Our Views

Mom’s Financial Words of Wisdom

We often think of financial planning as a complex field, dictated by economics and market analysis. However, at its core, many sound financial principles are surprisingly similar to the simple life lessons we learned from our mothers growing up. As we celebrate Mother’s Day this weekend, here are some reminders of Mom’s age-old advice—and how they might guide our financial strategies.

1. “Do Your Homework on Time”: Plan Ahead

Just as mom insisted on the importance of doing homework ahead of time to avoid last-minute panic, financial planning also requires proactive measures. Setting financial goals early, creating budgets, and planning for retirement are all part of doing your ‘financial homework’. This preparation ensures that you’re not caught off-guard by life’s inevitable surprises.

2. “Money Doesn’t Grow on Trees”: Invest Wisely

Mom taught us the value of money and the importance of not wasting it on frivolous things. In financial terms, this translates to investing wisely. It means understanding where your money is going, choosing investments that match your risk tolerance and goals, and ensuring your investments align with your objectives.

3. “If Everyone Jumped Off a Cliff, Would You?”: Resist the Temptation to Follow the Herd

In life and in investing, there’s often a herd mentality that can lead to poor decisions. Whether it’s investing in a trendy stock everyone is talking about or buying a home because it seems like the next step society expects of you, it’s important to think critically and make decisions that align with your personal circumstances and goals, not just because everyone else is doing it.

4. “You Brought This on Yourself”: Don’t Have Regrets About Poor Planning

Mom’s blunt reminder that our choices have consequences applies directly to financial planning. Neglecting to save for emergencies or failing to insure adequately can lead to regrettable outcomes. Understanding the importance of emergency funds, insurance, and other safeguards is crucial in avoiding financial distress.

5. “You’ll Understand When You’re Older”: Embrace Hard-Won Wisdom

Mom often said this when we were too young to grasp the complexities of certain life lessons. Similarly, in finance, experience plays a crucial role in understanding the nuances of investments, market cycles, and financial decision-making. As we grow older and gain more financial experience, we learn from past mistakes and successes, leading to a deeper understanding and better management of our finances. This hard-won wisdom is invaluable for making more informed choices that align with our long-term objectives and circumstances.

And while Mom may not have cautioned us that history repeats itself, we’d add that to Mom’s list too.

6. “History Repeats Itself”: Beware of ‘This Time Is Different’

While circumstances may appear new, underlying patterns and outcomes often remain consistent over time. In finance, the notion that “this time is different” can be risky. Investors might use this rationale during booming markets to justify overvalued investments or during crashes to justify panic selling. History shows that, although the surface details may change (technological advancements, market players), the fundamental principles of economics and human behaviour endure. Recognizing that financial cycles and risks are not fundamentally new can help us avoid costly mistakes driven by the belief that historical rules no longer apply.

The lesson? The foundation of good finance is akin to the simple, yet profound advice often imparted by our mothers. It seems that Mom really did know best. Happy Mother’s Day to all the moms and mother figures out there.