Did you have a great experience in school when you were young?
I had a mixed one… and very little of what I was taught was important for my success in life.
You see, some kids have a great experience in schools. But, sadly, many feel that it was some of their worst experiences.
Not only some kids experience bullying and social pressure as “unpopular”, but many also have their individuality and genius crushed. No wonder homeschooling is so popular these days!
And what bothers me a lot is how little practical skill-sets our kids get in schools and colleges.
Specifically, I am referring to basic financial education.
Not only our kids are not taught about the history and origins of money, the basics of financial literacy and financial responsibility, but they are also often get conditioned to fear money and/or to perceive the desire to be wealthy as a bad or unworthy pursuit.
So, if I could propose the basic financial education to our kids or even young adults, here’re 13 Financial Literacy Tips I would include:
1. Money is not a “thing” – it has the meaning YOU assign to it. So, it could be something that has a positive and empowering role in your life. And the best part is that it’s YOUR choice how you perceive money – a friend or a foe.
2. Wealth is not something you acquire…It’s what you create in your life. It’s also not the destination but a journey. This journey will build your character, test your strength and teach you important lessons.
3. Money is a form of exchange of value. In the old days, people traded commodities (e.g. grains or chickens, etc.) for things they needed. Then they invented money (e.g. gold/silver coins and later notes) as a more convenient token of exchange. The more people you serve and satisfy the demand they have, the more opportunities you create to earn more money.
4. You must know your cash flow – how much money is coming IN and how much money is coming OUT. And cash flow coming IN MUST BE MORE than cash flow coming OUT. If it’s the other way around, you’re bound to be a slave to money.
5. You’ve got to understand your personal financial statements. That includes your bank statements, credit card, and mortgage statements, etc. Ignorance is expensive.
6. You must understand different kinds of debt. “Good debt” is the leverage that helps grow wealth. “Bad debt” is high-interest consumer debt (credit cards’ debt) that hinders your efforts to grow wealth.
7. You’ve got to know the difference between assets and liabilities. For example, a house with a mortgage is a liability, not an asset. A car with a car loan is a liability, not an asset. More liabilities = less money for you. More assets = more money for you.
8. There are three types of income: Earned (paycheck from a job), Capital gain (when you sell the asset that appreciated in value), and passive income (when you receive money without exchanging your time for money).
9. Savings are seeds of your wealth. Investing is the fertilizer for growing your wealth. Strategic investing is how you make your money work for you.
10. To accelerate your wealth growth you must have multiple sources of income. Multiple Sources of passive income is how you become financially independent.
11. You can create wealth by building a business that offers products and services that people need, want, and are willing to pay for; OR by investing in various assets that provide value appreciation/growth and income (e.g. real estate, stocks, etc.)
12. It’s not about how much money you make but how much you keep. Understand how to manage it and how to minimize your investment risk. Know when to act and when to wait. Be mindful of fees and taxes. Invest in your knowledge – THAT’s the investment that has high returns.
13. NEVER put all your eggs in the same basket. Diversify your investments, develop skill-sets in different areas you want to invest in. Take responsibility for your financial sovereignty.
What do you think about these tips? Which ones you’d share with your kids? Which ones resonated with YOU the most?
To your Health, Wealth and Freedom!