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Why Do Parents Save So Much? Unlocking the Psychology of Money Across Generations

Compared to our parents, we love to consume more and keep buying, but they love to save more. So, we always complain to them, why do you have to be so frugal?

Morgan Hauser, author of “The Psychology of Money,” said that people’s views on money are formed in different worlds. In this case, an idea that is considered intolerable to one group of people is reasonable to another group of people.

Every money-related decision people make has a rationale because they are made after taking the information available to them at the time and then fitting it into their own unique cognitive framework of how the world works. .

Therefore, we don’t have to convince our parents because their financial concepts stem from their unique life experiences.

If you are a “post-90s” or “post-00s”, you grew up in an era of rapid prosperity, and it is difficult for you to understand what hardship is and what “preparing for emergencies” means, and your parents have experienced an era of scarcity. , their life experience is completely different from yours.

Moreover, they are not outdated old guys. They have seen more and further than you.

If we extend this experience to thousands of years of history, what kind of view of money will we have?

Economist Lai Jiancheng said something in his book “The Interest of Economic History”: According to Han customs, the most common gifts given to newborn babies by elders, relatives and friends are gold: gold ingots, gold necklaces, and gold bracelets. etc. These items represent blessings of good luck and longevity.

But Lai Jiancheng later gradually realized that our nation has long been fully aware of the “impermanence of destiny”. What gift to a newborn baby can be more reassuring than gold? These items amount to a “shelter fund.”

The writer Taleb wrote a book called “Black Swan: How to Cope with the Unpredictable Future”. He said that the 1000-day history of something will not tell you anything about the 1001st day.

Things are always happening in the world that have never happened before. Stock market crashes, wars, plagues, etc. are all “black swan” events. We must have sufficient cash to deal with various uncertain events.

There will be situations like this from time to time in life. In some fields, perfect mechanisms have been developed to prevent single point failures. For example, large civil aviation aircraft have four engines. Even if one or two engines fail, the flight will not be affected.

When it comes to money, the most dangerous single point of failure is relying entirely on wages for short-term expenses without using savings to create a sufficient buffer between planned expenses and expenses that may be needed in the future.

Maybe your salary today is enough to cover various expenses, and you may even have enough to change your car or travel. But this does not mean that your salary will be enough to spend tomorrow. We save money without knowing what it will be used for in the future.

If our financial planning only prepares for known risks, it will lack a large enough margin of safety and will not be able to withstand the test of emergencies.

Having a relatively sufficient amount of cash is not conservative. This means that you can have a certain degree of independence and autonomy without having to wrong yourself; it also means that even if you are sick, you will not be unable to make ends meet even if you take a period of leave; it also means that you can calmly wait for a replacement after losing your job. For good career opportunities, don’t rush to grab the first life-saving straw that comes your way.
These preparations are crucial to your life.