Teach Your Kids about Money like the Rich
What parents teach kids about money differs greatly based on who the parents are. As we all know that the subject of money isn’t taught in schools. While most people learn about the topic of money at home from their parents, but what are parents actually teaching their kids about money?.
What makes a difference between someone who will eventually become successful and someone who won’t, largely depends on the value they learn from their parents.
So let’s go over 11 things the rich teach their kids about money that the poor don’t.
1. The Importance of Money
Virtually all self-made millionaire or anyone who has achieved financial success understands the importance of money and it’s one of the first things they teach their kids.
Rich parents often show how important money is regardless of whether they believe money is important to their happiness or not. They know that money is important to have options and a better quality of life. Even if they only consider money as a resource and nothing else.
Most rich people know that money gives them freedom. From the freedom to choose the location for their next occasion to the freedom to choose where to live and even the ability to help others.
They know that they can have a less financially stressful life when they have an abundance of money. On the other hand, the poor rarely talk about money and some even say that money is not important.
This can affect their kids in the long-term because they will grow up in a financially driven society while neglecting their financial life all because they think money is not important.
2. The difference between Assets and Liabilities
Understanding the difference between assets and liabilities is one of the most important and basic concepts of building financial independence.
If you haven’t heard of this before, assets are things that you own or control with the expectation that their use will bring future benefits. In a more simple statement, assets are things that bring money into your bank account.
While liabilities are things that you owe usually money and the settlement of that will take money out of your bank account.
For instance, if you buy a house and you rent it out to someone, it is an asset because it brings cash flow every month in the form of rent. However, if you buy a house to live in, it is a liability because it takes money out of your pocket every month in the form of a mortgage. Though your equity will increase when you fully pay the mortgage.
The rich encourage their kids to build and buy assets and avoid liabilities. By so doing, they can create a business or investment that generates consistent cash flow and avoid the things that generate negative cash flow, which leads to more money in the long term.
The rich also understand the power of using assets to detach their time from their income, since it generates cash flow whether they are physically putting the work in or not, they are able to scale and use their time to develop more assets.
Rich people understand, teach, and focus on the spending pattern of the poor versus the rich. This is why few of the people earning the same salary become financially comfortable while others remain poor.
For instance, we have two people making $7,000 in monthly income but they have different spending patterns. One of them likes shopping, getting the newest phone, indulging in the finest restaurants, getting a new car, a nice house, and all of that nice stuff he typically spends his money that makes him look and feel good.
Individuals like that typically have little or no savings and years of debt on their credit cards, car payments, and mortgage payments. They are usually stuck in the rat race and often take years to get out.
The other individual also makes $7,000 a month but he does not buy a nice house or a nice car, he doesn’t go out every weekend and he doesn’t go to the fancy restaurants.
He occasionally buys clothes when he needs them and does not follow the fashion trends every season.
Let’s say he only spends 60% of his income and saves 40% every month and by the end of the year he has $33, 600 and by the following year he’s able to invest the money into and investment that generates cash flow.
Over time these two individuals will end up in completely different places all due to their spending habits.
In reality, some people spend their money to look rich while actually being poor. In the meantime, rich people look poor while getting rich.
I know some of you may say that there are a lot of rich people that have nice things such as expensive cars, clothes, you are correct.
However, the difference is that the poor borrow to buy that luxury stuff while the rich use their assets to generate cash flow which helps them to buy those expensive items.
3. Manage their Money
Many wealthy parents teach their kids about money is by letting them into the planning and managing of their household expenses.
Many of these parents involve their kids when they go over their financial statements and plan their budgets.
They familiarize their kids with the reality of having living expenses and this provides the children the experience of managing money from an early age. This builds them up in a way to properly manage their own money when they are older.
This is a big contrast to the parents with a poor mentality. The majority of parents don’t talk about money especially their own income.
They typically plan a monthly budget without their kids, if they even plan at all.
Often times, parents argue and express negative feelings when planning their monthly budget. This causes their kids to take on a similar planning pattern which will translate to similar behavior in life.
Rich parents know that living expenses are a reality of modern life and focus on associating good emotions with their living expenses.
As hard as that might sound, some people are grateful for those living expenses because it provides them with a roof over their heads and the ability to live comfortably.
4. Different ways of Earning Money
One noticeable thing about the rich is that they teach their children different ways of earning money.
Specifically, they do give their children the opportunity to take up jobs despite their wealth. One of the reasons they do this is for their kids to experience and different ways to earn money.
For example, one of the ways is exchanging time for money by taking up a job or work as a freelancer.
The second way is to build a system that generates money or having money work for them like building a business and leveraging the time of other people or leveraging online systems that provide automation or buying assets that generate income for you. This is illustrated in the book cashflow quadrant by Robert Kiyosaki.
The rich utilize this method to teach their kids various ways of making money so as not to be stuck in the rat race.
On the other hand, most poor parents only know one way of making money which is typically exchanging time for money, and sadly, it’s the only thing they teach their kids.
The kids grow up knowing only one way to make money which limits their earning potential.
5. Developing Productive Habits
The rich parent understands that what makes people wealthy is not just what they do but what they do consistently.
They understand that in order to achieve financial success, they must carry out their plan on a consistent basis. It’s not just about taking action but doing it over a prolonged period of time.
The way to do that is by building habits. The rich parents give their kids the opportunity to build their own habits. The kids also learn some of their parents, so it’s important to have consistent habits that create value.
6. No One Owes You Anything
Self-made millionaires and those who worked hard to make money for their family know how they fight their way to financial success and know that no one owes them anything.
This is very important for the rich because their kids grow up in a wealthy environment thinking they deserve a piece of their parent wealth.
The rich understand that this sort of entitlement can be a disservice to their kids in the future. Therefore, they teach and help them understand the importance of the concept of earning their own success.
They instill a sense of independence in their kids so that they can earn their own success.
7. Social and influence Skills
The ability to socialize and communicate with others can open a lot of opportunities for individuals, the rich know this.
The ability to create and influence those around you create that sense of leadership.
Installing that skills to understand people’s emotions, motivation and behaviors early on can provide an incredible tool for the future by helping the kids to become strong and influential leaders.
8. Delayed Gratification
The rich understand that completing a massive goal and building wealth takes time. They understand the importance of waiting patiently while working hard at the same time.
They teach their kids that hard work does eventually pay off, compared to others that engage in short term pleasure.
9. There is Always more Money
The rich have an incredible mindset that there is always more money. They believe that there is an unlimited amount of money in the world. This belief translates to their bank accounts.
When the poor might feel like there is no money, the rich feel that there is always more money out there, either to build a new business or to learn a new skill. They know there is more money out there and their job is to get it.
The poor think their salary is their financial limit and have to live under the financial ceiling. This is a scarcity driven mindset.
The rich believe there is no limit to how much they can earn and money is out there for them to attract. This is an abundance mindset. This is a simple mindset that can play a significant role in our financial success.
10. The Best way to Make Money is to Help Others
The most important thing that the rich teach their kids is helping other people solve their problems. The bigger the problem, the bigger the paycheck. The most successful people make financial success while solving other people’s problems.
For instance, Henry Ford transformed the personal transportation industry.
The rich focus on the result of solving problems while the poor focus on the salary they earn. Providing value is the rich person gain and the gain is based on the amount of value created or provided.
11. The Rich Understand they don’t Know Everything
The rich believe they don’t know everything. That is why they usually create mastermind groups to share ideas with others that will benefit them and their businesses.
The rich constantly learn new skills and develop new relationships. They pass on these attributes to their kids. The kids grow to build networks of valuable people around them. This is why the rich are friends of the rich.
Read Also: Personal Finance for Children
The eleven points summarize some of the important things the rich teach their kids about money that other parents don’t.
If you are a parent, I hope you have some takeaways from the article. Would like to know which point resonates with you the most and why?. Share your knowledge on this topic in the comment box. If you have gained something valuable, kindly share the article.