“Don’t worry that children never listen to you; worry that they are always watching you.” ~ Robert Fulghum

Many of the limiting beliefs that we hold about money are rooted in the experiences of our childhood. Whether we grew up in a household where money was scarce or plentiful, whether money was a subject of conflict or empowerment, something to be celebrated or cursed, everything that we heard, saw and experienced about money and wealthy people has a long-lasting influence on our own ability to earn, hold and grow our money.

Both my parents grew up in England during WWII. Growing up in an era that was marked by shortages, rationing and the uncertainty of war definitely influenced the way that they managed their finances and they placed great value on hard work, frugality, and homeownership. Unfortunately, their generation also believed that it was bad manners to talk about money and consequently, discussions of money in our house were pretty much limited to phrases such as “money doesn’t grow on trees”, “don’t waste your money” and “never borrow”. As a teenager who knew everything, I rejected almost every money management principle my parents followed, mostly because I didn’t understand the thinking behind it. As an older and (somewhat) wiser adult I’ve realized that they had it right all along. In examining my own limiting beliefs around money I developed a deeper understanding of the way my parents handled their finances and a new perspective on the thinking behind their strategies. Although my life situation is very different from my parents’ situation when they were my age, there are five principles they followed in managing their money that seem to have withstood the test of time:

Pay yourself first:

Simply put, as human beings, we’re hardwired for pleasure and, for many of us, the things that can be bought with money give us a lot of pleasure. Making sure that a percentage of your income goes directly into savings each month before you have a chance to spend it has a huge impact on your success in meeting your spending goals. People are often surprised by how much they can actually redirect to savings each month without feeling the impact in their day to day lifestyle. The key is to make it automatic. Whether you set up payroll deductions or schedule a withdrawal from your bank account every payday, if you make it automatic it’s a lot easier to stick to.

Related article: Principles of saving money

Spend less than you earn

For my parents, getting paid in cash and spending cash made it easier to live within their means. Today, with most people being paid by direct deposit and with so many credit options available to us it can be hard to keep track of how much we’re actually spending on a monthly basis. Tracking your expenses for a few months so that you know how much you’re actually spending can be a really useful exercise. It’s often the smaller value purchases that really add up and with gas and grocery prices on the rise, you may not have noticed how much more you’re spending on necessities compared to a year ago. Knowing exactly what our income and outgoings are allowing us to give every dollar we earn a purpose and reduces the chance of our hard-earned money drifting away to become shoes, lattes or other new “stuff”.

Related article: Principles of cashflow

Keep a “slush fund”

My Dad Says “no matter how well you budget there will always be expenses you didn’t plan for”. Without a slush fund of “money for stuff, I didn’t plan for” that unexpectedly high cellphone/hydro/dental bill can be extremely stressful. Rather than letting the bank balance get close to zero, we should plan to always carry a minimum balance. How much is up to you but $500-$1000 seems to work for most people? A slush fund is not the same as an emergency fund; it’s just a pool of money that you can dip into during a lean month and top up during a good month.

Related article: Are you protected from financial disaster?

Equality and open communication

Like many women in her generation, my mum worked before her marriage and then stayed at home to raise her three amazing children. She returned to work part-time once we were all in school but my Dad was always the main breadwinner in our family. Despite the fact that he earned the majority of the household income he always involved my Mum in every financial decision and respected her input. They always had open and honest communication around the family finances and they handled the money as a team. Seeing my Mum take an active role in managing the family income meant that I always felt comfortable handling my own money and never felt the need to let someone else do it for me.

Related article: Couples need to talk about money

Professional advice

My parents have always consulted professionals about their finances. They worked with a Financial Advisor and, as a business owner, my dad trusted the advice of accountants and tax professionals about the best way to structure his business. In retirement, they have been able to make informed and educated decisions about their finances and their estate because of the professionals they have consulted. My dad believes in ‘doing his homework’ before making any decision and it’s a belief that has served him well.

Related article: Online guide to working with financial advisors

Those are the lessons I’ve learned. What lessons have you learned from watching the examples of others? Who has had a positive influence on the way you handle your money? As a parent, how do you hope to model good financial management to your children? Let me know.