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Most schools don't teach about money as part of their lessons, even though many people agree they should. Instead, most individuals acquire knowledge about money from their parents at home. It's important to look into what parents are teaching their kids about money and what makes some people rich and successful while others aren't. In today's video, let's delve into six key principles that affluent individuals teach their children about money, which are often overlooked by those from less affluent backgrounds.
Let's get started.
1. Importance of Money
Practically every self-made millionaire who has attained financial success emphasizes the significance of money, making it a priority in their teachings to their children. Rich parents consistently demonstrate the importance of money, recognizing it as a crucial tool for expanding options and enhancing quality of life. They view money primarily as a resource that equates to freedom, appreciating the ability it provides to dictate aspects of their lives—from choosing vacation destinations to selecting where to reside and helping others in need. Conversely, individuals from less affluent backgrounds often avoid discussions about money, which can harm their kids in the future, making them unprepared to deal with a world where money matters a lot just because their parents think money isn't important.
2. Assets vs. Liabilities
Understanding the difference between assets and liabilities is foundational to achieving financial independence. Assets are sources of income, while liabilities deplete funds. For instance, purchasing a property and renting it out constitutes an asset, generating monthly rental income, while buying a residence to live in is a liability due to ongoing expenses. Many affluent parents instill in their children the importance of accumulating assets and minimizing liabilities, enabling them to establish businesses or investments that yield recurring income streams.
3. Spending Habits
Rich people often stress understanding and teaching good spending habits. Consider two individuals earning identical salaries of $7,000 per month but spending their money very differently. The first individual promptly spends their income on bills, indulgences, luxury items, and conspicuous consumption, accruing significant debts over time. Conversely, the second individual adheres to a strict budget, allocating a portion of their earnings towards savings and prudent investments. These differing spending habits lead to divergent financial outcomes. Wealthy individuals often leverage assets to finance luxuries, ensuring minimal impact on their financial standing.
4. How to Manage Money
A highly effective method employed by many affluent parents to educate their children about finances is involving them in the planning and management of household expenses. These parents often engage their children in reviewing financial statements and crafting budgets, acquainting them with the practicalities of living costs. This hands-on experience equips children with financial management skills from an early age, proving invaluable as they mature and assume responsibility for their own finances. This approach stands in stark contrast to many parents with limited financial means, who often avoid discussing money and budgeting.
5. Different Ways of Earning Money
Many affluent parents prioritize teaching their children about the various avenues through which money can be earned. For instance, Barack Obama's daughter once had a normal job in customer service. Wealthy individuals encourage their children to engage in conventional employment to show them different ways people make money. One method entails exchanging time for money, while another involves creating systems that generate income or allowing money to work for you, such as establishing a business or investing in income-generating assets. This empowers their children to explore multiple avenues of wealth creation.
6. No One Owes You Anything
Self-made millionaires and those who have achieved wealth through their efforts know how tough it is to get rich. They emphasize the importance of earning success through hard work and merit. Prominent figures like Bill Gates and Warren Buffett have publicly expressed their intention to leave their children minimal inheritance, emphasizing self-reliance and industriousness. By instilling principles of independence and diligence, these parents aim to empower their children to forge their own paths to success.
7. There Is Always More Money
A fundamental mindset prevalent among the affluent is the belief in abundance. While many people think there's only a limited amount of money, rich people know there are endless opportunities to make money. This abundant perspective shapes their approach to financial decision-making, prioritizing expanding their income streams over merely cutting costs. This mindset enables entrepreneurs to confidently offer value to their clients, knowing that people are willing to invest in what they truly desire.
That's all for today. I hope you found it informative and helpful..
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