Early Financial Experiences and Their Impact on Financial Planning
Memory often holds the keys to shaping our future behavior, especially when it comes to financial management. From the simple initial steps of saving in a piggy bank to the creation of a structured budget, these early experiences can have a profound impact on our financial planning journey. This article explores some of the earliest financial experiences and how they influenced financial planning habits.
The Power of a Piggy Bank
One of the earliest ways to start saving is through a piggy bank. I remember vividly the first time I received my allowance, my mother insisted that I save a portion of it in a piggy bank. This was not just a simple habit, but a formative experience that instilled a sense of responsibility and foresight. The piggy bank served not only as a physical container but also as a mental one, encouraging me to think about future needs and desires, such as buying a toy or a book.
Escape to the Bank: The First Savings Account
My first step into the world of structured banking was commencing my savings account at 10 years old. My mother regularly took me to the bank to deposit the money from my piggy bank. The process of echoing my hard-earned savings into a bank account was a significant milestone. It also marked the start of a conscious approach to financial management. I was taught to take out a fixed amount for spending, leaving the rest to grow in my savings account. This early exposure to budgeting and disciplined spending helped me build a strong foundation for future financial decisions.
The Financial Journey from High School to Grad School
My financial journey took a practical turn during high school. By 15, I had landed my first job at a McDonald's, earning minimum wage. My mother's insistence on opening a bank account at this young age was pivotal. I diligently followed her advice, depositing my paychecks into the bank and withdrawing a fixed weekly amount for expenses. This routine reinforced the importance of saving and the value of hard work. The experience of a fixed weekly withdrawal provided me with discipline and made me appreciate the fruits of my labor.
The Unexpected Turn: A Car Accident and Financial Mindset
After working part-time in various jobs, including at a CVS, and completing high school, I faced an unexpected setback. One day, as I was driving to work, a car ran a red light and collided with my front passenger side, totaling my car. Miraculously, I was unharmed, but my car had been destroyed. The savings I had in my bank account at the time (around $2000) became a lifeline. With this money, I was able to purchase a used car, a 1993 Ford T-Bird with 100,000 miles. Through regular maintenance and care, this car served me faithfully for six years until I could afford a better vehicle. This experience taught me the value of saving and the importance of focusing on long-term goals rather than immediate needs.
The Envelope Budget System: A Mom's Legacy
One of the most significant lessons I learned came from my mother. She taught me the intricacies of managing a household budget using an envelope system. Each envelope was designated for specific purposes, such as groceries, mortgage, insurance, haircuts, and allowances. Each month, the household received a set amount of money for each category. This system instilled in me the importance of tracking expenses and making informed decisions based on need rather than impulse. It also underscored the value of setting aside money for unforeseen circumstances.
Conclusion
From the humble beginnings of saving in a piggy bank to navigating more complex financial systems, these early experiences have been instrumental in shaping my financial planning. Learning to manage savings, understanding the importance of budgeting, and dealing with unexpected situations have all contributed to a more nuanced and effective approach to financial management. By reflecting on these early experiences, we can gain insights into how to establish sound financial habits and prepare for a secure future.