5 bad money habits you picked up from your parents

FeaturedMoney

Written by:

Moms and dads say they know best, especially when it comes to money matters. But a lot has changed since your parents were building their nest egg, so there are things you may want to do a little differently. Here are five bad money habits you might have unwittingly picked up from your parents.

Image Credit: FabrikaCr.

1. You’re wary of investing

5 bad money habits you picked up from your parents

Decades ago, it was possible to turn a small profit by saving, saving and saving some more. Consider this: The 90-day yield on a certificate of deposit in December of 1980 was over 18%, according to Federal Reserve data. As of November 2018, it was close to 2.4%. Meanwhile, the current average annual percentage yield (APY) on traditional savings account is a measly 0.09%, according to the Federal Deposit Insurance Corp.

As such, you can’t build wealth off of APYs alone. Yes, you should have at least three-to-six months worth of cash socked away in an emergency savings account. But you should also look into investing some of your assets.

Fortunately, there are some low-risk ways to grow your money, like turbo-charging your 401(k) contributions, opening an individual retirement account online, investing via a spare change app, like Acorns, or tapping a robo-adviser.

Image Credit: .

2. You won’t use a credit card

5 bad money habits you picked up from your parents

The Great Recession, coupled with burgeoning student loan balances, made many older generations extremely averse to credit cards. But credit cards aren’t inherently a bad thing. Used unwisely, a credit card can cause big financial woes. But, used wisely, a credit card is one of the best ways to build good credit. And it’s the only payment method that gives you real bang for your buck in the form of points, miles or cash back.

Image Credit: DepositPhotos.com.

3. You carry a balance to build credit

5 bad money habits you picked up from your parents

It’s one of the most common money myths, so don’t be too mad at mom or dad if they passed this tidbit along, but, contrary to popular belief, you don’t have to revolve a balance on a credit card month-to-month to boost your credit score. In fact, you shouldn’t. Instead, pay off monthly purchases in full to avoid incurring interest … and a balance you can no longer afford. The simple act of making those payments on-time, coupled with the card’s credit limit, is enough to improve your creditstanding overtime.

Image Credit: DepositPhotos.com.

4. It’s whole life insurance … or nothing

5 bad money habits you picked up from your parents

There are two major types of life insurance. Term life insurance covers you for a set number of years, then expires. Whole life insurance stays in effect for your whole life so long as you’re paying premiums. That might sound like the more appealing option. But term life insurance is much more affordable and less complicated than whole life insurance.

Unless you’re maxing out all your other retirement accounts, subject to the estate tax or guardian to a special needs dependent, it’s usually the way to go. 

Mom or dad may mention whole life insurance in casual conversation because they fit into that “maxed out” category — or they simply might not realize a cheaper alternative exists. A 2015 LIMRA survey found 80% of people overestimate the cost of term life insurance.

Image Credit: SolisImages / iStock.

5. You’re fixated on buying a house

5 bad money habits you picked up from your parents

Buying a house has long been considered an integral part of the American Dream — and it remains a noble endeavor. But there are some markets where renting is actually the savvier financial move. See: San Francisco, where generous tech wages and a prolonged housing shortage have drove the price of real estate sky-high.

If you live in the Golden City or these other major U.S. metros, it’s currently more cost-effective to lease rather than buy a home. Consider foregoing a mortgage, at least in the short-term, or relocating to a more affordable market if you’re truly married to owning a home.

This article originally appeared on Policygenius and was syndicated by MediaFeed.org.

Image Credit: .

AlertMe
5 bad money habits you picked up from your parents

Jeanine Skowronski

Jeanine Skowronski is a veteran personal finance journalist and content strategist, she has previously served as the Head of Content at Policygenius, Executive Editor of Credit.com and a columnist for Inc. Magazine. Her work has been featured in The Wall Street Journal, American Banker Magazine, Newsweek, Business Insider, CNBC and more.

Leave a Reply

Your email address will not be published.