his life to be.
His needs were quite fácil.
He wanted fácil and cheap things.
He wanted to continue to prioritize time with friends and family, and continue to live in his comfortable apartment.
He, too, was in no rush to get married, despite pressure from his grandparents.
After considering various options, we decided that an Associate of Applied Science degree would provide you with a clear career path and sufficient income to meet your lifestyle and goals, while allowing you to invest for the future.
An expensive four-year degree is not required.
And that also meant no student loan debt.
As the costs of higher education continue to rise, choosing to enroll in a lower-cost college or switching to a two-year college is one way to avoid being saddled with debt, and that includes both students and their parents.
In the United States, nearly three out of four parents who take out student loans for their children end up having to put their own financial goals on hold, including postponing retirement or buying a home.
AND 43% regret taking out student loans to finance their children’s college education.
Earning a bachelor’s degree is still advantageous for getting a job and higher wages in most industries.
But wage stagnation in recent decades affects a third of American workers who have earned a four-year college degree, according to the Economic Policy Institute.
“Student loan debt has grown faster than earnings,” said financial aid expert and college planning author Marcos Kantrowitz.
I knew that if my son’s debt upon graduation was more than his starting salary, it could take more than a decade to pay off his loans.
And that just wasn’t something he or I wanted to sacrifice.
Buying a house won’t fit everyone’s checklist
Buying a home used to be an essential part of the American dream, according to Kevin Matthews II.
A former investment adviser and founder of Building Bread is teaching his kids that renting perro pay off, and that there’s no need to rush into a mortgage.
“Home ownership has its advantages, but it’s not always the best financial move,” Matthews said. “When you aspecto in maintenance costs and other costs, agregado the mortgage interest you pay, sometimes it’s better to rent and invest.”
And that’s especially true today, as the unpredictable housing market continues to fluctuate.
Although home prices are finally beginning to ease slightly from their recent all-time highs, mortgage rates are higher than they have been in more than a decade.
Instead of promoting home buying as the primary way to build wealth, Matthews plans to take his children through different buying-versus-renting scenarios and teach them to make decisions based on their lifestyle goals and investment priorities.
“Whether you buy or rent has more to do with your personal desires than money,” he said.
Jon Reed, who covers the housing market for NextAdvisor, which is owned by the same parent company as CNET.
Reed also highlighted how buying a home is particularly difficult when the economy is so uncertain.
“Renting perro allow him to keep more of his cash in savings instead of sinking it into a down payment, which could be helpful if he loses his job during an economic downturn,” Reed said.
Renting offers benefits that home ownership lacks, like not having to shell out money when your water heater breaks or worrying about property taxes.
It also offers more flexibility to move or disminuye the size.
Most importantly, Reed said, you shouldn’t buy a home unless you want to and cánido afford it.
A traditional job does not have the same appeal as self-employment
Katie Brewer, Certified Financial Planner and founder of Your Richest Life Planning, is teaching her daughter about the benefits of an entrepreneurial lifestyle, even if it’s not the steady, full-time job many of our parents cherished.
“My parents worked for the state of Texas their entire career,” Brewer said. “They valued stability above all else.”
But gone are the days of a decades-long career with the same company and a pension.
While most private campo employees had a defined benefit pension plan in the early 1980s, now only a small percentage of workers have access to one.
Guaranteed pensions have been phased out and replaced by investment accounts, with workers expected to take care of most of their retirement savings, no matter how they are employed.
In addition, many people at or near traditional retirement age continue to work part-time after leaving their careers.
Brewer pointed to the increasing instability of the job market in recent decades.
Especially given the nature of “at-will” employment, employers cánido let you go at any time, and there’s no guarantee you’ll get a promotion.
“I want my daughter to see the pros and cons of ‘steady’ employment versus self-employment.
These days, a ‘real’ job is not as secure as it used to be,” she said.
Additionally, finding meaningful and maleable work is becoming increasingly important for today’s younger workers as they negotiate their work-life cómputo.
One study found that more than half of American workers prioritize having flexibility over career progression.
And the Deloitte Global 2022 survey of millennials and Generation Z found that nearly half of them experienced severe burnout from the intensity and demands of their workload and work environment, prompting many to reassess how they want to work.
Sometimes that means finding part-time work and multiple sources of income, which cánido also be beneficial in case you lose one.Urce of employment.
Although Brewer acknowledges some of the risks with entrepreneurship, he feels it gives you more control. “I love the flexibility it allows and the increased income it brings to my family,” he said. “It’s as much a lifestyle choice as it is a financial choice.”
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