Your parents have given you a lot of great advice over the years. They’ve taught you so much, from how to treat people with kindness to how to change your oil or bake recipes that have been passed down for generations. You might feel confident that following their advice in all areas will set you up for success. But when it comes to money, maybe you shouldn’t be so sure. Sometimes, the financial lessons your parents shared were well-intentioned — but a little behind the times.
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While taking outdated advice from your folks about your fashion sense is relatively harmless, taking outdated money advice could leave you broke. GOBankingRates chatted with a few financial experts to learn which pieces of parental financial wisdom you should roll your eyes at — though in a much kinder way than you did as a teenager.
1. They Said You Need a Lot of Money To Start Investing
For Matt Gellene, head of Specialized Consumer Client Solutions at Bank of America, one common piece of poor parental advice is that you need a large lump sum of money before you can start investing. Your parents might have encouraged you to wait until you’d saved a particular amount before getting into the stock market — but that advice could stop you from entering the market at the right time, which is as early as possible.
Time in the market — and the power of compound interest — matters more than how much money you start with.
Your parents’ hesitancy to start investing might have also created bad habits that could trickle down to your own kids. Gellene wants you to break the cycle of trepidation and set up a 529 college savings plan for your children as soon as possible.
“Even modest, consistent contributions can unlock significant growth for your child’s future by offering tax advantages, diverse investment options and high contribution limits,” he said. “While today’s shifting economic climate can make planning ahead feel overwhelming, delaying action is often the biggest cost.”
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2. They Told You Income Matters More Than Money Management
You understand why your parents brag about your high income to their peers — and you may enjoy being the subject of such praise. But if your parents only prioritized earning a lot of money without teaching you how to manage it, you could be setting yourself up for financial stress down the line.
“Financial well-being is built on smart money management, not income size. This is an important skill set that you can learn with the right tools, resources and expert guidance,” Gellene said. “Consistent planning, budgeting, saving and wise investing are far more critical for achieving financial goals than the amount of money you have.”
In other words: A big paycheck won’t fix poor financial habits, but solid financial habits can make any paycheck work harder.
3. They Said Avoid All Debt at All Costs
Most parents were taught to avoid debt entirely, and passed that belief on to you. But that advice is no longer realistic or helpful today.
Yes, you should avoid “bad” debt such as credit cards or personal loans when possible. But certain kinds of debt, including student loans, mortgages and business loans, can be useful. These typically come with lower interest rates and help you invest in your education, build wealth through homeownership or grow a business.
If you avoid all debt, you could miss out on building credit, buying a home or starting a business. A healthy financial life isn’t about avoiding debt completely; it’s about using it wisely.
4. They Told You To Always Pay With Cash
If you struggle with budgeting or overspending, paying with cash can absolutely help you stay disciplined. But relying solely on cash can also cause you to miss out on valuable benefits that come with using credit cards.
Credit cards help you build your credit score, offer fraud protection (something cash and even debit cards don’t provide to the same extent) and can earn valuable perks like cash back or travel rewards.
Yes, cash is helpful for budgeting, but relying on it for every purchase can limit your financial growth.
5. They Said To Take Risks That Don’t Align With Your Goals
Certified financial planner and Styled Wealth founder Autumn Knutson has heard a lot of money myths over the years. One common belief from older generations is that buying a home is always the smartest move financially and that renting is just “throwing away money.”
Knutson can’t entirely disagree — she’s seen how the process of saving for a mortgage can inspire smart financial habits. However, homeownership isn’t always the best choice. If your circumstances require flexibility, renting might actually support your goals better.
“The conversation is best to center around life plans, goals and risk tolerance, rather than on whether any of the monthly payment goes to equity,” she said. “The reward of building equity is because a mortgage is the least you will pay each month — whereas rent is the most you will pay.”
Knutson also notes that homeownership comes with more responsibility, higher barriers to entry and less liquidity than investing in the stock market.
6. They Encouraged Company Loyalty
When your parents and grandparents were building their careers, they could rely on job security and pensions to support them in retirement. No wonder they’ve encouraged you to stay loyal to your company.
Times have changed since they were in the workforce.
“Longevity and loyalty do not always pay and, to the contrary, climbing up via jumping to different ladders — moving to different companies — is increasingly common and lucrative,” Knutson said. “Some of the largest companies encourage it and see the variety of experience as an asset.”
Instead of being blindly loyal to a company, Knutson recommends packaging your skills to qualify for better-paying roles or promotions. She also encourages negotiating your salary, vesting schedule, equity compensation and even opportunities for remote work.
“If the employment is ultimately a great fit, then those longevity benefits may very well come,” she said. “And that will sweeten the setup even further for hopefully long-lasting mutual benefit for you and the company.”
7. They Encouraged You To Be Complacent
The idea that you could go to school, get a good job when you graduate and be financially secure as long as you weren’t foolish with your money is a nice old-fashioned ideal. Unfortunately, that advice no longer reflects the realities of high college costs, wage stagnation and rising housing prices.
“This sort of advice does not take into context the hurdles today’s young adult population faces,” Knutson said. “Such advice of ‘don’t mess up’ is incomplete and calloused.”
It’s much easier to make good choices when you have the right opportunities — and to access those opportunities, you have to be proactive.
As Knutson puts it: “It’s becoming more important to understand the chess game of avoiding pitfalls, building financial stability and taking opportunities to build wealth as they come.”
Sean Bryant contributed to the reporting for this article.
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This article originally appeared on GOBankingRates.com: 7 Ways Your Parents’ Money Advice Will Keep You Broke
