Money is Inherited
Money is inherited — and I don't just mean inherited from your parents, where every heirloom is somehow worth a billion dollars. I mean you, as a reader, have inherited money traits from your parents, who in turn inherited them from theirs, and so on.
My parents had a very popular story they loved to tell my sister and me. It goes a little something like this: my mother was secretly stashing away hard, cold cash. One day my parents were looking into buying a house when my father lamented that they had no money to put down. To which my mother brightened up and said, "Yes we do," and pulled out her bounty that she had hidden from my father. My father has NOT forgotten that moment.
It's an extremely cute story, but as I found myself hoarding away money into a savings account, it was hard to ignore the similarities. The reality hit when I ran the math. I was actually losing money. Liquid cash is nice, and you should have money put away for emergencies. However, there is such a thing as too much.
The math says the money that sits in a high-yield savings account (HYSA) only really keeps its value, while cold, hard cash, on the other hand, will lose its value over a long period of time due to inflation. If, for example, my yearly expenses were $100k and I generously saved $120k into my HYSA, that extra $20k would only hold its value over a 10-year time frame. Whereas if I took that $20k and invested it one time into the S&P 500, in 10 years that money would have nearly doubled to about $39k (assuming 7% return, which combats inflation).
A year's worth of savings is plenty. So the next clear thing to do was not hoard my cash. But I didn't do that. Why? The math is so clear. But the truth is, I was scared and overanalyzing what-if scenarios. What if I wanted to buy a house like in the story of my parents, and if I invested, I couldn't take it out?
Spoiler alert: it's 6 years later and I have yet to buy a house.
I did effectively learn to move my cash over into investments, but it took some hard truths. I'll say it again: Money is inherited.
When I thought about my parents' story and my upbringing, I realized I had inherited not money but the inability to take risks. My parents are what you'd call conservative in the financial community — which just means they are predisposed to more bonds and fewer stocks, or just prone to more safeguarding with less return on investment.
While the strategy worked for them, I had to understand that this is not the world we live in now. We are in a market that favors more risk — more stocks, if you will. In a world where 401(k)s are made up entirely of our own choices of stocks, I realized I had to unlearn the money traits my parents had unconsciously instilled in me if I wanted to not just survive but thrive in the current market.
All of this is a long-winded way to say: if you're finding yourself doing inexplicable things with your money, consider these questions:
Is this something my parents did? Possibly told me to do?
Regardless of whether they did or not, did it work out for them?
Is this something you want for yourself?
Emotions aside: does the math agree or disagree with the thing I'm doing?
I'll admit the last step does require a bit more studying and understanding of finances, but if you're reading this, you're likely already pretty financially literate. And if you're not, do not get discouraged. The first step in any financial journey, ironically, is not the math or numbers — it's the psychology of your finances.
I'd love to hear your fun money habits you do because of your parents.
Best,
Taylor xxx
