16 Things I Wish My Parents Had Taught Me About Basic Finances

Our parents teach us so many important life lessons but one thing that is often missed is how to properly manage money. In fact, most parents forget to teach their children about money except for the very basics. That is why so many adults still don’t know these 15 things about money even now that they are grown up. But it is never too late to learn! Take a look at these essential things that every adult should know about money. You may learn a new thing or two.

Note: The content of this article is for informational purposes only and is not a substitute for professional advice. Always consult with a qualified professional for advice tailored to your individual circumstances.

Budgeting Basics

Budgeting is one of the most important things you should consider when managing your money. You can make a straightforward, effective budget by looking at how much money you have coming in and how much money goes out each month. Consider rent, utilities, groceries, and other basic living expenses. 

The goal is to ensure your spending doesn’t exceed your income, allowing you to allocate funds for savings and emergencies. A good budget helps you make informed financial decisions, avoid debt, and stay on track with your financial goals. 

Track Expenses

Just like making a budget, it is just as important to track your expenses and where your money is being spent. Knowing how you spend your money will help you spend less and save more. There are many apps you can link to your bank account that will give you an immediate breakdown of how you spend your cash. This makes tracking and managing your money so extremely easy. 

Save Regularly

Saving money is often overlooked, but it is one of the most important financial decisions you can make. It provides economic stability and peace of mind. It helps you handle unexpected expenses and emergencies without going into debt. It also lets you work towards long-term goals, like buying a home or retiring early. You don’t need to save much, but putting away at least a little bit of money each month will significantly impact your financial security. 

Understanding Your Credit Score

I never knew how important a credit score was until I was well into adulthood. Knowing your credit score and keeping it high dramatically impacts your ability to borrow money, get reasonable interest rates, and even make big purchases. Many lenders and landlords use your credit score to assess your reliability and responsibility. Knowing your score and taking steps to improve it is more important than you may think. 

Avoiding Debt

My parents never told me how important it is to avoid debt. Being debt-free lets you use your income to save money or make purchases you want rather than wasting it on debt payments and high-interest payments. Avoiding debt also protects your credit score and will give you financial freedom. Plus, you will have less stress with no debt hanging over your head. 

Plan for Retirement

I admit that retiring is the last thing on my mind, but planning for retirement early is actually essential. You need to start saving money for retirement from the moment you start earning income. It takes a long time to save enough money to retire, so you need to start early. Consider investing your retirement money or opening a specific retirement account where your money can safely grow. 

Paying Bills On Time

My parents told me that I should always pay my bills on time, but I never realized how important this really is. Paying bills late results in high fines that you will then be required to pay on top of the original bill. Plus, late payments can negatively affect your credit score, impacting your future buying power. Plus, if you don’t pay your bills, you can expect constant phone calls from creditors, which is annoying and stressful. 

Negotiating

I wish my parents had told me never to accept the first price. It is incredible how much you can negotiate when it comes to expenses, especially those related to services. When a provider tells you a price, try to talk and negotiate it to be lower. You will be shocked at how quickly someone will lower the cost to ensure your business. Make sure you are realistic and respectful when you negotiate for a lower price. You do not want to miss an opportunity or offend someone selling a service. But, don’t be afraid to ask to pay less! 

Understanding Taxes

I will never forget when I got my first paycheck, which was a fraction of what I had expected. The government takes so many taxes from each check! Understanding what taxes will come out of your paycheck and where those taxes go is essential. It is also important to have a grasp of annual taxes and what you will be expected to pay, or hopefully get back, at the end of the year. While you do not need to be a professional accountant, you should understand where your money is going and why. 

Credit Card Responsibility

When you get your first credit card, it may feel like you just got a whole bunch of free money. This is definitely not the case! Understanding that your credit card is essentially a loan you will need to repay is essential. You should also know about the benefits of your credit card, such as cash-back deals. And, of course, know the interest rate of your card and any fees that come with late payments. I wish my parents had taught me how complex a credit card can be! 

Needs Vs. Wants

Okay, my parents taught me the difference between a need and a want, but not when it comes to spending money. Knowing what you truly need to spend your money on and what you want to spend money on is important. This all goes back to budgeting. You should always spend money on things you need like food, clothing and your home. However, you do not need to splurge on the most high-tech gadgets or fanciest clothes when you’re on a tight budget. Limit your wants, and do not ignore your needs! 

Invest Wisely

Investing your money is actually one of the best things you can do. You can make your money grow with very little effort when you invest wisely. Rather than spending every single dollar or just keeping your money sitting in your bank account, investing will actually help you make more money. Oh, how we wish our parents had taught us about how to invest wisely! But, if they didn’t pass on this wisdom to you, consider talking to a financial advisor who can help you decide how to invest your money and make your money work for you! Now, isn’t that a fantastic idea? 

The 50-30-20 Rule

Have you ever heard of the 50-30-20 rule? It’s super simple. 50% of your salary should go to basic needs. For instance, your rent, groceries, and so on. 30% of your earnings should be devoted to what you love, from a night out with friends to subscriptions to your favorite magazines, photography lessons, and so on. And the remaining 20%? This goes directly into your savings!

Delegating

Time is money! While it is surely cheaper to file our taxes and manage our finances, sometimes delegating is the best option. These processes can be incredibly difficult to understand and figure out for those who don’t work in the field, taking hours of your time and making you incredibly stressed. Hiring an accountant to manage your finances is often the best option.

Using Coupons

You can save so much money when you use coupons and promo codes. Once you learn the tricks about couponing, you may never pay full price again! Before you hit checkout on that online cart or before you get in the car to go to the grocery store, check for coupons and codes that can save you tons of money. Oh how we wish our parents had taught us about the importance of couponing!