Why teach kids about money management (balancing a checkbook, using debt correctly, building wealth, giving, etc.)?
Most people think it’s because, “I want my kids to be successful when they grow up.”
True.
I used to only think that also.
But now that is only half the reason.
But first…
Did you know that money is only a magnifier?
If you are a jerk and become rich, you’ll just be a rich jerk.
If you are already giving and get wealthy, you’ll become more giving.
Money can ruin some people.
So when you trade correctly for years and build a huge estate to pass down to your children at your death (I know we should not talk about death and taxes… but they are a major part of life) that money will:
Enhance your children
Or
Ruin your children.
See, it’s not just about them being able to make it when they grow up. It’s also about being able to handle the money they will inherit.
Side note: If your kids have nothing to inherit, then it’s time to get on the path to creating wealth. I believe trading is the best path.
Sure you can put a date stamp on the money such as; they get 10% at age 25 and 90% at age 35. But time does not always teach life lessons.
Plus it’s a whole lot harder to teach when you are in the grave.
If you don’t believe me that money can ruin people look at the lottery winners. A very high percentage of them end up in debt or broke years later. And many have said they are “less happy” at the very end (when the money ran out), then before they won.
Money is a magnifier.
I’m not perfect, but I’ve been teaching my 6 children (and one grandchild… nothing like spoiling him and sending him home!) about money management for years.
But recently when I realized just how much each of them would get at my death and that it could ruin them if they did not grasp the concepts I was teaching my intensity rose to a whole new level.
I don’t want to set them up for failure at my death when that extra money I earned from the markets was meant to bless them.
Do you agree?
Let me know your thoughts either way on my blog here (I do read every comment):
Helping you retire on time,
Big A
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It is critical to teach children how to manage their financial life. The simple things come first, Live within your means, Spends less than you make, Save something (5-10%) in a rainy day fund. Don't borrow more than you can pay back, ect. That's where America went wrong in the Dot Com bust and also the 2008 Housing Finance Scam. The Baby Boomers did not know how to apply the above issues. The Urban Myths got them in trouble. Myth 1. This is a New Economy, they said that in 1928 by the way. Myth 2. Property ALWAYS goes up in value. Myth 3. Buy and Hold is the Safest way to invest. Now go back and look what happened from 1929 to 1940. We are following the same pattern as then. So keep your Eyes on the prize and expect a range bond year in 2013.
All of this split-second trading done by computer has skewed the market. All of us "little people" that want to make trades get screwed by this. What about anyone buying equities having to hold them for at least 3 days, or they get a 50% tax on any profits made? That would sure slow things down. And I mean NO loopholes. Period. Sell before 72 hours and that 50% applies, no way around it.
GOD bless you big A! I just prayed for your duathger, yes, we also believe in prayer for healing, and many other things. Years ago we were farming, I got caught in the power takeoff shaft between the tractor and generator. It through me down against the frame, I could not get loose, there was no one around, so I Prayed, Oh GOD, stop the tractor so I can get free,the engine stoped as soon as I spoke the word. Yes GOD hears , and answers PRAYER. GOD is faithfull, amen. I knew it had to be the angel that GOD provided for me. So I decided, I would like to see an angel. I prayed, Lord, please let me see an angel, and I decided I would not stop praying this prayer until I saw an angel. Aprox four years later, I was driving my pickup along a country road, just as I crested the brow of the hill, half way down the other side, there stood an angel.! He was standing on the left side of the road, dressed in a long white garment, down to his feet. Shining black hair to his sholder. I said, LORD, is this the angel? I was never so scared in my life. So I drove slow, was planing to turn down my window when I got to him, But I was too scared to open the window . so I went down the hill and turned around ,was going to drive back up to him, and ask if he was an angel, so I turned around and started up the hill, but he was gone, so I went up to the spot where he was standing, I stoped the truck, I got out , I looked every direction, I looked up, he was gone, gone,. I said thank you JESUS, for letting me see an angel. all Glory be to GOD, AMEN. Praise his HOLY NAME! Sincerly , Leon W. Weaver
Thought I'd leave a comment and share some of my meakstis as a trader starting out. Approximately 7 years ago, I developed an interest in trading the markets and started to read many books on the subject, like most do at the start (I hope), and after about a year of paper trading I thought I was a seasoned trader and ready to take the plunge. My first week of trading was amazing I made about $5000 trading bonds, stocks and a few other commodities, with only minor losses sustained. I thought I'd be rich within the space of a few months, as I had read up about the power (and disregarded the evils of) leverage. I then remember the following week, the killer trades started to appear where I started taking heavy losses. Furthermore, I was leveraged up to the hilt on every trade, and/or in and out of more markets than I could handle, hence the losses were naturally multiplied in size. This continued on for about 6 months or so, until I had lost next to 95% of my trading account. I stopped trading when my account reached almost blow-out stage and thought I'd learn the business or at least attempt to learn it properly and give it the respect that it deserves. Six years later, I'm still learning. But hey, I'm doing much better now in that I plan my trades well in advance; I do not trade on a whim or on gut feeling; I know my risk tolerance; I know my entries, exits and targets; I know what to do if the trade goes against me; I know what to do if the trade is not behaving correctly; I've applied money management principles to allow me to keep my account healthy through the good and bad times; I trade less as opposed to over-trading in the past; I have identified a set of streamlined trading tools that work for me; I never deviate from my plan; I'm at my trading screens come rain or shine discipline; Warren Buffett teaches that you must know your 'circle of confidence'. I believe that by developing principles and disciplines, rules and guidelines, some of which are outlined above, you then will start to develop your own circle of confidence, and ultimately, your approach to the markets will be one skewed more in the direction of success.
You and a substantial poortin of the trading community have been raving on about imminent and crushing inflation for literally years now. You’re fascinated by the visions of runaway printing presses, debasement of the currency and the necessity to hoard gold. But there is no inflation in sight. When will you get tired of false prophesy? All the Fed’s additions to the money base have been computer entries into member bank reserves. Essentially none has been net added to physical currency in circulation. Anybody can check the EDGAR data system for confirmation. The willingness of banks to lend out of those reserves is attenuated by the Fed’s policy of paying interest on the reserves. All they have to do is tweak up the interest paid to banks to meter the willingness of banks to push money into the economy by lending to businesses and consumers. So the potential for money to flow into the main street economy is completely under control. There are numerous explanations of this to be found in the economic literature, but perhaps the best is found here: It is deflation that has been the real risk haunting the economy. The unprecedented underutilized capital, unemployment and housing overhang make inflation a distant, almost vanishing probability. Japan has provided proof that near- zero central bank interest rates can coexist with stable to deflationary prices for more than a decade under these conditions. As to the recent announcements promising to hold interest rates near zero for extended periods, there is a rich and rigorous research literature showing so-called “forward guidance” to be the only possibly effective way to exert macro influence in a liquidity trap situation. For some reason, Ron Paul and his gold-bedazzled acolytes have peddled this false prophesy of currency debasement and used it to harangue and harass Ben Bernanke and the Federal Reserve. Instead, we owe the man for ingeniously averting a replay of the 1930s Great Depression. History will show him to be the hero in all of this, despite his earlier mistake of falling under the spell of his predecessor, Alan Greenspan. You remember him: he of the Ayn Rand school who came to a belated awakening. It would be encouraging if you would base your advice upon a serious study of the economy and not rely upon the transient attention of those who never inquire about your past advice.
Sorry to hear Richard. Yes my system will help IF you follow the trading rules.
A. Warren Buffet
I once read that Warren decided not to leave the bulk of his estate to his child(ren) after he saw what a lot of money did to the people who had inherited it. He decided to just leave them a couple million and he would dispose of the rest of it.
B. AARP Magazine May 2012, p. 26
49 financial planners opined that it was best to leave equal amounts to your children. If you want to leave unequal amounts to your heirs it could lead to family bickering, distrust, anger, revenge and legal disputes that erode the value of the estate making the lawyers fatter and happier. If you still prefer to leave unequal amounts to your heirs it is best to pay a child now for services rendered (or other reasons) but make the will so that all children get equal amounts upon your demise.
C. Famous Movie Actor
The will of a famous actor (I can't remember his name) stated that if any of his children challenged his will in court then that child would be removed from the will and disinherited.
It seems that leaving unequal sums of money to heirs turns nice, happy, contented people into demons green with envy and the greater the difference the brighter the shade of green!
I absolutely agree with all the reasons that you cited for teaching your ENTIRE
family including your children how to manage money. It makes perfect sense and
should be part of the overall wholistic education that all families should address before
the parent(s) die. Super smart move Big A !
I wish that I had been given the blessing of learning how to acquire manage and grow financial wealth as a young un. Over the years I've been blessed with being able to associate with honest god fearing folks that have achieved 7 and 8 figures incomes. They steered me as best I could grasp towards principles and resources to help me develop a millionaire mind set and how to use it to bless others. After losing everything by ignoring a couple of the emotion based cautions I feel that a blessing has come my way learning how to trade the Big A way and as I get it down intend to school my chilluns:-) in how to handle things properly too maintaing the balance. at least I won't have to start at zero they did get a good foundation in god country family (although the family part came much later than I would have wished)
I agree with you with a passion. Our kids are not getting it in high school, so it's left up to the parents to teach them the simple basics… balancing a checkbook, managing debt, saving and investing strategies etc. Ironically most parents aren't very good at the basics I just mentioned. It does not speak well of our education system or the future for generations to come.
Yes, I do agree because of my past experiences with money. My parents did not have the knowledge on how to instruct me in that manner. Now that I am adult with knid of my own I am now trying to gain this knowledge and pass it on to my kids so they do not repeat the same mistakes I did.
Big A,
Once again, you hit the nail squarely on the head. I absolutely agree that money is a magnifier and letting anyone have a lot of money before they have been taught to handle it responsibly, is a disaster waiting to happen. Anyone who isn't aware of that, doesn't have to look any further than our own government's fiscal irresponsibility to have the point driven home. It's akin to giving someoe a gun without teaching them about gun safety and safe handling- a recipe for disaster!
Big A: You are spot on, as usual. I have friends, who are WEALTHY, and all oft the kids (grandkids to the original benefactor) have substantial trusts set up for them, yet none of them, (even though they most are already married with sizeable families, as are some of theirgradnkids) are living a luxurious life, and after spending a reasonable time learning, they all go off to work in THEIR chosen professions. None of them, or their children act spoiled or are puffed up with self importance, and all were goven a substantial financial educaation as they grew up.
I contrast this with a LARGE group of kods I knew that grew up as orphans, and were fortunate enough to attend a school where ALL their needs were met by the school, and their dependant Social Security benefits were accrued for them by the school, and they received the lump sum at graduation or their 18th birthday, whichever came LAST. Unfortunately, far toomany of these kids blew their entire fund faster than you would possily believe, and the main reason was that they had no more financial sense than "I can afford it, so I will buy it NOW!
What you are doing with your kids and grandson is so essential, I have seen the failure of doing so all too clearly.
Keep up the good work.
Motti Davidsohn
I have been reading your emails for the past year. I took an enormous hit when wall street dumped on the world. (150,000 lost business) so we soldier on and are trying to work that debt off. The loss of that business kept me from retiring so I am looking to find a way to try again financially. Can your system help?