The other week, while I was digging up weeds during my volunteership at the botanical garden, my 19-year-old colleague turned to me and asked, “Jackie, what would you tell your 20-year-old self?”
Whelp. I leaned in, gave her my wise, older sister face, and responded, “I’d probably tell myself to floss more, always get a full night’s rest, and also to open an IRA retirement account.” I then proceeded to explain to her the magic of compound interest.
Not the most exciting advice. But what would you expect from a money nerd?
There’s quite a bit of money know-how I would impart to a younger version of myself. Financial literacy certainly wasn’t taught in schools when I was growing up, and my family never talked about money. And like many, I learned about money on my own — and made mistakes along the way. Here are a series of money lessons I wish I could’ve taught my younger self:
Childhood: Know the importance of saving
One year for Christmas I received four piggy banks. Regardless if it was a coincidence or an act of serendipity, it motivated me at a young age to save any spare change into these respective piggy banks. And yet every spring, at the annual community fiesta, I proceeded to spend every dime. I didn’t really understand that if I saved for a bit longer, I could get larger items.
Jackie Koski Cummings taught her daughter to always save something. Back when her child was in elementary school, the financial literacy advocate taught her to spend half her allowance and save the other half.
“The savings added up so that she could buy something bigger on her wish list that she would not have been able to get with just one week’s allowance,” says Koski Cummings, a Certified Educator in Personal Finance and author of Money Letters 2 My Daughter. “Back then it was video games that she loved saving up for. Now that she is an adult she always saves part of her salary. These days instead of a piggy bank, it’s through investing apps or her online savings account.”
Teen: Learn how a debit card works
I can’t recall exactly how I learned to budget. I do remember opening my first bank account with a community credit union. And this was back before there were money management apps and loan repayment calculators, so I had to balance my checkbook with an old-fashioned register. I didn’t really know what I was doing and suffered an overdraft fee a handful of times.
“For older children, helping them set up their own checking account and giving them access to a debit card could definitely provide some useful lessons, especially if it’s their own money,” says Matt Becker, CFP® and founder of Mom and Dad Money. “It gives them an opportunity to manage their money in the same way as they’ll have to manage it as an adult and to build those skills, but with less risk since you will presumably be providing some guidance.”
Early adulthood: Know what you’re getting into with student loans
When I was preparing to attend college, I just assumed taking out debt was the norm and that once I graduated, I would be paying them off. However, I didn’t really know the details: What my interest rate was, how long I had until I needed to start my payments, the loan duration, and exactly how big a commitment it was. Also, I didn’t know what the consequences would be if I couldn’t make my loan payments.
When you’re 18, taking out a $10k plus loan is a big deal. I’m surprised that I took the plunge simply because I assumed all my peers were taking out loans for schooling, too.
Early adulthood: Don’t judge a credit card by its shiny exterior
Full admission: I chose my first credit card purely because it had a cute design of Bambi, from the Disney movie. Oh, and because I wanted in on the Disney rewards points. I didn’t even bother to look at the credit card terms, fees, and other pretty significant details.
Come to think of it, I didn’t really know what was on a credit report, or the different parts of a credit score. Luckily, I was not a huge spender and never incurred interest fees. Regardless, it was a major fail. “Unfortunately, many kids get to college or beyond before they figure this out because no one even stopped to explain it to them,” explains Andrew Herring, founder of Wealthy Nickel.
Jackie Koski Cummings taught her now-grown daughter about credit scores and how important good credit would be when she got older. Her daughter had understood the basic credit score formula since she was in high school but held off on actually getting a credit card until she was 24.
“She simply did not want to get in debt or end up charging more than she could pay when the bill was due,” says Koski Cummings. “She makes payments on her card before it’s due just to make sure she doesn’t have the balance creep up too fast. The best part is that she helped a lot of her millennial friends understand their credit as well.”
Early Adulthood: Open an IRA
To this day, I kick myself over the fact that I didn’t open a retirement account sooner. I actually opened a Roth IRA when I was 21. However, I only put in $100 and let it sit for a few years before rolling it over to a rollover IRA account. I do regret not contributing money on the regular. Even if I squirreled away $10 each week, at a 7 percent interest rate that’s compounded annually, I would have nearly $13,700 in my account. Not too shabby!
Instead, I went through long periods where I didn’t put any money into my IRA. And for whatever reason, I didn’t contribute to an employer-sponsored 401(k), despite there being a small company match.
Adulthood: Get in the habit of giving
My good friend Devin donates a portion of his tax refund every year toward a handful of his favorite charities. During the majority of my early adulthood, I was so focused on being frugal that I really didn’t make cash donations a priority. I was able to afford to give about a $100 a month to a local homeless shelter. Nowadays I make a greater priority of giving to others — either by donating to non-profit organizations, supporting friends’ projects, or frequenting businesses whose values jive with mine.
“I think the best way parents can instill a heart for giving to others in their children is to teach by example,” says Andrew Herring, founder of Wealth Nickel. “When we are writing a check to a cause we care about, we tell our kids what we are doing and why, and how others who are less fortunate need our help. That often prompts additional questions from our 3-year-old, which opens up the conversation to talk about giving even more.”
Adulthood: Explore your relationship with money
I didn’t really understand what it meant to have a relationship with money until I hit my 20s. It was ingrained in me that to have money meant you were either inherently shrewd or corrupt. So we ignore our behaviors, thoughts, and beliefs about money until the damage is done.
“Money is generally such a taboo topic in our culture that people are afraid to ask questions or even really think about it, which leads to poor decisions,” says Becker. “If you can get clear about why money is important to you and how you’re using it to express your values, you’ll be in a much better position to pass on positive lessons to your children.”
I wish my parents sat down and had actual conversations about money. “One of the best things you can do for your children is to simply make money conversations a normal, stress-free part of your relationship,” says Becker. “If your children are comfortable thinking and talking about money, it’s much more likely that they’ll be able to make good decisions when the time comes.”
While learning these money lessons at a younger age would’ve saved me some grief, the best teacher is life itself. And as they say, hindsight is 20/20. If you have kids, you might want to consider incorporating some of these lessons in your day-to-day. That way that can grow up into money-savvy adults who can pass knowledge down to their children, just like you have.