A former coworker told me that she was deep in credit card debt because she didn’t know what a credit card was when a salesperson told her to sign up for one on the first day of college.
This got me thinking about how little some of us know about money and personal finance before we head into the adult world. School doesn’t prepare us for the real world and this is unacceptable. It’s up to the parents to inform their children of what they should know.
Here are 14 money lessons you must teach your kids before it’s too late. Many of these money ideas should be instilled in them as early as you can so they can develop good money habits that will help them succeed for the rest of their lives.
Table of Contents
1. Don’t equate brand name items to a sign of wealth
Common judgment of brand name items
A lot of us associate brand name items as a sign of wealth when the opposite is what is happening.
Most people who buy brand name items aren’t rich. They are middle-class people who are trying to look rich. Some of them are even lower class. We’re not class shaming here. There’s nothing wrong with being lower class or middle class, it’s nothing to be ashamed of.
I didn’t grow up in an upper-class family or an upper-middle-class family for that matter. Lots of people didn’t and they are able to climb up the socioeconomic ladder later in life. What they did to get there isn’t to squander their money on useless brand name items.
If your children equate brand name expensive objects as a sign of wealth, no doubt they would try to get their hands on these brand name items with their first paycheque.
Teach your children that trying to look rich is a fool’s game. Don’t lose your money trying to get friends, strangers, and love interests to think you’re rich.
Having money in your bank account and/or investment portfolio is better than having the latest tech gadgets but only $100 in your bank account.
2. Don’t feel the need to prove wealth to anyone
There are a lot of millionaires who dress normally, drive normally, and live normally despite having the money to have more and do more. You wouldn’t know that they’re millionaires if you drive by them or walk past them because they don’t drive a sports car and they don’t dress in diamond clothes.
You must teach your children to not feel the need to prove wealth to anyone. Those who feel the need to prove their wealth won’t keep their wealth.
One sales tactic some salespeople use in cosmetic stores is to first offer passersby a test of the product and ask them if they like it, then, they’ll introduce the product and it’ll be named something like, “Ultra Deluxe Clam Tears Rejuvenating Rare Anti-Aging Creme Plus”. Oh, by the way, it only cost $430 per 100g container!
At this point, many people would feel uncomfortable and some would outright say that it’s too expensive. Then the salesperson may add, “But of course, it’s for people who can afford it” while giving you a rundown of the eyes as if assessing and deciding that you aren’t “rich”. Many people would feel offended and in order to prove the salesperson wrong, they’d say “Actually, I’ll get it” even though they don’t make enough money to spare on such an item and they’ll probably use their next two paycheques to pay it off and then some because they have to pay the interest charged on their credit card as well.
Analysis of sales tactic
You see what happened here? If you let people’s opinion of your social class and wealth get to you, you’ll be a slave to useless and oftentimes faulty judgments of you. You’ll spend money you don’t have to make sure nobody thinks you’re poor. Even if you do have the money, do you want to be so easily manipulated? That money could’ve been spent on a stock that will compound and pay out dividends.
Let them think whatever they want of you. No one should be able to manipulate your spending habits and overall behavior based on what they want you to think they think of you.
Click here to learn the 12 things to never buy as a college student.
3. Delay gratification
Delaying gratification is the idea that you should delay getting something that you want.
Let’s illustrate with a study.
The study is called the Marshmallow Test. Researchers took in people with children from all backgrounds into the lab. The children were asked to sit in a room by themselves with a sweet treat that they want. If they could wait 15 minutes until the researchers get back, they get another marshmallow to eat. The children who could wait the 15 minutes were found to perform better in various factors of life (a couple of decades later) including networth, success, and even marriage length.
Why does having the ability to delay gratification impact so many factors in life? Well, think about it like this, if you know you have homework to do but you want to play video games, a child who can delay gratification and apply self-control may be able to finish the homework first and do better on tests than children who didn’t finish the homework but instead opted to play video games. This of course has ramifications on their future careers.
Side note: you can, however, still be successful without having good grades at school
Delaying gratification and success
Similarly, a person with more self-control and could delay gratification in life may be able to accomplish the tasks they set out for themselves more consistently, whereas a person who can’t delay gratification may find more trouble in accomplishing their goals.
Such a goal could be to publish 2 blog posts per week. Having the ability to stick to the schedule could have ramifications for the success of a content creator’s brand. A successful brand can earn a lot of money and make the content creator richer.
Delaying gratification and relationship
In relationships and marriage, there are often sacrifices to be made. Let’s say a person delay gratification and enter into a relationship later when they are sure they found the right person may have a more successful marriage than a person who enters into a relationship with the first person who they found attractive.
Delaying gratification and money
Delaying gratification also works with money. If you can delay wanting to buy something, you can often get it for cheaper. If you can delay spending your first $100,000 on a car, that money can compound into more money if you invest it.
4. Compound interest
If you invested $500/month for 30 years, your money would grow into $756k roughly at 8% annual return and you would have only contributed $180k in total. This is the power of compound interest. Teach your children about how your money can grow more money with time and the importance of investing early in life.
5. It’s okay to not go to college or make your money with a traditional 9–5 job
Tell your kids that it’s okay to not pursue a traditional path in life. 100 years ago, having a college degree was impressive. Today, you would just be one of many with a college degree.
Many college degrees today are useless. They don’t help the degree holder in any way. In fact, many college graduates struggle to find jobs.
Don’t go to college just because everyone is going to college. Decide for yourself whether this path is for you.
Click here to find out if doctors are actually rich and the true financial cost of becoming a doctor.
I’ll give you one example that I find really inspiring:
This is Nate O’Brien’s YouTube channel:
Nate went to Penn State for college but dropped out before finishing. He dropped out to work on his YouTube channel full-time.
Nate was able to build his wealth on the internet. He did this without obtaining any college degree.
Success without college degrees
There are a lot of other people who successfully built up their brands on the internet and they never went to college or have dropped out of college.
It’s a misconception that you need a college degree to be successful in life.
In fact, I would encourage my future kids to not pursue a traditional career. I would encourage them to build up their brands on the internet. I want them to explore what they are interested in and build a brand around that. It would be great if they could make a living on the internet before they turn 18 so they wouldn’t have to spend a ridiculous amount of money to get a degree for a low-paying 9–5 job.
Click here to learn how to become a content creator and make money this year.
6. The importance of finding other people with the same mindset and values when it comes to money
It’s important to find a partner who has the same mindset when it comes to money. It’s not good to have one partner being a saver while the other gravitates towards spending every penny he or she makes.
Teach your kids to have honest money talk with their future partners about money before getting into any relationship.
Click here to learn the 17 surprising frugal tips.
7. It’s okay to want more money, you shouldn’t feel guilty about it
We as a society often like to shame people for wanting more money. We’d depict them as greedy and materialistic when in fact, there’s nothing wrong with wanting money.
You need money to survive. The sooner you realize how important money is the sooner you discover how vital it is to obtain more of it.
Money can buy you financial freedom from working 50 years at a 9–5 that doesn’t make you happy. Money can give you the freedom to help those in need. Money can buy you expensive treatments when you are sick.
Teach your kids that it’s okay to want more money. You shouldn’t let anyone make you feel guilty about wanting money. However, we must acquire money in a legal and humane way.
Click here to read the 50 ways to make extra money today
8. Look for opportunities to make money where others miss it
There’ll be a lot of opportunities to make more money when other people aren’t looking. Teach your kids to identify these opportunities.
Click here to learn how to make money streaming on Twitch.
Click here to learn how to start a YouTube channel and how much YouTubers make.
9. Don’t be impressed by money, be impressed by character
Your kids should know how not to be impressed by money. A person with $0 in their bank account vs a person with $100,000,000 in their bank account is worth inherently the same.
Never look down on a person because they have no money. Never look up to a person because they have money.
Character is more important than how much wealth a person has. Your kids should identify a good person from a bad person using character rather than their wealth.
10. Build a valuable brand that can make you money so you don’t have to rely on your boss for livelihood
This is something I’ll teach my kids to do from an early age. I’ll help them identify what they are interested in, what they want to learn more about, where they want to develop their skillsets.
Being a young boss
There are a lot of people who built up a successful brand on the internet while they were still relatively young. Anyone can build up a successful brand. You don’t have to be extremely smart or an adult to start building up a brand.
Freedom
The ability to be your own boss, make a living on the internet, and not rely on a company to pay you for your livelihood can open up a lot of freedom to actually live life.
This would be the best gift you can give your kids — the freedom from a traditional career.
A typical unfulfilling life
Most people will go to school, stressed over getting good grades, decide on a career that they feel the least repulsed by, get a job that doesn’t pay enough, a job that brings them no happiness, works 50 weeks a year, takes 2 weeks off a year, and repeat that for the next 40 years of their life, retire, realize they are too sick to enjoy life, before they know it, the end of life is here.
A traditional career path simply isn’t a good path. There are better paths out there that lead to financial freedom. It may take years to get there this is why starting a brand while still having a parent to cover rent and food for you would be helpful.
Click here to learn how to become a content creator and make money this year.
Click here to learn how to start a podcast.
11. The difference between credit card and debit card
This is one of the basic personal finance topics to discuss with your kids. Middle class and lower class people don’t talk to their kids about money because is considered a taboo topic.
Do what the rich people do, openly discuss money with your kids. They should know about the difference between credit cards and debit cards as well as what not to do with a credit card or debit card.
Want to know what the rich teach their kids the poor don’t? Click here.
12. The importance of reading the fine prints
Lots of traps are set in the fine prints. Teach your kids to not sign anything without reading the fine prints. Some of these traps could impact their financial future for life.
13. Minimalism can simplify your life
In a world where everyone strives to obtain more materials, minimalism can simplify a person’s life a lot. You don’t need that much stuff to be happy.
Click here to learn how to stop being a perfectionist.
14. The difference between an asset and a liability
Teach your kids the difference between an asset and a liability. Tell them to acquire more assets than liabilities. This will set the tone for their financial future.
Getting rich is a lot easier than most people think. You have to find ways to diversify your income, use your money to buy assets, not liabilities, do that for a couple of years and you’re sure to build wealth.
Final thought
Schools produce employees with a lower-class or middle-class mindset. If you want your kids to be financially successful, you should teach them what schools don’t teach.
