This website is not financial advice. Posts may contain affiliate links from which I earn commissions at no additional cost to you.
Graphic © wealthpowerboost.com. Background image © Shutterstock 1043906830 (under license)
They clearly went for an edgy, challenging title – but this is actually a first-rate video from Alux. Very inspiring! We have listed the 15 lessons rich parents teach their kids – and added our own summary and notes:
1. Understanding How Money Works
This is first of all about understanding that making and holding on to money is a skill set, not a matter of luck. It can (and should) be learned. One of the most important ways to learn this is to be around people who have already grasped it; there is an “osmosis” effect that comes from having parents or being surrounded by those who have this knowledge. At least some of it will be absorbed by their offspring. Wealthy parents generally take more trouble to teach their children about the importance of money management and the exchange of value. Money management and wealth generation should be part of the regular conversation – as opposed to stressful arguments about there not being enough!
2. Knowing The Difference Between A Liability And An Asset
An asset is defined as something that you can acquire that makes money for you, whereas a liability is something that continues to cost you money. It has often been stated that the middle class buy liabilities and the poor buy “stuff” while the wealthy buy assets. This is a universal truth. The truly wealthy spend their money on things that make money, thus increasing their wealth.
3. They’re Not Entitled To Anything
Many (poor) people in the world were shocked when the newspapers reported that Paul McCartney of Beatles fame stated that he was not leaving his money to his children but would instead give it to charity. However the wealthy understood this right away: He did not want them to be entitled. Paul had a working class background and was entirely self made, and realized the value of that. That was the legacy he wanted to pass on to his children – encouraging them to ‘be their own people’ and make successes of themselves independently of his wealth. This would be better for them in the long run than ‘living in his shadow’.
4. How To Be Sociable And Connect With Other People
Successful people ‘socialize’ their children and teach them how to get on well with others. Civilized behavior leads to greater opportunities and makes a positive impression.
5. Stop Expecting Immediate Results And Avoid Magical Thinking
Wealth is a “long game” but our culture of instant gratification leads to warped expectations with regard to how success works. A trait of the successful is that they think of time in “long batches” and make 5, 10 and 20 year plans. “Magical thinking” is a term for superstitious thinking regarding fortune, which people use as a comforting avoidance strategy, whereas the wealthy accept that wealth and fortune have more to do with hard work.
6. How To Create Daily Habits That Give Them Tremendous Advantages In The Long Run
Habitual actions, as opposed to single acts, are regarded by the highly successful as absolutely critical. Aristotle’s famous quote was that “Excellence is not an act but a habit, we become what we do repeatedly” – and this has survived for over 2000 years for a reason!
7. Money Is A Tool And It’s A Good Thing
Poor people tend to hold on to the idea that money is evil – which is hardly likely to bring more of it towards them! Your attitude towards money is an important facet of success. It is important to understand that it is just a tool, a thing that can be used well or used badly. Like any other “power tool” it can be used to create great things or to do great harm. But as with other tools, it is not the fault of the tool but of the person using it. You would not wield a chainsaw or drive a car without proper training. It is the same with money. It enables you to get fantastic things done but must be handled appropriately because of the damage it can cause when handled poorly.
8. Increase Income Instead Of Lowering Expenses
Poor people are so focused on lowering expenses that they do not focus on increasing the amount flowing in. This is known as being “Penny wise but pound foolish”. You might be able to save hundreds or perhaps even thousands by living frugally but the amount of effort required to inch forward is great – and that is all it would ever be, inching forward. The truly great gains are had by increasing income and this should be where you focus the majority of your effort.
9. Knowledge Is More Valuable Than Money In The Long Run
The wealthy appreciate the value of “investing in yourself” – which means increasing how valuable you are to the world. Valuable people can create value for others and this is the true key to earning more. Your greatest asset should be YOU.
10. Don’t Work For Money, Have Money Work For You
This is one of the cornerstones of wealth building. Poor people exchange their time for money and then spend it. You can only get so far trading your time for money – and the real way to move ahead is to put the money you have made to work, so that it brings in revenue after you have stopped working. Financial independence is truly attained when you have enough assets working for you that you can stop working and still bring in enough residual income to maintain or even grow your financial position.
Most people do not even bother to start investing because they think that you need large sums of money to start. You do not. The key is to start NOW and to keep going. It all adds up and the more passive income you have coming in, the more of your time is freed up to create even more income. So it is literally about getting on the ‘upward spiral’ right away even if progress seems slow.
11. The Quickest Way To Get Rich Is By Solving Problems
The wealthy understand that while the world has many problems, these can also be seen as opportunities. People will pay you to solve their problems, so in order to get rich, focus on solving the biggest problem for other people that you possibly can. The bigger the problem you can solve and the more the value you can provide, the more you can earn.
12. Don’t Waste Time On Pursuits That Do Not Translate To Real World Profit
This is about the difference between “indulging” in your fantasy of what YOU want to be or do, and providing value for others. It is a very good exercise to tell yourself that nobody cares. It is true. Would you pay someone just because they want to be an artist? Aww, how cute. But no. People pay you for what you can do for them and they do not care less what you are doing for you. Why should they? Do you care about what they are doing for themselves?
13. Learn How To Use “Good Debt” In The Way The Wealthy Do, Instead Of Bad Debt In The Way The Poor Do
There is a huge difference between borrowing money to purchase things that you don’t actually need and leveraging other people’s money to make money. Credit card debt will suck you dry, whereas pretty much all the big businesses in the world leverage the capital of others in order to expand their operations and develop profitable products and services.
14. 80% Of Results Will Come From 20% Of The Effort
This is known as the “Pareto Principle”. The idea is that it has been observed that of all the activities a person performs, 20% of them are the ones that will create 80% of the results. Therefore identify what that 20% of fruitful activities is and focus purely on those; either cutting out or delegating the rest.
15. Having Money Does Not Turn You Into A Better Person, It Just Makes Some Of Your Problems Go Away
This is well known amongst the wealthy. Money does not change the kind of person you are, it amplifies the kind of person you are. It can make some problems go away but it can also bring others, possibly even bigger than the ones you made go away. Watch out for our detailed tutorial on the 5 Ways Most People Lose All Their Money.