5 min read · Oct 29, 2022
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Whether we care to admit it or not, money significantly contributes to the overall quality of our lives. Despite its significance, I find it interesting that we are not taught about personal finance management in schools. Back at home, you are most likely to be exposed to the conversation of money if you have rich and wealthy parents.
In this post, we’ll discuss essential money lessons that rich parents teach their kids. So that not only are we made aware of them, but also pass them on to our children in the future.
“Instead of buying your children all the things you never had, you should teach them all the things you were never taught. Material wears out but knowledge stays” — Bruce Lee
Unlike poor households where parents shy away from conversations involving money or fall into heated arguments about money (making money a seemingly evil object), rich parents normalize and encourage the discussion of money with their kids. They discuss their active income sources, investments, and household expenses.
In this way, their kids start to have an understanding of how money is earned (through the exchange of value provision), factors that contribute to how much is earned, tax planning, etc.
Kids from rich households inherit the attitude of being responsible for their actions and consequences. Especially in the event that things go wrong or deviate from their plans and expectations, they accept full responsibility for it. In this way, they are able to find a way forward.
In contrast, kids from poor households unconsciously take on the habit of constantly complaining and blaming everyone but themselves for their current financial situation. This prevents them from identifying ways in which they can improve their situation and get them to where they want to be.
The success of rich parents can be found in what they do on a daily basis. As children, most of our actions and habits do not come from what our parents teach us but from what we actually see them do.
As a result, it is a no-brainer that unlike kids from poor households, the kids of rich parents are exposed to, and unknowingly pick up daily habits of success from their parents.
Rich parents have an abundance mindset and as a result, they teach their kids to see the world as a place with unlimited opportunities, where there is enough for everyone. This way of viewing the world empowers their kids and encourages them to go for whatever it is they want. They understand that money is abundant so if they provide great value, they charge their worth.
On the flip side, poor parents have a scarcity mindset. This mindset is passed on to their children through thoughts like — “they need to be in the 1st position in their class”. This implies that in order for you to win, someone else has to lose. There isn’t enough for everyone and as a result, you must always compete for the top spot. This also translates to the idea that money is a scarce resource so if someone earns more money, there isn’t enough left for someone else. In addition, poor people work very hard, yet feel guilty to ask for more money because it is a limited resource.
This quote by Robert Kiyosaki is very simple, yet powerful.
“Assets put money in your pocket. Liabilities take money out of your pocket.” -Robert Kiyosaki
I still remember the first time I came across this line while reading one of the most famous personal finance books of all time, Rich Dad Poor Dad. It made me rethink how I spend money and what exactly I spend it on.
Kids from poor households are most likely to spend their hard-earned income on expenses and the rest on liabilities such as expensive cars, mansions, etc. These liabilities create more expenses such as insurance, maintenance, etc. This results in little to no savings for the future, and living paycheck to paycheck. Should there be an emergency (eg. loss of job, serious health condition, accident, etc.), it is hard for them to cover it, largely due to their spending habits.
It is true that there are kids from rich households who choose to drive expensive cars, go on luxury vacations, etc. The difference is that these kids have been taught to first spend their income on acquiring assets first (eg. owning a business that pays dividends, owning real estate that pays rent, etc.), which would later pay for their needs and lifestyle expenses.
Depending on whether kids are raised in a rich household or a poor household, they love debt for what it can do for them or hate debt for the torment it brings now or in the future.
Kids from rich households love debt. They understand that debt is a risk so they learn to manage it while leveraging debt to acquire assets that will later put money in their pockets.
Conversely, as a kid from a poor household, you either fear taking on debt or you end up spending it on expenses and liabilities. As a result, you are stuck in an endless cycle of mismanaging money and digging a deeper hole for your debt balance.
Kids from rich households have observed first-hand from their parents the importance of connecting and socializing with others and the tons of opportunities it brings. In addition, their parents constantly remind them of its importance and encourage them to build, grow and nurture connections wherever they find themselves. Rich parents also give their children the opportunity to cultivate these skills by teaching them table etiquette and putting them in situations to network, such as enrolling them in classes to learn new hobbies and meet new people. Whether introverted or extroverted, connecting with others is a skill that rich kids acquire as part of their success toolbox.
On the other hand, kids from poor households grow up thinking hard work is all that is needed to achieve financial success. Especially if these kids are introverted, they remain blinded to the fact that connecting with others is a skill that can be acquired to enhance their financial success.
It may prove difficult to find kids raised by rich parents who fall for “Get rich quick and easy” schemes. This is because they have learned to approach their endeavors (eg. building a business) by tackling them on a long term-basis (Eg. 5 years, 10 years). They understand that in addition to the work and strategy they put in, it will take time to reap the harvest from the seeds they’ve sowed.
Without this understanding, kids from poor households are likely to give up too early on their endeavors, take shortcuts, or fall for “Get rich quick and easy” schemes. As a result, they never achieve the level of success they seek to achieve.
