As urbanites, we place great emphasis on academics.
There is a Chinese saying – “You cannot deprive education, despite being fiscally poor”. At present, parents are willing to spend 5-7 figures, placing their children through private schoolings, tutorings, exam-coaching, extras and universities. In doing so, they hope to provide children a head start in life. Usually, it means for them to be able to earn better income, thus, living a better lifestyle.
The equation is simple: Quality Academics = Higher Income = Better Lifestyle.
One Skill is Lacking
It is possible to have an impression that as long as one earns high income, he or she is on the way to wealth and is certainly set for life financially.
But, is it so? Here, I beg to differ.
While earning high income is an ingredient to build sustainable wealth, it is also possible for high-income earners to work towards financial poverty. As a matter of fact, the more they earn, the poorer they become. It is paradoxical. Now, you may think: “How is that possible?”. If one is earning RM 25k per month today, is it possible for him or her to be poorer than another who earns RM 5k a month?
The answer is: “Yes, it’s possible.”
This is because there are many aspects to building wealth than earning income. Think about it. Is it possible for high-income earners to:
a. overspend?
b. over-leveraged themselves with debt?
c. not know what, how, and when to invest their capital?
d. not know how to protect their finances with insurance, will, and trust?
The answers are yeses. These are financial management skills and presently, it’s not taught or greatly emphasised (if they are taught) in schools despite them to have a meaningful 6-8 figures (possibly 9-figure) impact to one’s net worth over time.
Thus, Step 1 to educating kids about money is to first appreciate its significance of doing so.
Why Does The Rich Get Richer?
And, why does the poor get poorer? There are many factors to this. But, I found that one of the reasons is – Rich kids could model financial behaviours practised by their rich parents. Poor kids can have good quality education but they would model financial behaviours from their poor parents.
Kids tend to copy, mirror and model what their parents do, not what they say. It is like smoking. What would be the odds for kids to pick up smoking if their own parents are telling them not to smoke with a cigarette held on their fingers? I’m not saying this to be an absolute truth for they are exemptions. But, wouldn’t it be easier to discourage children from smoking if their parents aren’t smokers in the first place?
I don’t have a kid. So, I would share my experience as a son to my father. To me, I’ve inherited “conversatism” from my father who is risk-averse. In investing, my father tends to shun it altogether as he is worried about the downside. When it comes to debt, he doubled his required mortgage payments and had paid them off earlier than scheduled.
His behaviour impacted me a lot in how I manage finances today. So, I believe it is similar to a lot of us. It is not what was told but what was done that impacted us the most. So, Step 2 to educating our kids about money is to be aware of our behaviour when managing our finances.
We Can’t Teach What We Don’t Know
Take stock investing as an example.
My father bought stocks upon recommendations and he was burnt. He thought that he was investing and after his losses, he viewed that investing is risky, thus, would avoid it at all cost. As such, what sort of knowledge can my father impart to me when it comes to stock investing? Nothing.
It is a classic example of you can’t teach what you don’t know.
Thus, it is best for parents to be educated on finances first. The basics would be to know how to read and prepare financial statements. Having this capability to do so is crucial. Without it, it is almost impossible to manage finances and build investment portfolios. In other words, if we expect our children to be good with money, we need to first know how to “balance” our balance sheets.
Thus, Step 3 is about acquiring financial skills first before imparting them to our children.
Keep it Fun, Engaging and Simple
If you are a parent reading this, you may acknowledge that some financial traits you adopt today are inherited from your parents. You find money management to be more than just earning income and want to gear yourself, spouse and kids for greater financial success. The question is: “Where to start?”.
Of course at KCLau.com, we offer a variety of financial education materials such as articles, webinars, and online courses. They are more suitable for adults. But, if you have school children and would like to be intentional about their financial education in a fun and engaging manner, you may try out:
Card / Board Games:
1. The Money Genius Card Game
2. Cashflow 101 by Robert Kiyosaki
3. Wongamania
To conclude, while it’s vital to prepare kids for academic success, it is now more crucial than ever to impart the necessary skills to be financially savvy to survive in today’s uncertain economy.
