Our parents really love to give us advice, particularly when it comes to money. However, as you get older, you slowly start to realize that a lot of this advice is merely misinformation that they got from their grandparents.
A lot of it can be relatively harmless or even amusing. But when they start telling you that cigarette smoke will help your baby’s earache (yes, people used to think that) or that you’re wasting money by not buying a home right now, their advice becomes really dangerous.
Here are a few examples of outdated and commonly made financial mistakes that your parents may passing off as tried and tested financial strategy.
You Need to Buy a Home
Let’s start with the biggest and most popular piece of financial advice that your parents may be clinging to. May feel that paying rent is a total waste of money.
Let’s be clear about one thing: the world your parents bought a house in barely resembles the world you’re living in.
First of all, let’s start with the huge financial hole you’re in after college or university. Baby Boomers only needed to work 306 hours of minimum wage to cover four years of public college in their day. Today, student-debt-saddled Millennials need to work more than ten times longer, and clock in 4,459 hours to cover their debit.
At the same time, the average monthly student loan payment was $227 in 2005, but skyrocketed to $393 in 2016.
Today’s average graduate enters the “real world” with of more than $37,000 in student debt. That number is already $20,000 more than it was only 13 years ago! Now consider that $37,000 could represent a 20% deposit on a $180,000 home, or it could be a 10% deposit on a $370,000 home
You Need a 20% Down Payment to Buy a Home
People like nice round numbers they can remember, and this 20% down payment number has been espoused for years now. Unfortunately, that number in today’s market could actually end up costing you money.
It is actually possible to pay less in fees every single month if your down payment is 19%, versus the traditional 20%.
Is 20% a bad thing or a waste of money? Absolutely not. However, being too focused on it can cost you money over the long run and could even cost you your dream home.
It’s Rude to Talk About Money
Sure, you don’t want to bring up your salary every 10 minutes, or ask someone how much they paid for their house.
However, you also don’t want to demonize the topic of money and make it taboo. Parents that don’t talk to their children about are passively contributing to financial illiteracy. Kids should be able to talk to their parents about money as soon as they start making it—and they should be able to teach their parents a thing or two when they get older.
We know. The older your parents get, the more set in their ways and unwilling to change they appear to be. However, we’ve just given the raw facts about 3 big financial myths they may be swearing by.
If you don’t change their mind on the subject, perhaps they will at least stop nagging you about it.