Millennials look to their parents and the older generation to seek advice on handling their money. You should always respect the opinions your parents have. However, that does not mean you should always listen to it.
Times change, and so does the situation. Their advice is based on their experiences, but the world is a much different place for you than what it was for them at the same age. What worked for them might not work out for you.
I will discuss two money tips you might have heard from your parents that you would be better off ignoring.
Buy a house
This is one of the most common pieces of advice you will hear from baby boomers. Investing in real estate paid off with massive returns for the previous generation. However, if you look at a typical person’s balance sheet, most of their money is tied up in their house. It makes sense if you look at the outstanding long-term performance of real estate in places like Vancouver and Toronto.
However, owning a home is not as fantastic for a millennial. A typical homeowner puts down 5-20% of the value of their house and finances the remaining amount. While it works out well most of the time, it can devastate your net worth. You need to hold onto your purchase for decades to see substantial returns. A housing crash can suddenly depreciate the value of your investment.
Besides the upfront cost and payment to finance the house, there are costs of maintaining the property and the hassle that comes with it. All the costs can amount to hundreds of thousands of dollars you could have used elsewhere to make more short- to medium-term profits instead.
Save your money
Another common baby boomer advice for millennials is avoiding swiping their credit card and saving money. The younger generation does tend to live in perpetual debt to fund their lifestyle needs. While I agree that staying in debt on purpose is not a wise move, the baby boomer advice is not entirely useful.
Instead of amassing cash savings as your parents did, you would be better off using the money you save as investment capital to earn more money. If you have been saving money by following your parents’ advice, you are missing out on opportunities by not investing the capital in high-growth companies like Lightspeed POS (TSX:LSPD)(NYSE:LSPD).
The Canadian tech firm is seeing its business grow rapidly in the changing economy. The company’s product offerings for customers is allowing Lightspeed to grow substantially. Lightspeed POS marketed its initial public offering (IPO) last year. Fast forward to writing, the company’s share price increased by 127%, and it is trading for $42.90 per share.
Investors who bought shares of Lightspeed in its IPO effectively doubled their money. Lightspeed has been operating well during the pandemic, despite the initial setback from the lockdown. Its product offerings cater to customers who needed digital solutions for the e-commerce industry boom amid social-distancing mandates.
The result has been a fantastic turnaround for Lightspeed. It dipped 70% between January 24 and March 20, 2020. The stock bounced back 217% to provide substantial returns to investors who stuck with the company.
Foolish takeaway
Home equity can be a great asset to the feeling you get when you make the last mortgage payment. Still, investing in real estate does not do much in terms of short-term growth. Saving your cash and relying on interest rates for returns cannot help your capital growth keep pace with inflation.
Instead, investing in high-growth companies like Lightspeed POS can help you make better use of your savings. I think you should consider stock market investing and invest in a portfolio of stocks that can grow your wealth. Lightspeed could be an ideal starting point.
