We have all heard the common complaint that financial education is not taught in schools. I agree that this is a travesty and we should lobby those in power to include basic money management skills as part of a normal school curriculum. After all, the world is based on capitalism and it is a necessary skill to function in our society along with reading, writing, and arithmetic.

It is Up to Us

Since the system is basically ignoring financial education, it is incumbent upon us, as parents, to give our kids the basic knowledge about money that they will require to, at least, have a fighting chance out there in the world. We need to prepare them for real life and the basic workings of money and value need to be in their toolbox as they spread their wings and leave the nest.

First - Educate Yourself

You cannot help others if you don’t know what you are doing yourself. It’s like when you are getting the safety demonstration before a flight and they tell you, please put on your own oxygen mask before you assist anyone else. This makes sense and you are no use to anyone if you are unconscious. The same applies to financial matters.

If you don’t know how money and wealth works then you can’t teach it to your kids. If you are like me, I want to give my kids every advantage I can so they don’t have to struggle like I did to make make their way in the world. Having money and good judgement are key to a life of adventure and enlightenment vs. struggle and despair.

Don't believe me?

Go to your local “poor” neighbourhood and see how much happiness and joy abound. You will tend to see crime. You will tend to see decay. You will tend to see alcohol and drug abuse. You will see broken homes and single parents struggling to food on the table. When your whole day is spent trying to survive, you tend not to have time to aspire to higher ideals. It is just a sad fact of life.

In contrast, in affluent neighbourhoods people feel safe, they tend to stay married and they pursue higher education. This is not a chicken and egg thing, this is the result of money. Money makes life easier - PLAIN AND SIMPLE. We can argue over the semantics of good and bad and morals etc. but in our society, nobody gets a free ride. Everything you need to live your life requires payment in some form, and it seems we are happy to let you suffer if you are a have-not. So my point is simple - money is important.

So make the investment in yourself and learn as much as you can about money, wealth and finance. Read books, take courses, watch YouTube, talk to successful people. It doesn’t have to be expensive. If you learn about money and practice what you learn, you can lift yourself out of despair and have the freedom to become the person you were meant to be. The additional benefit of this is you can now:

Take better care of your kids

Set a great example for them

Set them up for success

Change your family circumstances for ever. Break the cycle!

Once you have developed your own financial acumen now you can pass it on. At the very least, here are 4 things I believe every kid should know when they leave the nest:

Spent less than you earn
Maintain good credit. Pay your bills.
Invest in your self
Invest in Assets

Spent less than you earn.

This is probably the most important thing anyone can learn. No financial plan or investment strategy or monthly budget ever worked when there was more money going out than in. It is simple math, but its simpleness understates its importance. I suggest repeating this mantra to your kids a thousand times until it becomes ingrained in their brains. You need them to have this philosophy embedded deep in their subconscious minds so that they can’t ever do the opposite under the threat of mental torment.

It is far too common in our society for people to spend more than they earn to pretend that they enjoy a lifestyle that they really aren’t ready for yet. Credit card debt is at $1.07 TRILLION in the US alone. This averages out to about $8398 per household. It is madness to not understand that if you buy something on credit, all of the hours you work in the future are going to something you enjoyed in the past. You are facing backwards as you go through life. Overspending is the equivalent to voluntary slavery. Please discourage this.

Maintain Good Credit

Good credit is how you are going to get ahead in the world. Unless you enjoy an extremely high salary, it is unlikely that you will ever be affluent without using OPM (Other People’s Money). Good debt is money that is borrowed to invest in something that makes you money. Bad debt is money that you borrow for things or experiences that depreciate in value. If your children understand that they will most likely need to borrow money someday in order to finance their aspirations they will require good credit. This means to always pay your bills and learn the important character trait of trustworthiness. We want are kids to be people whom others can count on. It is never a bad thing to promote character building behaviours in our offspring.

Invest in Yourself

Encouraging your kids to better themselves teaches them that they are the masters of their own destiny. There is probably nothing more destructive and disempowering that someone moving through life with a victim mentality, always believing that life happens “to” them and that they are at the whim of circumstances. Promoting self reliance, accountability and a sense of control over their own circumstances is a healthy and powerful way to view the world.

Teaching your children to take care of their health and feed their minds will help them feel much more capable of dealing with the inevitable curveballs that life will throw at them. If they develop a healthy respect for education they will hopefully take with them a passion for learning. If you reinforce the importance on continuous education and life long self improvement they will always be ready for a changing world. Teach them to always be feeding their minds. Knowledge is power. Especially in the world of money ( which is really, the whole world). There is so much information out there about how to manage money, create wealth, and live a happy life. Inspire your children to take initiative and actively seek out this information. No one is going to do it for them.

Invest in Assets

As I eluded to earlier, Good debt vs Bad debt is really the difference between spending your money on Assets vs liabilities. If you teach your kids the difference between these two things, they will at least have the foundation they need to make better decisions in the future. They may not always choose to make the right decision, but at least they will have had the correct information. An asset is anything that you buy that makes you money. It could be a rental property, or a dividend bearing stock, or a GIC. If they understand how money can be made to work for you, then a whole world of possibilities open up. Learning how to use leverage and OPM to create exponentially more wealth will ensure they have the options available to them to enjoy any kind of life they choose.

Although some people choose to live a simple life, even as far as going full stoic and living in extremely humble circumstances, this is a choice. They are living a frugal existence on purpose. This is very different than being born into poverty and not having those choices. The purpose of having this knowledge is to have choices. You are free to live however you choose. Choice is the operative word here. True freedom is having the choice to live as you please. Being rich or affluent isn’t for everybody and I totally respect that. But I hate the idea that people live in squalor or are struggling everyday to make ends meet because they don’t have a choice. I believe that education is the way out of struggle. If you give a person who has no financial education a million dollars, most likely, they will be broke within a short period of time. Why? Because they don’t understand money. It’s not a character defect or a lack of morals. It is pure ignorance of how money works.

So if you want to give your children the best opportunity to succeed in the world, send them off into the fray armed with knowledge. How to be a good person, how to cook Kraft dinner, and how money actually works.

I wrote an article about my Top 5 personal finance books of all time. These resources are an amazing foundation upon which to start to build your and your kids financial journey. I believe they will give you the required knowledge you need to at least begin. If you want additional ideas and strategies, my books offer a distinct plan to grow your wealth starting with what you already have.

You can become wealthy. You deserve the right to choose to live as you please.

Give your kids the choice. Teach them well.