Mom’s Money Lessons

I_Love_You_momWhen it comes to moms, I won the birth lottery, in many ways.

For developing financial savvy in particular, I benefitted from my Mom’s lessons. Lessons like keeping costs in check, the meaning of finance words, and how to build up a healthy retirement account.

We’ve known, at least since the 1966 Coleman Report that children’s attainment in school, and professionally, correlates highly with family background, especially such factors as a mother’s level of education. So it’s maybe not surprising that in my case, I owe it all to Mom. But I didn’t need the Coleman Report to tell me what I owed to her. I knew it just growing up.

I wouldn’t say the first finance lesson I learned – on keeping costs low – always felt pleasant. In our under-insulated house in Massachusetts, for example, winters felt especially rough. Mom refused to heat most of the house. You Texans will probably think I’m exaggerating for the point of a story but I’m not. Really, ask any friend who spent the night: you could literally see your breath in the morning in my room growing during in the winter. Ok, it was awful. I guess Mom just didn’t believe in spending money on electricity, when the heat would just escape through the walls and windows of the drafty house.

cold_indoorsWhen my brother and sister and I complained about the risk of frostbite in our room?

“Put on a nice hat and sweater.” Every. Single. Time.

That Yankee thrift I learned from Mom plays out in my life in weird ways, like shoes I won’t discard until there are big holes, or sweaters that I’ve worn since junior high. You’ll be relieved to know my wife sometimes stages an intervention on the shoes and sweaters. Sometimes.

But Mom had other finance lessons for me besides being cheap.

I remember heading to New York City for a job interview in the spring of my senior year of college. At the time, I boasted precisely zero business experience, which partly explained why I had a hallway full of interview rejection letters taped to my dormitory walls – a neat tradition my roommates and I engaged in.

The opportunity in New York was with a small “fixed-income consulting firm” named Orion Consultants. This was the only job interview I landed my senior year. I talked to Mom the night before the big interview in New York.

“You do know what ‘fixed income’ means, right?” she asked.

“Um. Well. Not exactly.”

So that’s the day I learned from Mom that fixed income is the finance-industry term for bonds and its counterpart, equities, is the finance-industry term for stocks. Good to know. I got the job, my first one out of college. Thanks, Mom.

Orion_ConsultantsThis spring, teaching personal finance at Trinity University in San Antonio, I try to return the favor to the students by defining fixed income and equities early in the semester. As a result, I know they can land that first job. Sometimes just knowing a little bit of vocabulary is the key to getting the interview, or getting hired.

I also invited Mom to do a Q&A with my students on her retirement accounts.

Mom never made a high salary, as a college guidance counselor and seventh-grade teacher of writing. In fact, I made a higher salary in that first fixed-income consulting job in New York than what she made after twenty-five years of teaching. The fact that she never earned much was actually a key part of the reason why I invited her to speak to the class. Despite her lame salary – yes teachers, it’s the same in other states as well – she has built up a significant retirement account.

Mom described to my students the keys to her retirement investing success.

  1. Start early. She didn’t make much but she put some away as soon as her school offered a 403(b) plan. She did this for decades.
  2. Always contribute enough to the 403(b) plan to at least get the employer-match. Her school offered a match up to 8 percent of their salary, which was pretty generous. Over the years Mom became an evangelist to the younger teachers at school to at least invest enough to get the employer-match.
  3. You don’t need investment expertise. The broad mutual funds offered plenty of market exposure and diversification.
  4. Mostly buy equities. Mom knew, somehow, that you’re supposed to have exposure to risky and volatile investments in your retirement account, since over decades these will grow much more than the safe stuff like fixed income. Fortunately my students already knew what those finance words meant by the time she visited the class.
  5. Never Sell. Mom went through the various stock market crashes of 1987, 2000, 2008 and she never panicked, she never sold.

Quite a few teachers-to-be took my class at Trinity. I’m hoping they took comfort in Mom’s plan for building up a substantial retirement account despite their modest future earnings. The point I hope they remember was that Mom was no investing wizard. She does not pick stocks.

She does not even focus on the business section of the newspaper. Except my writing of course. Thanks Mom. I love you.

A version of this ran in the San Antonio Express News


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