Your parents’ financial advice is outdated. Instead, consider these options
Pound the pavement with a hammer. Simply go to the location where you want to hand over your resume. Why don’t you go out there and shake some hands with some people?
These financial pearls of wisdom have been passed down to us by our parents (and not always because we asked). Although they have the best of intentions, many of our elderly parents’ suggestions are, shall we say, out of date. To put it mildly, it was a disaster.
Listed below are six pieces of advice we received from our parents that simply do not apply to us today—as well as some more sensible alternatives.
1. Work Your Way Through College
When tuition was more affordable, working your way through college was an option. Even so, it was quite a while ago.
Since the 1980s and 1990s, most colleges’ tuition fees have increased by at least two or three times. Paying your way through school is possible with a job, but it won’t pay for your education. That’s why so many of us have student loans to deal with.
You may be able to save money in the long run by refinancing your student loans after graduation. You can replace your federal and private loans with a single private loan by combining multiple loans into one.
Refinancing can lower your monthly payments while also simplifying the repayment process.
2. Keep Your Money in a Savings Account
The following is a piece of well-known parenting advice: Open a bank account for your savings. Using this method, you’ll save the most money.
Okay, that’s fine. Because interest rates are so low, a savings account will earn you almost nothing these days. You might as well stash some money in your bedside table.
You can earn up to 5% cash back with a debit card and a digital account called Aspiration, which also pays you up to 16 times more interest than the average interest rate on your savings.
3. Always Buy a House — It’s a Great Investment
This is an oldie but a goodie in terms of quality. My parents can still be heard asking, “Why are you still renting?” When are you planning to purchase a home? It is an excellent investment!
The problem is that purchasing a home is not for everyone, especially given the skyrocketing prices of real estate in recent years.
It’s easy to make a compelling case for either option, and both are viable options. The housing market and mortgages are not a concern for renters; buyers benefit from tax breaks and the opportunity to make an investment in their future.
There is no one correct answer because every person’s financial and living situation is unique, and their priorities change over time as their circumstances change. It is extremely important to consider where you intend to live as well as how long you intend to remain there. This will determine whether it is more cost-effective to rent or buy a home.
4. Buy Savings Bonds
Savings bonds are exactly what they sound like. You might recall them as something drab your grandparents used to give you as a birthday gift when you were a kid.
Savings bonds are a classic, low-risk investment that has been around for a long time. The majority of savings bonds earn interest for a period of 30 years. However, the problem is that they will not generate much income for you. In the case of series EE bonds, the interest rate is 0.1 percent, which is extremely low.
These days, it is preferable to place your money in stocks rather than bonds. Volatility in the stock market can be a problem, with stock prices fluctuating up and down. Historically, however, investing in the stock market has resulted in a 7% profit over time.
Anyone, regardless of their financial situation, can begin investing with Robinhood with as little as $5, $100, or $800. It is popular with both novice investors and seasoned investors because it does not charge commission fees and allows you to buy and sell stocks without incurring any fees. There are no restrictions. Furthermore, it is extremely simple to use.
5. Depend on Social Security and Pensions for Your Retirement
For starters, it’s likely that you don’t have a pension. Pensions are almost non-existent these days, unless you work for the federal government.
You shouldn’t rely solely on Social Security to provide for your retirement needs either. Social Security is intended to be a supplement to your retirement savings, not to replace them entirely.
To be able to retire comfortably, you must consistently contribute a significant portion of your earnings to a 401(k) account. It is literally one of the most intelligent things you can do for your financial future. And if your employer contributes a matching amount to each contribution, you could have hundreds of thousands of dollars more in your account when you retire. It’s completely free money!
For those who cannot take advantage of this employer benefit because they require the entire amount of their monthly paycheck, a company called Lendtable will provide you with the funds.