Let’s take a look at the differences in parenting employed by the rich in order to make sure their kids get s better shot at success in the long term, shall we?
This is something we’ve been interested in for a while especially since, as time goes by, we’re considering having our own children and we most certainly wish to give them the right tools to get an advantage in life.
This article will benefit you no matter where you finds yourself in life, because you can still draw tremendous value from the lessons and advice the wealthy share with their kids.
So much to say that the right piece of advice provided early on or at the right time can make great differences in the long run.
As always, here’s the video version of this article in case you don’t feel like reading:
Number 1: Understanding how money works
While the poor remain financially illiterate.
This might sound basic to some of you, but there aren’t that many people who asked themselves:
How do people make money?
This might sound basic to some of you, but there aren’t that many people who asked themselves:
How do people make money?
Why am I being paid this much by my employer?
What factors determine my salary or revenue?
How do taxes work? Can that be optimized?
What needs to happen to improve my finances?
Rich parents usually make it a priority to discuss about the value and importance of money in their household as soon as possible. This familiarizes kids from a young age with the concept of value in exchange for services provided. They’re introduced to the household expenses and put in real life situations where they figure out pretty quickly that money is a lot harder to earn than it seems.
On the other end of the spectrum, the poor never talk about money at home, it’s usually a secret how much money the parents earn or how that money is spent. The only time the kids hear about money is when the parents are arguing about not having enough, thus associating the entire concept with a negative feeling.
Number 2: The difference between an asset and a liability
Rich parents usually make it a priority to discuss about the value and importance of money in their household as soon as possible. This familiarizes kids from a young age with the concept of value in exchange for services provided. They’re introduced to the household expenses and put in real life situations where they figure out pretty quickly that money is a lot harder to earn than it seems.
On the other end of the spectrum, the poor never talk about money at home, it’s usually a secret how much money the parents earn or how that money is spent. The only time the kids hear about money is when the parents are arguing about not having enough, thus associating the entire concept with a negative feeling.
Number 2: The difference between an asset and a liability
The poor never know what is a good purchase and a bad purchase.
After poor people earn money, they go ahead and spend it. That’s how you stay poor.
Let us explain in as simple terms as possible:
an ASSET = Makes you money,
while a LIABILITY = Costs you money
The problem here is, poor people never realize what counts as a liability. For example, both the car you drive to the grocery store and the house you live in are liabilities. They do not generate any revenue for you, but demand money to keep running. Same goes, for your new iPhone, fancy clothes your flat screen tv and everything else you purchased without thinking.
The rich focus all their time and money on acquiring more assets. Buying an apartment that generates rent, writing a book that generates revenue once it’s completed, purchasing a part of a business that’s doing ok and more.
“But Alux, most rich people have fancy cars and fancy houses? Isn’t that against what you’re saying?”
Yes, they do own luxuries, but please pay very close attention because this is extremely important:
"THE ASSETS pay for the LUXURIES!"
Rich people never buy luxuries from their own earnings. Want a new fancy car? Figure out how to buy 2 apartments and use the rent from them to pay for the leasing for the car. That way, when you get rid of the car, you still have money coming in. This is a crucial difference in behavior. When money starts coming in, focus on buying assets instead of spending it!
Number 3: They’re not entitled to anything
The rich know that the world can take everything away if they’re not performing, while the poor always look for someone else to take care of them.
Being born in a wealthy family definitely has its advantages. You have access to better tools, to better resources, you don’t have to worry about basic needs, but you also open up yourself to new threats that poor people don’t have to worry about. There is a lot more to lose if you’re not careful, so the pressure is always on.
It’s really important for the wealthy to teach their children that despite them getting a head start in life, the journey ahead is long and they need to remain focused on growth, not just maintaining the pace. Weather or not they will be successful in life depends on their own actions and daddy’s money can only go so far.
Families fortunes where children feel entitled, usually crumble in the 3rd generation.
First, there’s someone who’s really hungry and works incredibly hard to build wealth.
Second, their children grow with a sense that all they need to do is maintain the wealth.
Lastly, the 3rd generation has lost its hunger, feels entitled to success without work or sacrifice and usually spends it all stupidly.
Teaching your kids the lessons from this article will help you avoid this type of downfall.
Number 4: How to be sociable and connect with other people
You would think more people would realize how important it is to be able to have a pleasant conversation with others.
Successful people socialize their kids before the age of 4. Not even kidding.
Here’s why: if your child gets socialized that early, other kids will want to play with him. If he behaves well with other kids, other parents will want to take care of him when he or she plays with their own. This has a massive snowball effect through life. If people like you and like being around you, this builds up and doors open for you that otherwise wouldn’t. Teachers will treat you better, you will get access to better job opportunities, you will make better friends so there’s an entire tree of benefits that grows from early socialization.
We’ve learned this valuable lesson from Dr. Jordan Peterson’s book, 12 Rules for Life.
Ohh yeah, and poor people never teach their kids to read, because they themselves don’t read..
Number 5: Stop expecting immediate results and avoid magical thinking
We’re so caught up in this instant environment; want to watch a movie: Netflix , want to eat: drive through or order, want to have sex: tinder, that most people don’t realize wealth and happiness do not fall in the same category.
Poor people expect to get rich quick. To win a large sum of money or inherit property. They have this weird expectation that their lives will somehow magically become better. The irony is, even if they somehow got their hands on a lot of money, they’re not educated enough to know what to do with it and eventually blow through it all.
Rich parents make it a priority to teach their kids to play the long game. Long term thinking is one of differentiating characteristics of the rich.
Remember our video on 15 Things You Can Control in life? The bonus info there was a specific skill called: Trading with the FUTURE, which the rich employ in order to get themselves an advantage over everyone else. It’s an incredible video filled with actionable insights.
Something really interesting we discovered is how much progress you can make if you think about life in large batches of time 5-10-20 years.
There’s a really great quote from an interview Bill Gates did one where he said:
“Most people overestimate what they can do in one year and underestimate what they can do in ten years.”
The year is almost over and that new year new me bullshit will make its way into your lives. Instead of planning for the next year, why don’t you start planning your next decade? And maybe, this time you will do something about it!
Number 6: How to create daily habits that on the long run give them incredible advantages
One of the most valuable skills you can teach your child is How to create a habit for himself.
Habits are amazing and once you realize how valuable they can be, your life changes. It normally takes around 21 days to create a new habit and once you push through that 21 day limit, you’re off to the races. That habit becomes a part of you.
You don’t read enough? Transform reading time into a habit!
You want to get fit but never have the motivation to go to the gym. Make a habit out of it!
Same goes for work, if you make it a habit to organize and optimize your workflow large portions of your day open up for other things.
The rich use the power of habit to get ahead in life, while the poor, nurture toxic habits which leads to their lives in ruin.
The power of habit is a tool, it magnifies what you feed it. The rich simply choose wealth creation actions as their daily habits, while the poor pick negative routines.
Careful what type of habits you instill in your child.
Number 7: Money is a tool and it’s a Good Thing
The rich use the power of habit to get ahead in life, while the poor, nurture toxic habits which leads to their lives in ruin.
The power of habit is a tool, it magnifies what you feed it. The rich simply choose wealth creation actions as their daily habits, while the poor pick negative routines.
Careful what type of habits you instill in your child.
"Children learn from what you do, not what you teach them to do!"
Number 7: Money is a tool and it’s a Good Thing
How many times have you heard people saying: “money is the root of all evil”?
Plenty huh?! Think back of the person you heard saying that. How successful were they? How happy were they with their lives?
Poor people blame their misfortunes on the lack of money in their lives and attribute an element of negativity to the concept of money. This is because, even when they get money it leads to more and more problems which they don’t know how to tackle.
The rich do the exact opposite. They understand that money is merely a tool, which you use to navigate life. It’s just pieces of paper & plastic with drawings on them which we exchange for material value. Nothing less, nothing more.
Stop taking money so damn personal and use it for what it was created for. Exchange it to make your life better.
It’s super similar to scissors. You can cut hair with them or you can stab yourself in the eye. Why people choose to do the latter is a major mystery to us.
Once you start thinking of money like a tool, the game suddenly changes and you will stop harming yourself with it.
Number 8: Increase income instead of lowering expenses
Plenty huh?! Think back of the person you heard saying that. How successful were they? How happy were they with their lives?
Poor people blame their misfortunes on the lack of money in their lives and attribute an element of negativity to the concept of money. This is because, even when they get money it leads to more and more problems which they don’t know how to tackle.
The rich do the exact opposite. They understand that money is merely a tool, which you use to navigate life. It’s just pieces of paper & plastic with drawings on them which we exchange for material value. Nothing less, nothing more.
Stop taking money so damn personal and use it for what it was created for. Exchange it to make your life better.
It’s super similar to scissors. You can cut hair with them or you can stab yourself in the eye. Why people choose to do the latter is a major mystery to us.
Once you start thinking of money like a tool, the game suddenly changes and you will stop harming yourself with it.
Number 8: Increase income instead of lowering expenses
One of the most valuable lessons a parent can teach their child is how to generate more money.
"It takes the same amount of effort of work to barely survive or make a fortune."
This might sound peculiar to some of you, but it’s the truth. The difference is in the approach and the knowledge you use to backup that effort.
The smarter you are from a financial perspective the least effort you have to deploy into the real world. That’s why Wall Street brokers earn so much more than miners. Who between these two do you think deploys more effort?
Poor people are always focused on lowering expenses as much as possible; to the point that life isn’t almost worth living. Do you think the rich care about buying or not a $5 coffee from Starbucks or spending $30 on a movie?
Instead, the wealthy put all their attention to increasing the amount of money flowing in. If you radically increase your income there’s always going to be large amounts of cash left at the end of the month.
Poor people teach their kids to lower expenses while the rich focus on increasing their income.
Major difference.
Combine that with lesson number 2 from this list and you have officially won the game of money.
Number 9: Knowledge is more valuable than money on the long run
There’s another quote that we kept hearing a lot when we were getting started and it took a while to fully comprehend the true implications it had. It goes like this:
“Invest in yourself, it pays the best dividends!”
Sounds easy right? But it has very little to do with going to school or reading books.
It has a lot more to do with increasing how valuable you are to the world. The world rewards people who are valuable, because valuable people can create value for others and in exchange for that value, they can get whatever they want.
The concept of becoming a valuable person is not thought to their children by the poor, even just a few of the wealthy bring it up when the child is growing up, but those who do see a higher probability of both success and happiness.
There are many ways to become valuable, from filling a position in a company, to creating a product or service that people use, to showcasing your talent to the entire world.
The more valuable you are, the richer you will be. The only way to become more valuable is through the increase of knowledge, skill level and time.
Learn how to be better and then practice being better at it for long enough that you start to see noticeable differences. It takes 10,000 hours to master anything, that’s why the rich have their children try a bunch of activities in order to get a headstart on that number of hours.
Someone who has knowledge will always be able to generate money, because he is valuable to the marketplace! The opposite is not always true, sometimes knowledge can be too expensive to buy.
Number 10: Don’t work for money, Have money work for you!
This is the centerpiece of how to get rich. You can read as many books as you’d like, go to seminars, classes, MBAs, whatever you want, it’s all based on this.
"Poor people exchange their time for money and then spend it!
The rich, use the money they get to create more money."
There are big differences in the approach to finance these two classes of people employ.
Most people stay poor because they believe you need large amounts of money to invest, otherwise there’s no point. The rich, are always looking for way to add the smallest drop in the bucket of passive income they can find, because it’s not about the amount as much as it is about freeing your time.
You can start a business these days with less than 100 dollars, if you know what you’re doing or even for free as long as you’re willing to put in the time. As soon as you generate enough revenue, use that money to pay for someone to do the things you used to do to keep the business running as you focus on growth and other things.
The concept of passive income and understanding how to use money to generate more money is the foundation to any wealth building strategy. Whenever anybody new asks us: what is the first book anyone should read if they want to be rich? We always answer with: RICH DAD POOR DAD by Robert Kiyosaki.
It’s the first financial book that made a difference in our actions and beliefs when we were starting out. You’ll find it translated in every language out there. If you haven’t read it, we strongly urge you to pick it up as soon as possible.
It’s such a valuable book!
Number 11: Solving problems is the quickest way to get rich
Something the rich are quick to teach their children is the fundamental difference between getting paid and getting rich.
Let us explain: Poor people get paid to take care of something someone needs done. For example: Deliver the newspaper, wash the car, answer the phone and more single activity jobs. Where you basically do the same thing over and over again.
The rich never do repetitive work, because that’s easily outsourced, instead, they focus on the big problem. The bigger the problem you fix, the richer you get.
That’s how, delivering the newspaper -> became content websites, same result, less hassle.
Answering the phone -> became automated messaging – which btw, google has a new AI that will likely end the job of receptionist for good.
Let’s take 3 Iconic modern entrepreneurs: Elon Musk, Mark Zuckerberg and Jeff Bezos. They all got super rich by solving problems for humanity and creating products and services to serve that mission.
People will pay money for you to solve their problem. Teach your children that and they’re off to the races.
Number 12: Not to waste time on things that do not correlate to the real world
Sorry to break it to you, but nobody sees value in your ethnic or gender studies. Same goes for majors and degrees in: journalism, film and media, history or fine arts.
To be honest, we feel like the entire educational system right now is pretty messed up. They’re just repeating to you some things that used to make sense a while back, with a blatant disregard for the future.
You’re basically getting in massive debt over skills that 1. Do not have a direct correlation to the marketplace you will be performing in once you graduate and 2. If you’re really passionate about any of those topics and put in the time to master them, you have a better shot at making it on your own.
“We’re lending money we don’t have, to kids who will never be able to pay it back, for jobs that no longer exist. That’s crazy, right?
That’s what we’ve been doing for the last forty years.”
Number 13: How to use good debt instead of bad debt like the poor do
Yeah, there are two types of debt.
Bad debt, makes you poor while Good Debt makes you rich.
Did your parents ever mentioned this to you when you were growing up? Probably not.
It’s one of those lessons that the rich have figured out a long time ago. Other people and institutions will actually help you get rich quicker if you know the difference between those two.
It’s all about the purpose of the debt. Poor people take out loans with the purpose of spending the money on liabilities. They borrow money to get a new car, to get a new phone, to cover necessities.
The rich only borrow money with the purpose of generating more money. Banks and investors love to lend money to this kind of projects, as long as you can clearly explain to them how their money will be safe and you will be able to pay it back.
That’s how people build skyscrapers, they don’t pay out of their own pocket for the building, not even for the land, it’s all borrowed. The bank is certain that you will be able to cell or rent the building and is willing to take that risk with you. Prove that you know what you’re doing and that you’ve done this successfully in the past.
Number 14: 80% of results comes from 20% of the effort
It’s one of those lessons that the rich have figured out a long time ago. Other people and institutions will actually help you get rich quicker if you know the difference between those two.
It’s all about the purpose of the debt. Poor people take out loans with the purpose of spending the money on liabilities. They borrow money to get a new car, to get a new phone, to cover necessities.
The rich only borrow money with the purpose of generating more money. Banks and investors love to lend money to this kind of projects, as long as you can clearly explain to them how their money will be safe and you will be able to pay it back.
That’s how people build skyscrapers, they don’t pay out of their own pocket for the building, not even for the land, it’s all borrowed. The bank is certain that you will be able to cell or rent the building and is willing to take that risk with you. Prove that you know what you’re doing and that you’ve done this successfully in the past.
Number 14: 80% of results comes from 20% of the effort
Rich parents do not want their kids to be top of the class. Shocker right?! It has to do with the 80-20 rule also known as the Pareto Principle or the Pareto Distribution, which states that 80% of the outcomes is the result of just 20% of the action. In businesses, 80% of the revenue comes from only 20% of the customers. 20% of your employees, basically do 80% of the work and so on.
This is a mathematical ratio that’s been proven to be quite accurate in almost all enterprises and in life in general.
Back to why rich parents don’t want their kids to be the first ones in class? It takes takes too much time and effort. To improve with the smallest deviation you would need to dramatically increase the time you put in which doesn’t leave enough for your real life education. There’s more value to take out from experimenting in the real world than being inside and studying all night just to get 5 or 10% more on your exam.
We first discovered the 80-20 rule in Tim Ferris’s book The 4 Hour Work Week and to be honest, we’ve been leveraging that concept ever since. There’s also another book called the 80/20 principle that’s focused exclusively on this concept by Richard Koch.
Between us, we recommend the 4 hour work week, it’s more fun.
Number 15: Having money doesn’t make you a better person, it just solves some of the problems.
Surprise surprise.. When you’re thinking of rich kids, you probably picture snotty, arrogant pricks who believe that just because they have money they’re better than anyone.
That’s not usually the case. Unless you inherit money, you probably worked your butt off to get to where you are in life. On the road to riches you got to understand how valuable humility can be and most rich people are very humble individuals. Because they never forget where they came from, these values don’t get lost.
Humility and respect for others are some of the first lessons rich parents teach to their children, because they know what it feels like to be sitting on the other side.
You should never be ashamed of having money or being successful, it’s actually something the entire world should celebrate. A lesson most people figure out too late in life is that you can’t buy a clear conscious, no matter how much money you throw at it. Money pays for comforts of the body, but not for comforts of the mind and soul.
Source: www alux.com
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