This is Part 2 of “Why You Should Raise Millionaire Children” If you missed part 1, be sure to read it now.
In Part 1, I discussed the importance of teaching our kids to have a healthy mindset about money. In Part 2, I’d like to explore 3 reasons why you as a parent should want your children to become rich and what you can do as a parent to implement wealth-building principles.
Reason #1: Lifestyle The first is an obvious one – lifestyle. Having money gives you more choices in life. Why shouldn’t you have and do everything you want in your life? Whoever said you can’t have and do everything you want? God meant for you to have it all. I don’t let anyone tell me or my kids that we can’t have or do something that is important to us. One of the worst things you can say to your kids is, “We can’t afford it” or “That’s too expensive” or “That costs too much money.” Saying those things reinforces that you cannot have the best things life has to offer. Now before you yell at me, I know what you’re thinking. What if it’s true and you really can’t afford it and it really is too expensive? You might also be thinking that you want your kids to learn delayed gratification and to appreciate what they have. You also want them to understand family finances. So do I. A few simple changes in how we phrase things can make all the difference. Rather than saying, “We can’t afford it,” say, “When we can afford it.” Instead of saying, “That’s too expensive,” replace it with, “We choose not to spend our money on that right now.” The message we communicate is night and day to our children. One says, “Nice things cost money, which we don’t have and if you want to grow up and be like mom or dad, you need to not have money and not buy nice things too.” Ouch! Replacing the words used in the same situation with the positive approach to money communicates that it’s ok to have and do nice things as long as the money is used wisely first. Let me give some real life examples of everyday activities that provide opportunities to teach our children to have a healthy relationship with money.
Saturday morning you wake up to a flat tire on the car. You might say to your age-appropriate children, “Kids, the car has a flat tire. Learning how to fix it is a valuable skill in case you are ever stranded with a flat tire. It is also a skill that is easily performed once you learn how to do it. I’d like to teach you how to do it and let you practice so you can learn this simple life skill.” While fixing the tire, you could further explain, “Kids, since this skill is easy to learn and doesn’t require a lot of training or expertise, it doesn’t cost very much to pay someone else to do it. In fact, I know someone I can call right now that would come here, take off the tire, take it into town to get the hole plugged or patched, bring it back and put it back on the car, all for $12/hour.” To help them understand the principle you might ask, “Kids, why might it make more sense in some cases for me to hire someone to do such a simple, inexpensive task?” Help them come to the realization that you value your time more than $12/hr. You might ask, “What else could I use that time for instead?” Answers may include, making money in a business, learning new things, spending time with the family, doing something fun or another project that’s a better use of time. The lesson taught here is how to fix a tire, but more importantly, you teach the value of time and expertise and their relation to money. Teaching the lesson has nothing whatsoever to do with whether or not you can “afford” to hire out the job.
When I explained this concept recently, a mother told me this story about her husband and kids. The children wanted to build a tree fort and approached their father about it. Dad said, “Kids, I would really like to help you do this, but we simply can’t afford the cost of the lumber to do so. Since we can’t afford it (I cringe even to write the words), let’s go to several different lumber stores and see if we can gather the discarded lumber until we have enough to do the project.”
This mother asked me how her husband could have handled the situation better. So I reenacted the conversation the father might have with his kids that went like this: “Kids, that is a great idea and I would love to help you do such a fun project. You know someday when you’re running your own businesses, you’re going to need to find ways to cut cost so you can deliver a better product and earn a bigger profit. No matter how much money you make or how profitable your businesses are, it’s always good to find inexpensive ways to get things done. I’ll tell you what, let’s build the tree fort, but let’s see if we can find a way to do it for as little cost as possible. Kids, can you think of any ways we can do this?”
Then let the kids think of ideas and slowly nudge them in the direction of free discarded lumber if need be. I went on to explain to her the difference between the two examples (although she already knew it). In the way her husband handled the experience here was the message he unknowingly sent to his kids: “I am a good father and it’s important for me to spend quality time with you, but I am also broke. If you want to be like dad someday you’ll need to be broke too.” In the version I used, you’re still not spending the money so it’s got nothing to do with afford or not afford. Instead of sending the message “Dad is broke,” you are reinforcing your belief in their future success and, at the same time, teaching valuable lessons about being creative, saving money, cutting costs and making a profit.
Let me share another story. Recently, while training to run a marathon, I bought a new pair of running shoes. They were the latest and greatest and cost $150. My son was admiring them and then turned to me and said, “I wish I had a pair of running shoes like these.” Seizing this wonderful opportunity I said, “Jarod, do you know why I am able to buy shoes like these?” He replied, “Because you have a lot of money.” I said, “While that is true, that’s not the reason. The reason is because I am very wise with my money. I make sure that with the money I earn, I first allocate a portion of it to tithing, charity, savings and investing. It is more important for me to build long-term wealth than it is to have nice shoes. I never borrow money for “things” or spend our money unwisely. Once I put the right amounts of my income in the appropriate accounts, then it is perfectly ok to buy nice things like these shoes.” I didn’t stop there. I said, “Jarod, as long as you first dedicate the right amounts of income in the right accounts, you can have whatever you want in life.” If I failed to teach my son to focus on appropriate priorities – commitments, building wealth, and finally, spending – he may only understand that money can buy nice things. It’s an easy jump from there to “running shoes can make me happy.” But things do not make you happy. Many people live for that fallacy. They don’t save, invest or build wealth. Those same people spend money they don’t have under the false belief that having “things” makes a difference. It’s just not true. Having money has provided me and my family some amazing opportunities. This past year we bought an RV and went on a 33-day home school field trip. For me this was a realization of a dream I have had for many years. We traveled across the United States, spent time together, visited museums and historical sights, and built lasting memories. Our kids will never forget that experience. As a side note, that month was actually one of the best months for me financially and I hardly worked at all!
Reason #2: Leave a Dent in the Universe
The late Steve Jobs, co-founder of Apple, Inc., revolutionized the way we use computers, listen to and buy music, the way we communicate and use cell phones. He left us the charge to “leave a dent in the universe.” To me that means to make a difference in a big way. So I think big. At the beginning of a new year, our family tradition is to sit down and individually write out our goals. I call this exercise “How to Have, Be and Do Everything You Want in Life.” This goals exercise includes writing down on paper 50 things we want to have, become, or do in the next 10 years. Then we narrow it down by choosing three things from the list of 50 to focus on in the next one, three, and five years. This is followed by an action plan to accomplish them. (click here To get a free copy of my “How to Have, Be and Do Everything You Want in Life” Goals Exercise. I have done this same exercise with other children and teens, as well as my elite real estate clients. I’ve noticed that, generally speaking, kids are able to think big and have fewer reservations about sharing their hopes and dreams. Adults tend to struggle just to come up with 50 things and have a harder time openly sharing their aspirations. Isn’t it sad that many people trade their childhood dreams of “leaving a dent in the universe” for status quo and mediocrity as an adult? The question we need to ask ourselves is, “Am I unknowingly instilling limiting beliefs in my children?” I’ve heard it said that, on average, a child hears the words “no” or “don’t” from their parents over 14,000 times during their adolescence! Is it any wonder that most of us lose the ability to “think big” as we grow up? What other words, beliefs and values do loving parents leave engrained in their children that later in life may actually hold them back? This past new year while our family was doing our How to Have, Be and Do Everything You Want in Life goal-setting activity, one of my sons emphatically declared to the family that one of his 50 goals in the next 10 years is to become a billionaire (apparently becoming a millionaire was small thinking). I’m not sure he even grasps the reality of how much a billion is, but here is how I responded: I looked him straight in the eye and said, “Jarod, think of all the good in the world you will be able to do when you accomplish that goal. Think of the lives you will change and the people you will help. Think of the dent in the universe you will leave!” You see, I want my kids to associate money and wealth with life-mission, doing good and making a difference.
Reason #3: Personal Development
As you may have noticed, in our family our children are encouraged to think big. A common question my wife and I ask our children when they want to do or have something big is, “What do you think you’ll need to do to accomplish such a lofty and noble goal? What skills will you need to acquire?” This often leads to conversations about leadership, character, education and skills. We follow the Thomas Jefferson Education in our home school curriculum. One of the founding principles is that the purpose of the child’s education is to discover, develop, and pursue his or her life-mission. Imagine what a child’s life will be like if they are allowed to explore their interests and then are encouraged to develop those interests with the intent to someday live their life’s mission with passion and purpose. I believe that a healthy mindset about money coupled with passion and purpose in a field of interest will result in a person spending the rest of their life experiencing amazing personal growth and development. This is the ultimate recipe for a happy, successful life. Pursuing excellence is a fairly easy concept for most parents to accept and grasp. We want our children to learn how to work hard and do their best. We talk about discipline and dedication and determination in academics, music and athletics. My dad used to say, “A job worth doing is worth doing right.” So why is it when it comes to earning money so many miss the boat completely? One of my favorite quotes is from the billionaire Donald Trump who said, “You have to think anyway, so why not think big?” I try to adapt that philosophy in everything I do. Think about it in the context of earning, saving and investing money: You have to earn money to support yourself and your family anyway. Why not become the best at what you do and earn as much as you possibly can as quickly as you can? I once shared with someone that my goal was to develop businesses and investments that allow me to work less while earning more. This person accused me of being “lazy” because I was trying to get out of “work.” The way I see it, it is lazy to NOT seek out and develop systems and procedures that will allow you to earn more money while working less. I believe it is lazy to NOT learn how to invest your money and have your money working and growing for you instead of you working for money. This information is readily available to all who make it a priority to learn and then implement that knowledge. We are all given the same amount of time in a day. In our home we don’t have TV or cable (we subscribe to Netflix for documentaries and occasional movies that are planned as a family). My wife and I are avid readers. Since I am a runner, I listen to audio books (audible.com) while I run and I listen to 1-2 books per week on leadership, parenting, business, marketing, money and investing. I concur with business expert Brian Tracy who teaches that if you read one book per week in your chosen industry that in one year you will have read 52 books and will have become an “expert” in that industry. We can teach this to our children as well. Teaching your children how to create and build wealth at an early age will benefit them for the rest of their lives. You can review data from the US Department of Labor for proof that retirement isn’t what many people hoped it would be. I’ve heard it said that less than 4% of Americans at the age of 65 will have income above $35,000 per year. 20% of them will live below poverty level and 50% will depend on welfare, social security and relatives. Is this what we want for our children? Absolutely not! Help your children develop a life-long personal growth plan so that they don’t become one of these alarming statistics.
Thinking Big, Living Large.
When it comes to spending, borrowing, saving and investing, how are you modeling money to your children? Once age-appropriate, my children all start an eBay business. The reasons are simple: it’s easy, requires little capital to start, and most importantly, it’s the perfect playground for a kid to start learning sound business principles while having fun. Perhaps what I like best is that instead of trading time for money (getting paid hourly), with eBay you get paid based on results. The better you get at doing “deals” the more you earn, regardless of time. In my real estate training business I have two salespeople with no college education, both under the age of 30, who each earn over $250,000 per year. They get paid 100% in commissions. Whether I’m working with contractors, employees or vendors, I can always spot top talent because top talent prefers to get paid based on results instead of based on time. Do we inadvertently teach our kids to trade time for money or do we teach them that money has absolutely no connection with time? I have several products that are fully automated sales funnels that sell online. These products were set up once and continue to sell over and over again without involving my time. This used to be referred to as “mailbox money,” meaning money that surprisingly shows up in your mailbox everyday. I affectionately call it “inbox money.” I wake up in the morning to see sales orders in my email inbox that transacted through the night while I was sleeping. I get paid based on my results, not my time. One of my sons loves photography and came up with an idea to take pictures of the neighborhood and create a calendar with those pictures and then sell the customized calendars to the neighbors for $20 each. In other words, do some up-front work and then earn money on results (selling it to all the neighbors). If the project goes well he can recreate new calendars each year and gain repeat customers. What a great idea and project for a kid to experiment with. A child who grows up seeing his value as “results-oriented” will become a natural leader. EBay provides that opportunity for kids and teens. Recently I taught a class about how to get started with eBay to a group of teenaged boys. One boy took the lesson to heart and within one week was selling unwanted stuff from around the house (with his parents’ permission). He was so excited to share his success with me. We sat down and talked about the power of re-investing his earnings into new inventory to be sold. I showed him how quickly his working capital would grow if he did this instead of spending it. My kids are taught to live on very little of their income. Here is how their money is allocated.
- Tithing 10%
- Investing (back into eBay business) 50%
- Saving (for big purchases such as a new bike, laptop, Boy Scout camp, etc.) 20%
- Spending (day to day expenses on wants and needs) 20%
I look at the spending account as training for their living expenses as adults. Imagine if a child learned to live on 20% of his income and carried that into adulthood. Instead, many of today’s Industrial Age-minded youth start out in life already heavily in debt. Many graduate college with massive student loans, then, as was modeled to them, they go into further debt by financing a home and cars. Many don’t stop there and quickly rack up thousands in credit card debt to buy things they think are essential. They quickly fall into the trap of focusing on earning a higher hourly wage or salary simply to pay bills. Striving to make more money to “pay the bills” is a horrible existence. In most cases, making more money only exacerbates spending problems. When you make more money, you see yourself as deserving more expensive “stuff.” This often requires even more debt. The real problem is that debt is all consuming and hinders personal growth. It robs one of his or her ability to build wealth. There is peace in saving and living below one’s means, but there is power and freedom in learning to create wealth. For me personally, one of the greatest benefits of becoming wealthy is the personal growth I have experienced. Through all of my failures and successes, I have become smarter, wiser, and a better leader and businessman. I have been able to overcome obstacles that I wouldn’t have managed just a few short years ago. I also realize how much I don’t know and still need to learn. This realization motivates me to make personal growth a priority in my life. The world changes quickly. One thing I’ve noticed with successful real estate investors is that they have acquired the ability to quickly adapt to market changes. They don’t cling to what worked yesterday, but rather recognize that when one door closes, another opens. Are we preparing our children to embrace change or are we slow and reluctant to adjust? Tomorrow’s problems will be solved by people who identify them and quickly create solutions. It is my hope and prayer that we can all have the courage to learn and effectively model success to our children. Inspire your children to discover and live their life-mission. A healthy, millionaire mindset will help them in their quest to create an abundant, happy life while leaving their dent in the universe.