My parents tried to teach me about money. They told me to save for things I wanted. I got an allowance when I was a kid and I saved up to buy Breyer model horses. When I was older they tried to instill good values into me: don’t buy on credit, for example. Save some of everything you make. But their words didn’t have any real meaning for me, and passed in one ear and out the other.
I got my first job when I was 15. I worked at McDonalds and made $3/hour. I spent every paycheck I got on clothes, trying desperately to keep up with my designer-obsessed friends. While going to University I had a very good part time union job. Again, I spent everything I made, most of it on entertainment.
Some time during those years I read The Wealthy Barber. The premise was simple: save 10% of everything you earn from your first job onwards and you’ll easily retire a millionaire. I remember being firmly convinced of the truth of what the author was saying, but I felt that I couldn’t afford to do that. After all, I reasoned, I was living paycheck to paycheck. I didn’t get that so much of what I was spending money on would not be missed. Now I look back and shake my head at how much savings I could have amassed if I’d just followed that advice.
My rationale? I was at school, heading for a well-paying career in research. I always assumed I’d “have money” some day and could thus make up for my years as a poor student. How naive I was. I had no idea that making more money would simply increase the amount of Things I felt I needed, and that I would always be living paycheck to paycheck if I didn’t grasp some basic fundamentals of money management. It also never occurred to me that I might willingly give up my career in order to be a stay-at-home mum (in fact, I’d have laughed my head off at the notion – back then I was the least maternal person you’d ever meet). It didn’t occur to me that, at age 40, I wouldn’t have a nice house and expensive car and money in the bank. Age 40 seemed a lifetime away.
When I got my first credit card I was determined not to fall into the trap of credit. I reluctantly used it for the first time when I had to get gas and had no cash on hand (this was before the days of pay-at-the-pump debit machines). After filling up and putting it on my freshly minted charge card, I drove to the bank and immediately transferred the amount from my chequing account over to my credit card.
But eventually I got sucked in. I saw a dress that I simply “had to have”, and reasoned that I could pay it off with small minimum payments for the next 3 or 4 months. But of course before those 3 or 4 months had passed there was something else I simply had to have, and eventually I maxed out my card. I never did get myself into “trouble” as defined by delinquent payments. But I carried debt on that card for years and years. As an adult I’ve been through at least two cycles of paying it off and racking it back up again. It took a summer of living in a cash-in-envelopes state of budgetary tightness, when I was making more money than I ever had but paying most of it towards debt, that finally woke me up to the dangers of credit.
The question is: why did I have to go through all that before it sank in? It’s not like my parents didn’t try to tell me. It’s not like I didn’t have money of my own to manage. Why didn’t I get it? And how do I ensure my kids don’t have to make the same series of mistakes that I did before they get it, too? I’m giving much thought to how I can do this, and I’ll write about it in a future post.