- How to break away from following in your parents financial footsteps – in order benefit from the things that matter to you now.
- Most young adults live quite different lifestyles to their parents (and spend money in very different ways) – so why mimic their financial choices? Trust, ease, laziness?
- Making the right choices for your life stage now can be the difference between a Business Class Europe trip of a lifetime or staying home – still saving – and planning for that trip...one day.
Everyone takes a different life journey. Some of us fly the coop as soon as we finish high school, jetting off to a new city to study or work. Others stick around their childhood home for years. And while we all have various priorities in life, when it comes to managing our finances there’s one common thread most of us had while growing up – we usually went with the same bank as our parents.
As soon as you turn 18 you’re legally an adult and you’ve got the power to start running your life the way you see fit. It might have taken me a little while (or a job in the finance industry), but today at 30, I'm now making my own well-informed and researched choices about banking and credit cards tailored for my personal finance.
I admit that in the past I mimicked the choices my parents made in terms of which banks and credit cards to use.
Now, my parents’ financial decisions were not bad ones, but in retrospect they just were not the right decisions for me.
So what did I do to change this, and get the right deals for me?
Playing ‘Follow the Leader’ with Mum and Dad’s decisions
It was not that long ago that I was still following in the footsteps of Mum and Dad’s financial decisions, something I’d done since I was a kid.
Like most Aussies, I was a Dollarmite with the Commonwealth Bank since I was five years old. In the years that followed, my parents were typically loyal types with their choices, having changed banks only three times that I can remember. And until last year, I’d only changed banks three times myself, always at the same time as Mum and Dad.
Looking back, I can see that those changes weren’t always the best choice for my life stage. I actually feel kind of ashamed that I didn’t do any research into the banks or card options when Mum and Dad changed theirs.
I looked to their advice. They told me what deals they were getting and I thought: “Okay, well that’s the best thing for me as well." I blindly made that decision.
The moment of realisation
As a teenager and into my early 20s, I knew I had the choice to go with whatever provider I wanted, but it was just too easy to stick with what I, and my parents, knew.
Plus, there was the added benefit of getting any financial questions answered by Mum and Dad. They had that information, so I could ask them questions about it and get an informed decision. At the time, I saw that as a good benefit.
But a major turning point in my career made me realise I needed to step up and take control of my finances if I ever wanted to get the most out of my spending and saving habits.
Changing employers to work for a credit card comparison website was a big factor in starting to think about my finances in relation to the lifestyle that I live. In the past 12 months, I’ve become much more aware of financial advice and making my own decisions, the best decisions for myself.
I live in the city, I like to travel, and I like to get rewards and benefits for the money I spend. I spend my money on completely different things and in different places to my parents, so why was I just copying what they were doing financially?
That lightbulb moment brought with it the understanding that I lived a really different lifestyle to my parents, and I wanted to be rewarded for my purchasing choices.
When I stepped back and thought about it, and did my own online research by comparing all the options, is when I realised I’d been going about it the wrong way.
Multiple cards for better returns
Once I had the ‘aha moment’, I began researching and comparing what the right options for me were. That meant seeking out the best credit cards for my day-to-day life and travel goals, and it ended up as not just one, but three everyday cards for different purposes.
So I have a Visa credit card, which is with my main bank, and then I have an American Express card as well. I see real benefits to that, because everywhere possible I use my Amex, as I’m all about chasing the points these days.
My third card is a debit Mastercard, which I only ever use to withdraw cash while out and about. The rest of my purchases are with a reward-driven American Express or, where merchants don’t accept Amex, the Visa credit card.
I now look at spending this way: “I may as well be getting points for any money I spend."
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Different cards for different lifestyles
While on this ‘journey’ of financial self-realisation, it became obvious to me how strikingly different my financial goals were to those of my parents.
My parents are at that stage in life where they’re saving for retirement and looking towards the future in that way. They have plans to continue working for the next couple of years, but they want to spend their money – now that they’ve raised all their kids – on trips away and doing things with the family.
And while they are also interested in earning points through their own credit cards, the way they use those points couldn’t be more different.
Case in point: Last year I booked a European holiday, where it was my priority to use some newly acquired sign-up bonus points on overseas flights and upgrades. Whereas my parents aren’t really looking to use their rewards like that. They’re wanting to use their points on domestic flights and hotel accommodation, getting more 'instant' or short term value out of their points.
Staying debt-free as circumstances change
Aside from earning rewards, I’d have to say the biggest benefit to taking the reins of my financial future has been educating myself about how to stay out of debt. This has meant I’ve been able to seek out credit card deals that offer lots more than just a low introductory interest rate.
This is important for my situation, because if you had spoken to me in the past five years, I would’ve been looking for lower interest rates only. Why? Well, I was earning less and probably wasn’t paying off my credit card completely each month. But when my work life changed, I saw that my credit card could change to my benefit as well.
I pay off my credit cards every month these days, so I’m not as concerned about the annual fees or the interest because I know I’m getting more benefits out of the points on those cards.
Preparing for the future
Perhaps the biggest risk anyone can make after going through a major financial change is to rest on their laurels. It’s far too easy to slip back into old habits and watch all that hard work go to waste. That’s why I plan on matching my credit card provider with whatever curveballs life throws my way.
I don’t know where I’ll be in the next five years. A different card could be what I need in the near future compared to the one I need today. Whatever the case, it’s about finding the best card for my situation.
What are the best resources to help you make your own financial decisions?
So what’s the solution? How can people who, like me, aren’t naturally financially savvy, find their way through what is sometimes seen as a maze of financial options?
My take on it is to get online and get informed. There are plenty of websites – ours and others on the market – and all of them have different information about the various types of credit cards, and tips and tricks on how to choose the best one for you.
In addition to online research, chatting to your family and friends about what options they have can be beneficial, if they have similar lifestyle circumstances to you.
But at the end of the day, don’t just take one person’s opinion. Collate and compare all your options, have a real think about where you spend your money, and what rewards you’re after.
If you don’t do your research and take your personal circumstances into account, you’re going to risk the one thing we all try to avoid in life: rejection.
One of the reasons a credit card application can get rejected is because people aren’t looking at the cards that are best for them. They’re not comparing cards. The benefit of applying through a comparison website – regardless of whether you end up going for a card that’s with your current bank or not – is that it gives you a transparent view about what’s out there in the marketplace and what might be the right option for you.
Words of advice to a younger version of myself
Most of us wish we could travel back in time and tell our younger selves something to get them out of a jam. My advice to my younger self – and to anyone stuck in a financial rut or looking to get out from under the shelter of their parents’ financial decision-making – is this: get informed.
Don’t be scared of the complexity of finance. It might be overwhelming, but stick to it, and find the right option for you.