Financial Advice From Your Parents That Didn't Age Well

Your parents likely gave you great advice for different areas of your life, but unless they're professional investors or accountants, they probably gave you some genuinely horrible tips for managing your finances. It isn't completely their fault. They were just passing along information given to them by their elders. You can appreciate the advice in the spirit it was intended, but you don't have to act on it. Doing so could set back your financial goals by years.

​Let's look at why their advice is suspect. Keep in mind that much of what your parents said may have made more sense many years ago. But, like a lot of things, it has an expiration date. Times change along with interest rates, the housing market, and investment strategies. Learn the more modern, up-to-date methods you should use instead. You'll not only improve your finances, but you can also help stop the next generation from embracing outdated practices.

Your parents remember a time when having money in the local bank was a true testament to a person's financial know-how. It indicated level-headedness, responsibility, and stability. A typical bank would have given customers in 1980 around 8% interest on their savings accounts. But by 1990, the going rate was in the neighborhood of 4% to 5%. Then in 2000, you were fortunate to get 1% or 2%. Looking back, that seems like the good ol' days because traditional banks today might give you only 0.3% to 0.5%.

So, during the years your parents were starting out, brick-and-mortar banks were places to make easy money. For you today, it's an unappealing and losing proposition. Using the approximate historic rates listed above, a $10,000 deposit would have yielded $800 in 1980, $400 to $500 in 1990, $100 to $200 in 2000, and just $30 to $40 in 2025. In 2025, that small amount of interest you would have earned from a traditional bank would have been gobbled up by inflation which was 2.7%. So, while your bank statement seemed to indicate that you had gained money, you would have essentially lost money because consumer prices were climbing faster than your bank balance.

A neighborhood bank is one of the worst places to keep your savings. Choose a financial institution that lives online. There you'll find respectable rates, at least by today's standards, as high as 5%.

For older generations, owning a home was one of their primary life goals. Later, they financially advised others to achieve the same. Home ownership was part and parcel of the fabled American Dream, not renting. But that's partly because there wasn't a huge gap between a monthly mortgage payment and a monthly rental fee. In fact, according to JP Morgan's chart analysis of the Case-Shiller Home Price Index, the average mortgage and rent payments were both around $200 in 1970 and remained close throughout the 1970s. However, in recent years, while rent has experienced predictable growth, home prices have gone skyward. Mortgage payments for an average home are twice as much as they were before the pandemic of 2020.

Whereas people may have previously been proud to have a mortgage as a sign of their adulthood, nowadays it may easily be seen as an unnecessary burden. For example, workers of your parents' and grandparents' generations rarely changed jobs voluntarily. Modern workers on the other hand are far more likely to switch jobs, even careers. That's another reason that renting may be a better fit, both financially and psychologically, for you than for your folks. 

Older generations thought of houses as investments, so they urged their kids to buy the biggest house they could afford. Experts today don't agree with that advice. With a bigger house comes bigger maintenance expenses that could chip away at your savings. You can also expect more expensive insurance policies. 

Your parents may have encouraged you to choose the largest home in the neighborhood because it's the one they thought would be the most likely to bring a profit the day you decide to sell it. However, the value of the neighborhood's flagship house isn't likely to grow as fast as that of the more modest homes nearby. Updates you make to your massive house aren't likely to have much impact on the house's value, but similar updates to nearby smaller homes could cause the value to climb significantly. 

Your house pulls along the prices of the other houses. But the service doesn't work in reverse. No matter how high the prices are set for other houses in your neighborhood, they'll never be larger than the fair market value of your house. In other words, you can't expect your neighbors to help drive up the price of your house.

A house was likely the largest purchase your parents would ever make. Paying off the mortgage quickly freed them to pursue other goals. But instead of blindly following their lead with your mortgage, there are several factors you must weigh. For starters, the money that you would use to make those extra payments on your mortgage could be invested instead. To determine which choice is the better, compare their interest rates. 

If the loan on your house carries a higher interest rate than any safe investment is likely to yield, then it can be a good thing to use the money to accelerate your mortgage payments. On the other hand, if you successfully qualify for a low-interest house loan, you'll probably have little trouble finding an investment that yields more interest than your loan carries. 

True, 30-year fixed mortgage rates are currently higher than they were a few years ago at more than 6%. But even now you can find investments, such as certificates of deposit, that return more interest than your mortgage carries. Historically, the stock market, particularly index funds, have also surpassed 6%. Your parents may have firmly believed in paying off their mortgage fast because they were under double-digit interest loans. If that's not your case, there's no financial reason to behave as if it is.

Once you got your first real adult job, mom and dad didn't want you to buy a used car. You probably heard them repeat the line that buying a used car is buying someone else's problems. It's true that you can never be 100% certain that a used car will be reliable. But modern used cars are mechanically more sound than their counterparts from the time when your parents were just getting started. You can maximize your chances of getting a solid, dependable vehicle by purchasing a certified previously owned car from a dealership. The cars generally have low mileage and are well-maintained. They also typically come with a new car warranty still in effect from the original owner's purchase. For example, when you buy the vehicle, it may have four years remaining on a seven-year powertrain warranty.

Once you've calmed your parents' fears with your car's impressive warranty, you can dazzle them with how much you saved by buying on the secondary market. According to Kelly Blue Book, that shiny new car will lose 20% or more of its value within the first year of its purchase and 30% after two years. After five years, the car has lost an astonishing 55% of its value. After considering these industry figures, even your parents might agree that depreciation makes buying a used car a rather savvy financial move.

Were your parents always busy? Were they the kind of people who seemed to own every household tool and every type of yard and garden equipment available on the market? If so, they probably instilled in you the idea of never paying someone to perform a service that you can learn to do on your own. Yes, you can save a lot of money by doing everything yourself, but that loss of time can take its toll on your overall happiness.

If you don't enjoy mowing the lawn and trimming the hedges week after week, you're not likely to look forward to your Saturday afternoons like someone who engages in activities that brighten their lives. If you can afford to hire someone to care for your lawn, why shouldn't you? You're more inclined to regret not spending more time with the special people in your life.

Once you begin to prioritize time over money, the habit may begin to affect far-ranging decisions from whether to expand your business to if you should spend all day Sunday trying to repair your car. If you look back on your childhood and wish your parents had spent more time with you, your decision to opt for time over money may become much easier.

Did you know that the average American is $104,755 in debt? That's according to a 2025 survey conducted by the credit reporting agency Experian. Generally speaking, avoiding debt is prudent as long as you don't make the mistake of thinking that there aren't legitimate exceptions to the rule. If your parents were adamantly anti-debt, maybe it's because they thought of all debt as bad. 

However, there is such a thing as debt which can help you move closer to your financial goals. For example, you may have to take on debt to purchase needed equipment for your small business. As a business owner, it may be nearly impossible to wait until you've generated sufficient revenue before paying for an equipment upgrade. If you did, you could always be lagging behind your competition in innovation. To stay competitive, you may need a small business loan. Typically, they're low interest loans tailored to be manageable by the average successful company. US Bank says those types of loans represent good debt because they could put you in a good position to increase your earnings and the company's net worth.

Your parents told you to keep a small balance on your credit cards to help your credit score. But CNBC encourages you to pay off your card as soon as possible. Doing so will eliminate or reduce the amount of interest you pay. Sure, it's tempting to pay a little each month, but you'll end up paying far more for the item than it's worth. Soon, you could find yourself saddled with an enormous credit card balance.

Instead, try to achieve a $0 monthly balance. Contrary to what your parents taught, a $0 balance improves your credit score because one of the factors influencing it is how much of your credit line is in play versus how much remains unused. The more credit you have at the ready, the better you look in the eyes of the credit reporting agencies.

There are additional safe and effective ways to use credit cards these days. One of the improvements since your parents' younger days is the proliferation of cash-back and rewards cards. Manage them responsibly and you could use the purchase of a needed item to help finance the acquisition of something else.

Life insurance is a good idea. But treating life insurance as an investment is a bad idea. White Coat Investor says that the vast majority of their doctors wished they hadn't bought a whole life policy. One of the chief features of having one is that as you pay your premiums you simultaneously establish and build a cash value that you can later use as your own bank if you need to borrow money. However, a $4,000 monthly premium represents funds that could best be invested elsewhere to make your money grow faster than it would as part of an insurance policy. 

White Coat Investor estimates that you could only expect a return of 3% to 4% after decades from a whole life policy. It will usually take you the first 5 to 15 years just to break even. White Coat Investor references data from the Society of Actuaries to show that after 30 years, some 77% of people who purchased whole life insurance policies have gotten rid of them.

Your parents probably thought that it was a hard and fast rule to eliminate all debt before investing. But the truth is more nuanced. Western & Southern advises taking a look at both the interest on the debt and the potential earnings from the investments. The key is to put your money where it will do the most good under the present circumstances. 

If the interest on your debt is lower than the interest you stand to receive from a trusted investment source, it doesn't make good economic sense to concentrate on eliminating your debt. Instead, you'll come out better in the long run by increasing your investment. The profits can then help pay down your debt. On the other hand, some debts carry extremely high interest rates.

For example, the interest rates on your credit cards are likely more than 20%. It would be extremely difficult to find a safe investment that would yield more than your credit cards' interest rates, so your money would be best spent lowering your balances. Otherwise, any gains from your investment would be swallowed by the credit cards.

Older generations developed a fear of making too much money because they thought that they would have to pay an extraordinarily high amount of taxes. But like many fears, explains Marketplace, it's based on faulty beliefs. The cautionary bit of advice makes it sound as if your entire salary is subject to a higher percentage of taxes. In truth, it's simply the portion of your new salary that is greater than the maximum allowed by your previous tax bracket. Your promotion should still result in you taking home more money after taxes.

Let's look at an example of someone who earns $50,000 annually before receiving a promotion to $60,000. Let's say the tax rate on the $50,000 is 10% and 20% on the $60,000. After taxes on the old salary, a person would take home $45,000 ($50,000 – $5,000). However, $50,000 is the maximum the person can earn in the old tax bracket.  

The new salary is $10,000 above the old tax bracket, so it gets taxed at the rate of the next higher tax bracket which is 20%. Notice that only $10,000 of the $60,000 is subject to the new tax rate. The tax on the promotion would be $2,000 ($10,000 x 20%). So the take home amount on the promotion from the raise would be $8,000 ($10,000 – $2,000). With a salary of $50,000 a person would take home $45,000 while a person with a $60,000 salary would take home $53,000. 

Many in your parents' generation grew up with the belief drummed into them that responsible adults avoided the stock market. It was too easy to lose everything overnight. The financial boogeyman was always the 1929 stock market crash. People who weren't even around to see the crash passed along apocryphal stories of distraught businesspeople making suicidal jumps from New York's skyscrapers after being wiped out.

In truth, the stock market is one of the safest investments you can make over the long run. Yes, it will have its ups and downs. Your net worth at the beginning of the day will likely be different by the end of the day. But if you keep your money invested in a diversified portfolio, you're historically in a good position to weather the inevitable financial storms and still come out ahead. For example, according to an investment calculator, if in 2017 you had invested $10,000 in an index fund with holdings representative of the general market, such as the Vanguard S&P 500, your portfolio would be worth $35,505 in 2026. Consistently, the stock market delivers results far greater than you could ever expect over the long term if you left your money in a traditional bank savings account.

A college degree meant bragging rights for previous generations. This was especially true for those who grew up with parents who had never set foot on a college campus. The degree signaled that you were upwardly mobile, well-schooled, and qualified to make money more than the previous generation. Back then, college tuition was manageable on a modest salary. There were legendary programs introduced to increase the number of college graduates, notably the GI Bill, which continues to put thousands of military vets through college. Other students were able to pay for their tuition by working routine jobs during the summer and part-time jobs during school months. They were able to graduate with zero student debt. But, according to the Bureau of Labor Statistics, since 1981, the cost of tuition has outpaced inflation. It's now typical for most students to go into debt in order to earn a basic degree. Graduate school means falling even deeper into debt.

It's wise to at least reconsider college education in the traditional sense. You might want to investigate alternative ways, such as online courses, to gain the training you need or your children need to succeed in a given profession. For example, firms looking for computer programmers are far more interested in the hands-on programming projects a person has completed rather than the name of the school they attended. Selecting alternative education can mean entering a profession without a degree, but with less debt.