A lot of people get the “Aha” moment with their finances when they’ve hit rock bottom. They’ve declared bankruptcy, their bills are up to their eyeballs or they see the amount of debt that they’ve accumulated. Some people see their parents struggle with finances and vow never to go through that. Some get the “aha” moment and see the light after going to a financial seminar or after reading a book from a financial guru. I don’t have an interesting story about an “Aha” moment, because I don’t think I ever had one. Rather than one moment which instantly changed my thoughts on finances, my journey in life has shaped the way I deal with my finances.
Frugal Role Models
Growing up, my parents were always frugal with their money. We had all the necessities like food on the table and a place to live. No, cable television and fancy clothes are not necessities. I don’t remember a specific lesson or lecture that my parents gave to teach me about financial literacy. I think I just saw the way they valued money, and learned that spending money frivolously was not something that was appropriate.
I remember one time when my mom brought my sister and me to the mall. I don’t remember how old I was but I was a pretty young child. We went to the toy store to purchase a gift to bring to a birthday party. At the store, I saw a toy that I really wanted. It was a children’s tool set. (Thinking back, I find it quite odd that I had an interest in tools as I am not handy at all!) I told my mom that I wanted it, but she told me that we were just there to buy a gift and that I had plenty of toys at home. We left the store, and later on when it was time to go home, my mom looked at me, and said, “you never ask for anything, if you really want it, we can go back and get it.” Even at that young age, I could tell that she really wanted to buy me that toy, but also understood that money was not to be wasted. I looked up at my mom and told her I didn’t want it that much, and that I did have toys at home I could play with. Maybe that’s why I’m not that handy, I never got that tool set! Mystery solved.
As a child, I’d often receive money for Christmas, Chinese New Year and my birthday. My parents allowed me to put the money into a piggy bank. Once in awhile, my mom would ask my sister and I if we wanted to transfer the money from our piggy bank into a savings account at the bank which was held in trust for us. She explained that we would earn “interest” from the bank, and that the money would be saved for us to use in the future. Never being the type of child who had issues with instant gratification, I jumped at the chance to accumulate interest from the bank. My mom would show us the interest that the bank paid out in the bank passbook and that motivated me to save more. Back then, the interest rate was a lot higher. Unfortunately, the 1 percent interest rates nowadays aren’t too exciting. Now, of course I did keep a portion of my money to buy basketball cards and snacks at the cafeteria. But, even as a young child, I always planned for the future and was fond of saving my money.
When I was about 11 years old, my father bought me a Nintendo game called Wall Street Kid. I was a nerd and loved that game, but I hid it when my friends came over as I would be teased mercilessly for playing that game. Not only did my father buy me an investing game, he invested in a mutual fund for my college education. They didn’t have 529 plans back in the day. The mutual fund did really well and my father showed me the statements with 20% to 40% growth and I was hooked. I continued to be interested in investing as I grew up, and signed up for the deferred compensation plan immediately after starting my first job and opened an IRA. While I learned the hard way that you can’t always expect 20% to 40% growth investing in stocks, I understood that investing was a great way to build wealth.
It would be great if schools would teach financial literacy to their students as it is such an important topic. However, ultimately, parents are the best teachers of how to manage your money. Children will always look up to their parents and model their behavior, good and bad. Even if you aren’t good with your money, don’t worry, you don’t necessarily need to be financially literate to teach your kids about money. If you’re interested in volunteering for an organization which teaches young people about money management and how business works, check out Junior Achievement. My sister volunteers for them and they send her to schools, with a lesson plan teaching financial literacy based on the age of the students. When she taught a classroom of kindergarten students, the lesson was to teach the difference between “Wants” and “Needs”. Of course, the little kids labeled television and candy as “Needs”! It’s never too early to teach children about financial literacy. Actually, I think there are many adults out there who still struggle with differentiating a “want” from a “need”.
April is Financial Literacy Awareness Month, and Shannon from The Heavy Purse has invited many wonderful personal finance bloggers to write about financial literacy. Please check out the excellent articles written by my wonderful fellow bloggers by clicking here.
Please share your journey to financial literacy in the comments.