I can remember talking about money with my dad when I was a child. Sitting on the living room floor with my brother, my dad would layout all his spare change and say, “Boys, every weekend I’m going to give you my coins. You need to start saving for a rainy day.“ Then he required us to keep coin rolls under his bed until we had enough to deposit in a savings account at the bank. At the time, I wondered why we were saving, as I was never allowed to spend the money until my teenage years. Looking back, I understand that my father was trying to teach me financial responsibility.
It seems that American parents today work hard to educate their children on the game of life. In fact, parents are likely the most important source of education when it comes to money. However, average parents teach their children that ‘going to college to get a high-paying job,’ or ‘saving for retirement’ will help them be financially secure. This is simply not true.
Even with college graduates earning higher salaries than non-graduates, Americans find themselves living middle-class lifestyles long after college – going to work, paying taxes, saving for retirement, and spending the rest. We finance our homes, vehicles, credit cards, and education because we don’t have the money to support our lifestyle. We spend each paycheck until we retire and expect to live on savings.
When considering the American lifestyle, parents should correctly educate thier children about money. Traditional lessons about saving money are valuable, but financial independence requires more than just ‘going to college’ or ‘getting a good job with benefits.’ Saving takes too long and you will likely keep only two-thirds of it (due to taxes) when you’re ready for retirement.
Alternatively, the rich create their own sources of income and follow a financial plan that involves taking risks. These risks include things such as investing in real estate, starting a business, or buying businesses to sell later. They take these risks in order to rise above average investors who earn less by playing it safe. With a good plan and determination, it’s fairly simple to generate wealth quickly. Without these things, generating wealth will likely remain a dream.
I was thinking of adding this passage to a book I’m writing about personal finance. Please let me know your thoughts.