Growing up, dinner table conversations never revolved around financial matters. There were no debates about the best ways to save money or discussions on how to pick the best stocks for long term success. Unfortunately, the school of hard knocks became my best teacher.
That’s one of the reasons I vow that my kids will understand the rules of money right out of the gate. So, what advice will I pass on to my children before they venture out into the real world?
Become an owner
Think about it. The richest people in America made their fortunes through ownership. Warren Buffet became rich by way of stocks. Donald Trump rode the real estate train to wealth, while Oprah built a business empire on her way to becoming one of the wealthiest women on the planet.
We’ve been fed the myth that a good 9 to 5 job is the surest way to wealth. Yet, with the exception of the occasional CEO, the way to true wealth is always through ownership.
In America, financial prosperity is linked to ownership, whether it’s ownership of stocks, bonds, real estate, an interest in another business, or even ownership of your own business.
Unfortunately, we’re trained to be consumers rather than owners. We’d rather buy Apple iPhones than purchase Apple stock. We’d rather let others build businesses than start our own.
My children will understand that owners major in wealth, while consumers major in debt. The richest people in the world didn’t get wealthy by mastering the art of consumption.
And how exactly will they become part of the ownership society? I’ll teach them to spend less than they make, while using what’s left over to invest in wealth building ownership assets.
Resist the urge to follow the crowd
Most people are not wealthy. So why then do we follow the examples of the people around us? I admit, following the the crowd is easy. It requires little thinking and less effort. But, following the crowd is the surest path to financial disaster.
My kids will understand that becoming financially fit isn’t hard, but it isn’t easy either. You must be willing to do what the crowd refuses: track your spending, follow a budget, avoid buying on credit, and save and invest a percentage of your income.
Financial guru Dave Ramsey sums it up best when he suggests that we, “Live like no one else today, so we can live like no one else tomorrow.”
Master the art of self control
“God has equipped you to handle difficult things. In fact, He has already planted the seeds of discipline and self-control inside you. You just have to water those seeds with His Word to make them grow!” – Joyce Meyer
The greatest challenge to financial freedom is self-control. The lack of self-control has us buying items we can not afford and purchasing things we really do not need. The ability to delay gratification and to distinguish a “want” from a “need” are crucial skills all parents should pass on to their childen.
Don’t let your possessions define you
Too often our self-esteem is tied up in what we drive, who we wear, or where we live. This dangerous trap crushes any hopes of achieving financial freedom. We end up sacrificing financial stability for the fleeting validation that material possessions provide.
I will be sure that my children derive their self-worth from being competent, God-fearing, empathetic human beings, rather than from owning material possessions. This will free them up to become more concerned about the type of retirement account they own instead of the brand of car they sport.
Once we understand the true nature of wealth we can start making our money work for us instead of against us.
Personal finance is about more than math. It's about behavior. Change your behavior and you change your financial situation.
When we spend money we're really exchanging time spent on the job (our life energy) for a product. Understanding this leads to better buying decisions.
Put your finances back on track with Michelle Singletary's twenty-one-day financial fast.
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