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Money mindsets that rich kids learn from their parents

If parents live the right way, their kids learn from them and go on to enjoy a bright future.

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Financial Responsibility: Preparing teens to make the best financial decision

It is said that the sins of the parents are inherited by their offspring. Likewise, the good fortune of parents can also be inherited by their offspring. These hold true because the way children are nurtured as well as the habits, behaviours, and way of life they learn by observing their parents play a huge role in their adult lives.

Thus, if parents live the right way, their kids learn from them and go on to enjoy a bright future. However, if parents are not living the right way, their children most times suffer the same consequences when they grow up.

This article discusses attitudes that parents knowingly or unknowingly impart to their kids, which influence how financially successful they become.

Note: ‘The poor’, as used in this article, does not necessarily refer to people that live on minimum wage or can’t afford new clothes or three square meals. It could be you if you can’t live comfortably for up to six months (or a year) should your monthly income cease.

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Also, exceptions can always exist for the ideas presented here.

  • In a wealthy home, parents often do not shy away from discussing money openly with their kids. They know it’s important that, as early as possible, the kids learn the right ways to make and grow money.

On the other hand, kids from poor homes might start from a young age to have negative attitudes towards money. Why? Because the few times their parents talk to them about money are when they complain about how hard it is to make.

  • Since lower and middle-class parents most times fail to differentiate assets from liabilities, their kids may take up the same habit. Most of these grownups consider their cars, TV sets, iPhones, and other such items that depreciate in value over time as assets.

[READ MORE: Become a “rich salary” earner today by following these simple steps)

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To be clear, liabilities are possessions that do not yield value. Instead, they take money away from your pocket in the long run. That’s why poor people often never grow financially or even get poorer over time.

Comparatively, rich parents spend a huge part of their income on the acquisition of assets rather than liabilities. For example, they build houses and collect rent, invest in stocks, start and acquire businesses, etc. Their kids grow up witnessing this beneficial way of life and it becomes second nature to them.

Note: You may say: “What about the lavish lifestyle rich people live? They drive expensive cars, wear fancy clothes, and whatnot.” Well, one thing you should realize is that rich people fund their lifestyle with the accumulated profits generated from their many assets. So even if they blow a million naira in one night, they do so with the awareness that they will certainly make the money back in less than a few days. And they don’t make it back by the sweat of their brows, unlike lower and middle-class families, but through the profits generated from their assets (referred to as passive income).

  • When you step into a rich home, you are bound to discover a well-built library. Rich people are enlightened and always try to gain new knowledge, stay motivated, or find solutions to problems. It is through books that you can rub minds with brilliant authors from all over the world, benefiting from their research and personal experiences. Kids who have reading parents learn the same habit and it takes them far in life.

Poor parents, since they have other things to worry about, hardly find time to read, and their kids end up following in their footsteps.

  • A common thing with all rich people is that they think long term. Poor people, most of the time, are concerned with what they can enjoy today or this month. Thus, we may find (there are exceptions of course) that kids from lower and middle-class homes grow up with the same short-sightedness. No matter how well-paying their job is, they will live from paycheck to paycheck.

The attitude of lacking patience and long-term plans is also why many fall prey to quick-money making schemes. They feel that investing in stable ventures that yield interest overtime is not worth the wait.

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  • The rich are more concerned about increasing their income rather than lowering their expenses. Therefore, since they are not willing to live below a certain standard, they must find new ways to create wealth. Poor people, on the other hand, are barely innovative. Thus, as a poor kid learns to succumb to their circumstance and manage what they get, rich kids learn how to solve problems that enable them to increase their earnings so that they don’t have to go below the standard of living they are used to.
  • The rich let money work for them while the poor work for money. What this means is that the rich are concerned about freeing up their time. They, therefore, employ the wealth they have to create more wealth.

The poor on the other hand spend all their time actively working for money. And when they are paid, they use up all their earnings to settle bills and have fun. They then continue working to make some more money to spend.

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On the contrary, since the rich are more concerned about freeing up their time, they know the importance of saving and investing. They focus on generating passive income and therefore strive towards becoming entrepreneurs (job creators) rather than job seekers.

  • The rich, most often, do not worry more about making money than solving problems and creating value. For them, it’s all about the passion for what they do. Money then becomes the inevitable aftermath.

The poor on the other hand are more concerned about the money they need to make rather than creating value and making people’s lives better through their activities.

Note: There are exceptions to the above argument. Some people get rich through dubious means and selfish pursuits. Yet, such riches don’t last long, or the individuals involved hardly have peace of mind in the long run and often end up in unsavoury situations. The few that manage to see old age without losing their money try to appease their conscience by giving to charity. And other times are exposed when they least expect (Sometimes when reputation is their greatest asset).

  • The rich avoid bad debt and embrace good debt. For the poor, the opposite is the case. So, what’s the difference? It’s all about the purpose the debt serves.

Money mindsets that rich kids learn from their parents

Good debt is when you borrow money for investment purposes. You may not always have the money you need to key into ventures that yield long-term income. Therefore, rich people understand that being debt-free is not always a smart decision. They know how to use other people’s money to make even more money.

Bad debt, on the other hand, is when you borrow money to pay bills or spend on things that don’t yield income or that depreciate in value over time.

[READ ALSO: Richard Branson teaches best ways to become a good business leader)

Conclusion

Being a parent is a duty that must never be taken lightly. You are responsible for the fate of this separate individual (your son or daughter). It is therefore of the utmost importance that you perform a thorough self-examination and try to shed certain bad habits and attitudes which you may knowingly or unknowingly transfer to your children.

At the same time, reinforce those good attitudes that will help your kids become financially successful individuals when they grow up. You owe them that much.

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3 Comments

3 Comments

  1. Tobenna Nnabeze

    February 7, 2020 at 8:59 pm

    I received some private messages concerning this article.
    They argued that a car is an asset and not a liability.
    I agree with that.
    First, you can sell the car at any time and put cash in your pocket (although you can never sell it at the same price for which you bought it, due to depreciation. Unless it’s a high-value vintage car, for instance).
    Secondly, a car enables you to create value, even though the value of the car itself depreciates over time. Apart from when it’s used in a business, a personal car allows you to drive to work every day and avoid the stress of boarding a bus, especially in a city like Lagos.
    Thank you for sharing your thoughts.
    I appreciate them.

  2. Anthony

    February 8, 2020 at 4:37 am

    One of the best articles I have ever read… Nike.

  3. Chy

    February 9, 2020 at 6:26 am

    Very well eye-opening..Nice piece.

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Personal Finance

How to build solid financial success system and achieve financial freedom quickly

These are the three systems you need to speed up your financial success by almost 20 times.

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Financial system and freedom

The majority of people I know want to increase their financial success. If this is also what you want to do, you need solid financial systems.

What systems do you need and how do you increase financial success especially if you are stuck in a 9-5 job? In this article, I will show you exactly what to do.

To increase your financial success, there are three systems you need. These systems determine how fast or slow you achieve financial freedom and are explained below.

Multiple Income System

This is the system that brings in massive money into your life. It comprises 3 main components – quality of your main income, source of your income, type of income.

The quality of your income can be high or Low. It is high if your main income gives you the ability to save more than you spend. It is low when you can only spend more than you save. High-quality income is the only type of income that can make you rich.

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The second component of the multiple income system is the source of your income and there are two types – the one source income and multiple source income. The key to fast-tracking your financial success is to upgrade your source of income from one to many.

The third component of the multiple income system is the type of income you earn. There are two types of income – active income and passive income.

When you earn only active income or have a weak passive income, you limit your chances of financial success. True success is created when you have a strong active income and a strong passive income. You accelerate your financial success when you depend on passive than active income.

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These are the three components of the multiple income system. When you have all three components working for you, you accelerate your financial success by almost twenty times.

So, now that you know the first system for fast-tracking your financial success, let’s look at the second system.

Money Preservation System

Earning extra income is just one step in the financial success process. What truly creates wealth is the income that you keep. True riches are created when you keep more income for yourself.

Unfortunately, this is rarely the case. Most people are only keeping leftovers for themselves. They are enriching others through their spending and getting poorer and broke every day. To achieve financial success, you must preserve more of what you earn. To succeed with preserving income, you must maximize two key components – the savings component and investing components.

READ: Billionaires that can triple the value of Bitcoin

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The savings component works best when you save big portions of your income every month and investing your savings to produce solid passive income. To save big portions, you must strive to increase your savings by 1% every month. You must also try to maintain a low maintenance living standard.

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The second thing to do to preserve your income, is to ensure that money saved and invested is never lost. Losing money through unguided investment decisions is not wise. To achieve financial success, you must invest to preserve your savings.

So, now that you know the second system that can accelerate your financial success. Let’s look at the third system.

READ: Ripple adds Bank of America to payment network

Money Multiplication System

The money multiplication system is the system that enlarges your wealth. There is a limit to which savings and investing alone can make you rich.

This is because they are heavily dependent on your own direct effort. To create massive wealth, you need to move beyond your effort and create systems that can enlarge wealth even in your sleep. To create this kind of system you need one critical component –  Leverage.

READ: $385 million worth of Bitcoin moved by unknown identity

What is Leverage?

The best way for me to explain leverage is to use the example of a school Teacher and a movie star. A school teacher solves the problem of ignorance through education and a movie star also solves the problem of ignorance and boredom through education and entertainment.

Both teach their audience something about themselves or other people, that they do not know before. A teacher delivers her services by standing in front of a few students and is confined to a classroom. Every day of her life she does the same thing, teaching the same materials to different kinds of students.

READ: Nigeria generates N416.01 billion from Company Income Tax in Q3 2020

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Without her presence, her work cannot be delivered, her time is blocked. She is cut off from the wider society and can only earn income from her direct effort. Although, the teacher arguably provides higher perceived value than the movie star, she lacks leverage and her income is limited by it. This, therefore, means that you can provide enormous value and still not be rich. Value alone does not lead to wealth. It is value and leverage that creates massive wealth.

The movie star in contrast has massive leverage. He shoots a movie in some remote town unknown to the audience. He invests weeks, months, and sometimes years producing the movie. But, once produced, he never has to do the same movie over again. The movie produced is distributed all over the world. He is seen on all the media platforms, in theatre, television, and DVDs.

READ: Top passive income strategies using Cryptocurrencies in Nigeria

His movie is watched by billions of people. He is able to build a solid fan base and is patronized from all over the world. A movie star works once and is paid for a lifetime. It is the long-lasting and far-reaching value of the work of a movie star that makes him richer and wealthier than the classroom teacher. Thus, even with little perceived value, a person can create massive wealth with the right leverage.

Leverage is thus the ability to work once and be paid for life. It also the ability to do it in one place and spread it all over the world. The tools that make leverage possible is the right relationships, the right media platform, and the right distribution system. If you do not build your own leverage system, there is a limit to how much money you can earn.

Explore Data on the Nairametrics Research Website

So, these are the three systems you need to speed up your financial success by almost 20 times. Perhaps, you are thinking to yourself how do I build these systems and where do I start. If this is you, we can help. We will help you build these systems and accelerate your journey to financial success. If you need help, send an email to [email protected]


About author

Grace Agada is the Senior Financial Happiness Director at Create Solid Wealth. She is an Author and Column Contributor in six National Newspapers. She is a contributor at BellaNaija, Nairametrics and Proshare. She is on a mission to help working-class professionals and CEOs become more financially successful. To learn more about Grace and how she can help you, send an email to [email protected]

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Personal Finance

Must-do things after you finally become debt-free

Now you are finally debt-free, these next steps will help you make sure you never fall back into debt again.

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So now that you are debt-free what next? Remember that clearing your debt is just one part of the exercise; staying out of debt is vital to ensure that you don’t end up in the same financial injury. Living debt-free is not rocket science. All it requires is the consciousness that healthy finance is essential for you to live a happy life.

You may want to check out our previous articles 9 Brilliant ideas to pay off debt fast in 2021 and How to get out of debt: A step-by-step guide where we discussed extensively how to find your way out of debt.

Outlined below are some things to help you live debt-free; have a good read.

Make a list of your income and expenses

The first thing to do to ensure that you don’t fall into debt is to plan. Planning is such a vital step to success for anything we want to do in life. Indeed, if you don’t want to fail, you cannot neglect to plan. This doesn’t have to be complicated in any way. It’s as simple as you putting down words and figures. The first step in this process is making a list. You need to see on paper, what your finance looks like. It may not seem like such an important thing to do, but it is necessary. Making this list, all you have to do is write out what you earn on one side. If you have different streams of income, put it all on paper. Then, write out your expenses on paper, everything you know you spend money on monthly. Depending on when you receive your incomes; you can make it weekly or bi-weekly. Just compare how much is coming in against how much is going out.

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Create a budget plan

The next step in the planning process is to create a budget. Based on your analysis from the step above, you should assign every dollar/naira you earn a task. You cannot afford to be passive with your money, give them work to do. They are available to make life easier for you right, but if you don’t tell them what to do, they cannot help you achieve that. You have to understand also; depending on what the ratio of your income to expenses is, you might need to make certain adjustments. In fact, if you want to stay out of debt, you NEED to make those adjustments. This step is not as difficult as you may think, if you do not know how to go about this process of creating a budget, you can use a budgeting app to make it easier for you. There are so many choices out there so you must choose wisely because your financial needs may be different from your neighbour’s.

Be intentional about your money

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This tip can be summarised into the first two steps already outlined. But it is such an essential factor that deserves special attention. Intentional merely is being deliberate in your actions. Therefore, being intentional about your money requires that you don’t leave anything to chance. Conscious money habits will ensure better financial health and keep you from running into debt. So, as basic as the first two steps might seem to you, you really cannot neglect them.

Do not make purchases based on emotions

It is very easy to spend to make ourselves feel better. The painful truth is that the things you buy won’t make you feel better. They cannot take away that feeling, because when the initial gratification has waned, you would still be left with that emptiness you were feeling in the first place.

Unsubscribe from sales emails

Everybody likes to get the first updates for those juicy deals and grab them as they come. If you have not planned for it, please don’t do it. You have to unsubscribe from emails that make you spend more money. Remember that the person sending those emails wants to make money. You do not need to place that instant ordering; turn it off.

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Maintain a good credit score

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Remember when we talked about how to stay out of debt; one of the tips offered was to negotiate lower interest rates. Having a good credit score qualifies you for lower interest rates. More than that; having a good credit score grants you more negotiating power, better insurance deposits, easier approval for loan requests, it also affords you higher credit limits. Overall, having a good credit score places you on better standing than having a bad one.

Do not tie up your money in illiquid investments

As necessary as an investment is, you must engage in those with high liquidity as opposed to illiquid investments.

Earn more money

There is no human on this planet that this idea will not be appealing to. We always want to have more money, no matter how much we already have; it’s in our nature. The simple ways to earn more money is to get a side hustle, become a freelancer or contractor; use your skills to make money. With unlimited access to technology, the world of work offers more opportunity than ever for anyone to turn their skills into pay.

Staying out of debt can be summed into these few words; “Live within your means”. The way to ensure that you do that is by planning. Be intentional about your money. Life can happen at any time but even when it does, with a proper plan already in place, you will be better equipped to handle unforeseen circumstances than when you don’t even know where your money is coming from.

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Personal Finance

How to get out of debt: A step-by-step guide

Follow these few simple practices and you may well be on your way to living a debt-free life.

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The crowding out effects of rising States' debt: Why Nigerians should worry, How to Get Out Of Debt: A Step-by-Step Guide

Having to run or hide from someone just because you owe them some money is not a very fun exercise. But what if you didn’t have to do it, what if you lived debt free? Hold your gasps; it’s not so shocking. It is very attainable, and if you can follow the few simple practices we’re about to examine, you can be well on your way to FREEDOM.

Here, we’ve outlined necessary steps to help you live debt-free;

READ: How to make more money solving problems

Gather your data: These include records and information that contain your bills and expenses, income and source(s) of income, credit score etc. the goal here is to get you acquainted with yourself. You have to know yourself well enough to understand your spending pattern and identify critical areas to adjust or habits to do away with.

Understand your debt: Make a list of all your debts, all that you currently owe, and how much interest rates are charged on them. Remember to include the minimum required payment for each debt. This would help you understand the type of debt(s) you owe. Understanding your debt will help you know how it happened and give you a clearer perspective on how to clear it. If you have more than one type of debt, it can be challenging to keep track, and you may find yourself always paying money and not even knowing if you are a step closer to clearing your debts. But you cannot begin to pay off your debt until you understand what the figures in your records represent.

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READ: Football: Manchester United net debt rises by 133% to £474.1million

Create a budget and debt pay-off plan: Creating a budget should have come as a first step. However, that would be more effective in the situation that debt doesn’t exist, because one of the reasons for budgeting is to make sure that you DON’T fall into debt. Having gathered your data and coming to terms with what the records are; the next thing to do is to create a plan. There are different tools you can utilize to help you. A simple keyword search would give you an idea of what to do. The budget plan doesn’t have to be complicated, create a list that you would be able to understand and stick to the program.

(READ MORE: How declining interest rates, others drive a shift in Nigeria’s investment sector)

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Lower your interest rates: The reason why people fall into debt and find it challenging to pay is due to the interest rate charged on their actual amount borrowed. You see; because you are required to pay interest rates on that money, it drags out the length of time you could payback. Negotiate your interest rates lower. Even when you may have already borrowed and started paying it off, if you find it challenging to complete payment, you should consider asking for lower interest rates. Depending on who your lender is, and how persuasive you are, you may find yourself having less to worry about.

READ: Afreximbank posts $217m net income in 9M 2020

Pay more than you have to pay: Another reason you could remain indebted to someone is when you stick to just paying the monthly required amount. Because of the interest charged on most loans, you only concentrate on paying that specific amount for that particular month. That keeps you in debt because instead of bringing you closer to clearing your debt, you are only dragging it out. Regardless of the interest rate, if you can pay more than the expected amount, you should go on to do so. It is something that you can discuss with your lender. It serves both of you because the faster you clear your debt, the quicker he gets his money back.

Earn More Money: To settle your debt, you have to go out of your way to ensure that your income supersedes your expenses. One way you could earn more money is by starting a ‘side hustle’ or taking a part-time job. In this modern age, there are more opportunities than ever, for anyone to diversify their streams of income. And most of these gigs are conveniently remote; you can run them from the comfort of your home. Of course, any human would be elated at the prospect of earning money, and when you are in debt, you just have to go out of your way to do everything possible to clear.

Curb Your Excesses: If you are in debt and you are finding it difficult to clear, evaluating your lifestyle habits could help put things into perspective. You have to be honest with yourself. If you want to pay off your debt faster, you’ll need to cut your expenses as much as possible. One tool you can create and use is a bare-bones budget. This is a strategy you can use to make your expenses as low as it can go and live a minimalist lifestyle. Live only on bare necessities and do away with frugality.

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No matter the type of debt, you can always clear it. Never believe that it is impossible. Always remember to have a plan. You really cannot afford to leave your life to chance. Be intentional about every aspect of your life, especially with your finances.

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