‘My parents did a stupid financial thing’: 13 mistakes to learn from

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I have interviewed more than 1,200 people around the world since 2010. Although my main research questions change every year, I always ask, “How did you learn about money?”

Some said they opened a bank account early and were day-trading pretend stocks by the time they were 11. But the single most common story isn’t that. It is a version of “my parents did a stupid financial thing, and I vowed not to make the same mistake.”

Many people learn about money by seeing their parents screw up horribly, and they resolve to do the exact opposite – and that works.

Here are some real-life lessons and what we can learn from them.

Lesson No. 1: The dangers of overspending

According to a 2022 LendingTree survey of nearly 1,600 consumers in the United States, “Overspending, understandably, can lead to regret. Most consumers (77%) who overspent to impress others wish they hadn’t. This was more common among Gen Zers (85%) and millennials (82%) than Gen Xers (74%) and baby boomers (60%).”

Here’s what my interviewees had to say:

From a chief economist: “Although dad earned a good living in the public service [Canadian government], he wasn’t so good with money … he was a bit of a ‘bon vivant’ enjoying time with friends, drinking beer, and he owned two or three sailboats. This trait ran in his side of the family – they all spent pretty much whatever they made. This had a great impact on me! I’ve always liked to earn money, and from the time I was 14 or 15 I’d had about 30 different jobs starting when I worked at the Aylmer Marina serving hot dogs and slush puppies. Now, at age 42, I am much more financially responsible than the majority of the people I know. I also have an obsession with Excel spreadsheets: I’m very disciplined, and I’ve had a practice of updating my finances weekly (income, expenses, assets, liabilities, net worth, etc.) since my early 20s.”

From a CEO: “My mom was a spender! She always had someone to take care of her as the only female child and then as a wife. She didn’t ever have to go through any financial challenges … well, until her husband died. Her father had sheltered her from worrying, and then her husband did the exact same thing. This was not at all helpful, particularly when she was widowed at age 32 and left with four kids (one disabled). She was presented with money but didn’t understand the economy of money or how to think strategically. Watching all this was a huge, huge trauma for me: I vowed that I would never ever need to beg for money, borrow money or live beyond my means.”

My mother was what you might call a ‘low level’ gambler; we used to go to the track and bet on horses so that we could afford to buy groceries.

From a real estate agent: “The thing that has driven me all these years is not wanting to be like my mother when it comes to how she mishandled her finances. She was an only child and she was given a large chunk of money, but she didn’t think to grow it for the future. Instead, she frittered it away on luxury travel, and now in her mid-70s she is stuck living a very quiet life in a retirement home. Mum was never open to taking advice – she was too concerned that investment advisors would take all her money. My advice to my own daughters will be to look at all your options and be open to taking advice.”

From a magazine editor: “My mother was what you might call a ‘low level’ gambler; we used to go to the track and bet on horses so that we could afford to buy groceries. I didn’t have any savings or investments before I came into some money as a result of winning a lawsuit. I had always wanted to buy land, and fortunately my natural instincts were right. My smart move was to buy a cottage a couple of hours outside the city, and it has since tripled in value. I wish someone had told me to start saving when I was 25 years old when I first started drawing a full time paycheque. I spent everything on clothes and restaurants – what a waste! The sooner you start saving, the sooner you can buy something substantial.”

From a senior event manager: “I saw a lot of ‘what not to do’ when I was growing up. When I was eight or nine my parents had very little money and we lived in a small town in Idaho. I learned that my parents overspent because we always had bill collectors calling the house. This would depress me even at that young age. But then our fortunes suddenly changed and my parents starting making tons of money flipping houses – we went from lower middle class to the other end of the spectrum, and I was able to study at the Sorbonne. Their overspending habits became even more pronounced to the point where they spent $250,000 on my elaborate wedding in Paris. Fast-forward a few years and I am now divorced, and so are they. My mom lost everything, and she is back to where she started financially. I clearly don’t want to end up that way.”

Lesson No. 2: Lack of preparation for divorce or death of spouse

Most of us grew up with the fairy-tale assumption that we would marry for life, buy a house, have kids and live happily ever after.

Unfortunately, when it comes to financial competence, fairy tales don’t serve us well. Here is some data from an article I wrote in 2019 for CFA Institute: “We all start out single, and most women, whether they marry or not, will end up that way. About half of all U.S. marriages fail, and 11 million of the 13 million widowed spouses in the United States are women. That’s more than 80%. So the odds are pretty good that even a married woman will find herself single one day. Then we need to add in those women who will be ‘virtually single’ due to incapacity in their partner, with 10% of all Americans over 65 having diagnosed Alzheimer’s. My calculation is that 90% of married women will end up needing to manage their own finances at some point due to divorce or widowhood.”

From an academic: “I saw my mom make some bad financial decisions, go through two marriages and two divorces, and I learned from her that I didn’t ever want to be economically dependent on someone else. I would describe myself as an ‘independent feminist.’”

From a retail executive: “Everyone’s life comes with its own unique set of circumstances, it’s how you deal with them that matters most. My father left when I was a very little girl with no financial support for my mom and me. As a result, I was raised by two incredible women: my mother and my grandmother. Both of them taught me the value of working hard, the importance of a good education and how critical it was to be a financially independent woman. Their strength taught me that I could do anything that I set my mind to, and that I was responsible for myself.”

From a professor: “My parents got together during the Depression in the 1930s in Winnipeg, where my mother worked at Eaton’s for six dollars a week and my father drove cabs. I was six when they split up and mom, me and my two sisters moved to Chilliwack, British Columbia. My mother only had nine years of education and had to support us: I saw first-hand how difficult it was and I knew early on I would need to figure out how to find a better life for myself.”

From the president of a financial firm: “Growing up in a modest home with parents who didn’t speak much English is not a new story for many, but my particular learning was a deep sense of self-reliance at a young age. My father passed away when I was in my early teens, leaving my mom and I with no life insurance. Based on this experience, I decided to make sure to have life insurance when I had a family. To provide for your family just seems the smart thing to do – for yourself as well as for those you love and who depend on you.”

From an advertising executive: “When I was young I observed firsthand my mother’s devastation when her husband opted for a life with another woman. When you watch your mother’s life decline to zero, you learn never to be dependent on anyone for anything.”

Lesson No. 3: Beware of the cult of investing

When we are obsessed with something or someone, we don’t make rational decisions. It’s human nature. Sometimes, for various reasons, people over-index in a stock or a sector or a region or a charitable cause, and they put too many eggs in one basket.

From a venture capitalist: “Growing up I had the opportunity to learn a money lesson by seeing how people can fall for scams. My mom belonged to a church, and she was very conforming. Unfortunately she was giving ridiculous amounts to the church, something along the lines of 10% of our income per year, another 10% on holy days, and another 30% every three years. She now totally regrets that period of time when she was emotionally and financially tied to the church. On the positive side, from an early age I was cognizant of concepts such as income and spending.”

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From a fintech entrepreneur: “In 2000, my father was a senior executive of an infamous Canadian telecom company, and his investment portfolio consisted of $10 million worth of stock options in the firm that employed him. Dad knew that he should diversify at some point, but he had been worried about what the perception would be within his peer group if he exercised options and started selling stock. So, he continued to be tied to the stock price of one company for not only his paycheque and his career, but also his family’s financial future. Most Canadians know that this story didn’t end well: The company went bankrupt. Our family’s investment portfolio was 100% demolished. I got a clear understanding that anything can happen at any time to any company. Putting all or most of our eggs in one basket is in fact making a decision to speculate, not invest.”

From a global researcher: “For many years I regularly had lunch with my elderly father, and we always enjoyed talking about the stock market – from my early teens he had been teaching me how to invest. Dad had invested wisely his entire life, but in 2014 he became depressed and he was disenchanted with world politics. On a whim, he cashed in his entire retirement account and used the proceeds to buy a single gold stock. He felt strongly that this was the best way to protect his wealth and put his affairs in order. Unfortunately, not only did gold have a bad year as an asset class, but his particular stock was the worst of the lot. His portfolio declined in value by 70 percent, and then — surprise — he decided to go to cash. His portfolio was worth much, much less than the amount he started with. Living through this series of events gave me a clear understanding of how emotions can interfere with logic. Even the most seasoned investors can be vulnerable.”

Writer Barbara Stewart is a Chartered Financial Analyst (CFA) with 30 years of investment industry experience. She spent five years as a foreign currency trader, more than two decades as a portfolio manager for high-net-worth entrepreneurs, and for the past six years she has been performing interview-driven research for financial institutions around the world.  Barbara is a keynote speaker for CFA Societies, banks, stock exchanges and industry conferences globally, and she is a columnist for CFA Institute and Canadian Money Saver magazine. She is on the advisory board of Kensington Capital Partners and also is the Ambassador for the Kensington Women’s Forum. In addition, 13 years ago Barbara saw a need to challenge outdated financial industry stereotypes and share positive messages about women and money. Today, Barbara is recognized worldwide as one of the leading researchers in women and finance. Her Rich Thinking® global research papers quote smart women and men of all ages, professions and countries and are released annually on International Women’s Day, March 8. To find out more about Barbara’s research, visit www.barbarastewart.ca.

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