What money lessons do you recall learning in your household? I  came across this Morningstar article which made me think about one money lesson I inherited that I have not been able to toss aside. First, here's what got the author of the Morningstar piece thinking about this: 

That conversation got me thinking about the various bits of "received wisdom" that most of us are carrying around about money. Could some of these "family money lessons"--beliefs we hold true we because we learned them from financially healthy people we trust--be massively influenced by what behavioral researchers call hindsight bias? Investors' own hindsight bias is a well-studied phenomenon, but is there such a thing as "inherited hindsight bias"?

I think so. In fact, I think some of these family money lessons are an under-discussed aspect of behavioral finance. To help think through that point, I decided to take stock of some of the other money lessons I grew up with, beyond the used-car thing. To what extent do they hold up today? To what extent were they influenced by past--perhaps never to be repeated--history?

Now on to my "inherited hindsight bias." Like the author of the article, I have always had this bias towards buying new cars instead of buying used one. My impressions regarding the quality of used cars came from a seminal event of my childhood: my sister's purchase of the 1970's era Vega with her hard-earned savings from her lifeguard job. Described as "an unmitigated disaster" in the automotive press, I remember the quarts of oil she kept on hand, the dark smoke billowing out of it's exhaust and her extreme disappointment. Apparently, we weren't alone. "Car and Driver said: "It was so unreliable that it seemed the only time anyone saw a Vega on the road not puking out oil smoke was when it was being towed." The quality of cars has clearly improved in the four decades since and yet I still have never purchased a used car given my fear of buying a "lemon."

This issue of family lessons makes for an interesting writing prompt for your students: 

What family money lessons have you learned while growing up? Be specific.

• Are these lessons consistent with what you have learned in class? 
• Do you think that you will continue to follow these family lessons in the future? 
• Are there any money lessons that you want to "unlearn?" 

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Want to delve deeper into this complicated issue of families and money? Check out the NGPF lesson, Family and Money, in our Financial Pitfalls unit. 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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