12 Essential Money Lessons Your Parents Forgot to Mention

Parents have a lot to teach their children, from how to behave in public to how to succeed in school and beyond.

That’s why it's understandable that some may have forgotten to pass on lessons and tips for how to manage finances — especially if these parents weren’t savvy with money themselves.

But there are some rules that are essential to learn no matter what stage of life you're in. From ways to build wealth to preparing for retirement, following are some important money lessons your parents should have taught you.

1. Start saving for retirement

Arguably the most important thing you can do for the health of your financial future is to start growing your wealth and saving for retirement, regardless of where you are in life.

This is something you can ideally do over the course of your entire career, but the sooner you start, the better. You can set up a 401(k) plan with your employer or invest in a solo retirement account. You might even qualify for employer contributions.

2. Pay yourself first

Always pay yourself first. That means you should automatically earmark a part of each paycheck for savings before you spend it somewhere else. This is a surefire way to make sure that you are saving money.

3. Save smart

In addition to retirement savings, you should have a savings account with two to three months of income in case an emergency arises. Consider investing any other savings you accrue in the stock market, which could give you a better return on your investment.

If you’re unsure of how and where to allocate your savings, work with a financial advisor to develop the best possible plan for your money.

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4. Find a way to make money while you sleep

Find ways to create passive income, which is money that comes in without you having to work hard to generate it. Investing is one popular way to make passive income , as your money does the work for you.

You also may be able to generate passive income from a rental property or collect ad revenue from content you create.

5. Spend less than you earn

This is a simple and obvious tip that your parents should have taught you: Don’t spend more than you make, make it a goal to stop living paycheck to paycheck .

If you spend more money than you earn, you are likely to borrow the money from someone else or borrow it from a lender. Neither option is good.

Spending more than you earn likely means you are in debt and not saving enough money — if any at all. That is not a good financial position to be in.

6. Be wary of loans

Borrowing money means you’re going to have to pay it back somewhere down the road, so make a plan to get out of debt that accounts for that. Yes, some loans may be necessary — such as student loans or a mortgage. But be smart about borrowing.

Many people don't consider a credit card a loan, but it could be one of the most dangerous forms of borrowing if you don't use it wisely.

7. Invest in yourself

Going to a four-year college and getting a bachelor’s degree — or completing a course of study at trade school — is usually worth it.

Higher education means you increase your earning potential when you enter the job market, so invest in yourself now for benefits that come later.

8. Pay off credit cards every month

Some parents will tell you to avoid credit cards altogether, but there’s a better option: Get a card or two and make sure to pay them off every month. This will help you to both stay out of debt and build your credit score, which is the backbone of your financial health.

Pro tip: Up the ante by using rewards credit cards , which can give you everything from cash back to travel discounts and discounted gas.

9. Diversify your revenue stream

As cliche as it may sound, don’t put all of your eggs in one basket. Yes, you want a full-time job with benefits, PTO, and a shiny 401(k). But a side hustle is also a good idea. That way, if you lose your job for any reason, you have something to fall back on.

You can diversify your revenue stream by driving for a rideshare app, doing some contract writing on weekends, or flipping a house, to name a few options.

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10. Never buy a brand-new car

Unless you’re very wealthy, it’s wise to avoid ever buying a brand-new car. Automobiles depreciate very quickly and steeply, meaning they’re not a good investment. If you try to sell the vehicle a few years later, you’re going to get much less than you paid.

Instead, purchase cars that have been leased for the first two to three years of their life. You can then reap the benefits of a car knowing the previous owner took the depreciation hit.

11. Never lend money to friends

It may sound like a tough stand, but there are several reasons you shouldn’t lend money to friends. For starters, that’s money you could have working for you in investments.

There is also a good chance your friend will never pay you back in full. So, you may wind up with a ruined friendship, or at least know that you have enabled someone with bad financial habits.

12. Live by a budget

Everybody needs a budget. It helps you keep financial goals in full focus and prevents you from spending more than you have.

It also allows you to identify and break bad money habits. Budgeting can help you prioritize saving money, which is vital to your financial health.

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Bottom line

Parents have a lot on their plates, which is why they might not have taught you the best lessons about planning your financial future or why you may not have passed on these words of wisdom to your own children.

Fortunately, it’s never too late to start saving money and building wealth, which can help you get ahead financially .

Once you master your finances, perhaps you can even teach your kids the tips they never learned. Wouldn’t that be a win-win situation for everyone involved?

Money tips that can work for everyone

No matter what your bank account balance is, there's always an opportunity to optimize and improve your finances. Here's a quick checklist of things you can look at today.

Focus on paying off your debt. Debt can hold you back from making progress with your overall financial well-being. Aside from cutting expenses, there are tools that can help you pay off debt faster like balance transfer credit cards and debt counseling.

Earning extra income can give you breathing room. If finances are tight, earning some extra money to supplement your income can make a huge difference. A new job is one option to consider, but if you're not ready to make a big change or already retired, a part-time side job could be a better choice.

Cut your expenses. It sounds painful and so not fun, but it doesn't have to be. Take a look at your biggest expenses because that's where you'll probably find the biggest savings. For example, auto insurance rates have been soaring so shopping around for a new insurance company can be the fastest way to cut your bill. Also, look for ways to cut your grocery bill (despite rising inflation).