The importance of Teaching your children how to invest and thrive for the future.

Part 7: what the wealthy do differently 

Today we continue to explore the way people with generational wealth think, we call this “old money” how does old money think?

If we want To know how to build generational wealth, then we need to look at how people with generational family fortunes think.

1. Spending – Not Cool

Give a million dollars to an average person, and he/she immediately thinks of what it will buy. But give a million dollars to an old-money family, and it goes into a business… an investment… or a new entrepreneurial venture. Big difference!

What matters for old money is producing, not consuming. We don’t want to consume goods and services. We don’t want to consume information and ideas. We don’t want to consume Wall Street’s fee-stuffed “HNWI” (high net worth individual) products, either.

Let others drive their fancy cars, carry their expensive handbags, and have addresses in the chic ZIP codes. Old money doesn’t show off by buying things. It prefers to keep a low profile… and a low cost of living.

It knows that investment costs have to be kept down, too. And the best way to do that is to avoid hedge funds and structured products. Stick with simple, low-cost, long-term investments.

2. Spending the Family Fortune – Even Less Cool

“Never touch the capital” is a long-standing rule and a hallowed tradition among old-money families. You may spend the interest on the family fortune – even the capital gains it produces. But woe betide the heir who draws down the principal.

The principal must be kept intact. Any distributions should be of interest, after taxes and inflation adjustments. At today’s low interest rates, it is hard to earn much income – safely – from your investments.

Families are tempted to “dip into capital” to make ends meet.

 Once you begin living on a previous generation’s savings, you will find it hard to stop… until the family fortune is all gone.

“Eat only what you kill” is a better way of expressing the taboo against spending family wealth.

It allows you to spend only what you make yourself. The earnings from capital go back into the family fortune, replacing losses from inflation and taxes.

3. Doing What Others Do – Not Cool

Most people want to fit in. They seek social approval by doing what other people do. But if you do what other people do, you will get the results that they get. You will become average – just like they are.

Having wealth is rare. Having it for more than one generation is rarer still. You don’t do that by doing what other people do. You have to think more clearly… and avoid many of the ideas, values, and habits that most people have.

You must be willing to be different.

The importance of Teaching your children how to invest and thrive for the future.

Patience and time in building the family fortune.

Today we begin to explore the way people with generational wealth think, we call this “old money” how does old money think?

If we want To know how to build generational wealth, then we need to look at how people with generational family fortunes think.

How is their thinking different from our own? 

What do they do differently from the rest of us?

What separates the truly wealthy from the rest of us?

Specifically one thing comes to mind over everything else;

The Long View!

What accounts for it? How come some families stay rich generation after generation, while others never have a penny or a nickel?

“Culture,” or “Education,” perhaps. 

But what, specifically, about culture and education is it that makes such a big difference in outcomes?

The wealthy take the long view.

If you thought you’d live forever, would you do anything differently? 

Wouldn’t your attitude toward your money change a little? Wouldn’t you slow down, realising that you’re not in such a hurry to make money? Or spend money?

And wouldn’t you reduce your spending, too, knowing that your money would have to last you a long, long time?

Generational wealth is “forever” and it’s the long view!

Old-Money thinking.

If you look carefully, almost all Old Money thinking can be traced to a single source: 

A longer-term outlook. The truly wealthy are careful to spend their money on things that hold their values over time.

It’s why they do not trade in and out of investments. Instead, they find a few positions and stick with them – for decades. they don’t rush in or out of anything. 

It’s also why they prepare their families, over the course of many, many years, so that they will be ready for the challenges of managing and enlarging the family wealth.

(Hence why we’re writing this mini series titled “Generational wealth”)

They make sure family members add to their collective wealth, rather than subtracting from it.

It’s why they spend time and money on lawyers and accountants, too, making sure that the structures are in place to pass along wealth and protect it.

It’s why they prefer deep-value assets over momentum investing. Over time, value rises to the top. Momentum slows.

It’s why they will wait a long time – many, many years – for the right investment at the right price.

It’s why they like investments with long-term payoffs, such as timber, mining, and real estate.

And it’s how they are able to benefit from compound growth, letting relatively modest gains grow over several generations.

It’s why they are almost fanatical about eliminating costs: taxes, investment charges, and unrewarding living expenses. They know that wear and tear, over time, will wreck their family fortunes.

It’s why they develop long-lasting partnerships with the professionals they need to make sure their interests are protected and their plans are carried out.

Time, Time, Time

It is all a matter of time. Old-Money families have money. But they expect to have it for a long time. So they work hard, investing in education and professional advice, to make sure they have the personal resources they need.

The long view comes into play in almost everything. And over the long haul, it’s time, time, time… the most immutable, inflexible, unforgiving resource under the sun, that separates the rich from the poor. 

It would probably be so much more fun to spend your money now, wouldn’t it?

But the main point is worth keeping in mind: Building wealth is not about getting something. It is about giving up something. 

 It is for the person who wishes to make a sacrifice – even if it is a relatively agreeable sacrifice – so that others may benefit from it, perhaps others whom we may never meet, the future generations. “May the tree you plant today shade and shelter your great-grandchildren.”

Until next time,

Frank

The importance of teaching your children how to invest and thrive for the future.

Making and publishing a children’s book on Amazon with my five year old son Liban.

This issue of our mini series “Generational Wealth” is about sharing our ideas as parents on how we can help our children learn entrepreneurship along with the much more basic mundane educational stuff that’s taught in the institutional school system. The idea being, that if our children grow up with an entrepreneurial mentality and the confidence to go along with it, they stand a good chance of being successful at life in general as well as monetarily.

Since my wife and I actively and consciously homeschool our two children perhaps we have an advantage by way of our freedom to ultimately design and create the curriculum we think is best, (it also means we’ve a lot of “extra” thinking and work too)

As homeschooling parents we spend some time of each day teaching our kids the basic stuff that they would be learning in school along with many other things mixed in that we view as important, most of which is not taught in school at all.

Our Son Liban is five so we’re teaching him his ABC’s, basic words, basic reading and basic numbers.

Liban learnt his alphabet by drawing and publishing a children’s book.
A very basic task like teaching the alphabet can be used as an opportunity to teach so much more than just the letters, it’s true that some of the learning is simply practice and repetition over time, but it doesn’t have to be so basic, and it’s usually more fun and interesting if it’s not too basic to start with.

Somehow through a mixture of listening to Liban’s ideas (allowing for a bit of self direction) we ended up drawing an animal to represent each letter in the alphabet, using animals as a visual aid for each letter seemed to make each letter memorable for him, if he forgot a letter and we looked at the specific animal drawing, he would remember what the animal is called and also what letter it starts with. It seemed to work well as a process, one element of the experience is that he learnt his ABC’s.

Then there were a lot of questions about each animal, what do they eat? What’s their natural habitat, do they have feathers? What climate do they like? How long do they live and all sorts, so not only did he learn the alphabet, but we all learnt a lot more about 26 different animal species than we knew before.

We would sit down and draw one animal and one letter a day for about 20-30 minutes, so the whole thing took about 26 days.
Part way into the exercise, probably around the second week, we came up with the idea of turning it all into an alphabet book, mainly so Liban could look back at it for reference to the alphabet.
By the time we were done, we had 26 pages of crayon drawn animals and letters, so I thought, why not publish it on amazon, that way Liban would have his own printed copy of the book and perhaps others could see it too.
It took me about 8-10 hours of headaches on the laptop with Liban watching to get it published.
Meanwhile Liban had lots of computer related questions as to what amazon KDP publishing service is, how Microsoft word works, how amazon would enable his book to be sold, he liked the idea of a marketplace and thought he’d like to sell the book to his friends,

Publishing the book was another important educational element for Liban to realize that even at five years old, with a little help he could publish a book and he learnt at least part of how to go about it.

https://www.amazon.co.uk/Libans-ABC-Book-animal-picture/dp/B08MS5KM8K/ref=sr_1_3?dchild=1&keywords=libans+abc+book&qid=1607709777&sr=8-3

We’re not suggesting that every parent should do as we’re doing, but simply providing examples of things that we think will help nurture the next generations ability to be successful in life, and that can lead to generational wealth.

From a financial perspective, book royalties, or any royalties for that matter are well worth a look, and from a confidence perspective, giving your child the opportunity to realize that drawing and publishing a book isn’t so difficult after all, and that Liban has the confidence to do so, was to us as parents of equal importance as him learning his ABC’s.
Sometimes Liban asks me to check on amazon to see how many books he’s sold, he hasn’t forgotten about it.

Until next time,

Frank

Generational wealth:
The importance of Teaching your children how to invest and thrive for the future.

In this post let’s look at our habits as adults, how are we all doing in terms of healthy money habits?
How do we manage our money?
Do we even manage it at all? or does it just disappear?
I know for myself there’s always room for improvement and sometimes I just don’t do what I know is best in terms of my finances, simply because I want something now and I don’t want to wait, but hey, we’re all human. The important thing (I think) is that we keep trying to do better at it, that’s how we create new habits.

Let’s take a quick look at three habits that if implemented in our lives will help to grow wealth and change our future towards wealth being generational.
(I can’t stress enough the importance of at least making an effort with these three habits, and if it doesn’t stick the first try, just keep at it, over time you’ll see an improvement in your finances.)

Habit 1: Be thoughtful about your spending

Being frugal does not mean being cheap. Maintaining a frugal budget means spending your money on the lowest-priced but highest-quality product or service available. Sometimes a high quality item is cheaper in the long run.
A simple step that anyone can do before pulling out their credit card is price compare online, and check reviews, simply pull up a few tabs and search for the lowest price for the exact same product or service from a number of different retailers. The key to this process is patience, and an understanding of when and where you can find the best deals. Wholesalers for example, can actually help you save on groceries.
If you rush your purchase, you may not get the best value. Depending on the item or service, there might be lower prices on a seasonal basis, thanks to holiday or clearance sales.
(While I hate penny pinching and am often accused of being to liberal with money, I have grown to love a good deal, and well…..there’s a noticeable difference in my finances since I’ve made an effort to create this habit.)

Habit 2: Save 20% or more of your income

Implementing this habit means maintaining a standard of living that allows you to live off of 80% or less of your net pay. You can work up to this goal. If you are able to begin saving immediately after graduating high school or college/university, for example, this savings percentage can be as low as 10%.

Time and the power of compounding give saver-investors a significant advantage.
It’s never too late to start saving and investing, either. You just may need to make some adjustments depending on where you are in life.

As a rule of thumb, every 10 years you delay forming this habit will require an additional 10% savings. For example, if you start saving in your 40s, you’ll need to boost your savings rate to 30%. If you’re in your 50s, you’ll need to save 40%.

For aspiring saver-investor millionaires, accumulating wealth requires that you make a habit of paying yourself first, putting yourself ahead of all of your other monthly bills. This “savings first” or “paying yourself first” strategy creates the funds that you will then invest.
If you don’t save, you can’t invest. It’s a process. But once you make saving a habit, you can then put your savings to work by prudently and consistently investing, so your wealth can grow — even while you sleep.

Habit 3: Create a bucket system for savings

Identify specific savings priorities and devote a percentage of your savings to each bucket: examples could be: wedding, first home, emergency fund, college savings, investment capital, retirement and so on.
And remember that that the system is subject to change as your needs and goals evolve.

For those of us that are parents, if we want to teach our children healthy money habits and help create the idea of generational wealth we’d better work on our own habits too!

As always Its interesting to hear from our readers with any comments and feedback to which we will respond as much as we can. You can reach us here: info@decentralisedlife.com

until next time,

Frank

Generational wealth: The importance of teaching your children how to invest and thrive for the future.

In today’s post we will start to look at ideas for teaching our children healthy money habits from a young age, specifically an idea that my wife and I are trying out with our five year old son Liban.
Many of us as adults might have been a little further financially today had we been taught some of the basics of money management during childhood by our parents and through schooling. Money management is something that should also be taught in school.

The three jars

For my wife and I, the simplest format to start teaching our son Liban about money, we could think of was to use three jars;

1)One for savings

2)One for spending

3)One for sharing.

We don’t give Liban money freely. We dont believe in allowances, just because. There’s no weekly pocket money or other hand outs, so he has to earn it somehow, and it’s not “can you pay me to put away my toys” scenario, it is a reward for effort and hard work. When we feel he’s worked hard at something with us on our farm for example, we give him a dollar or two as a reward sometimes but not all the time, and ask him to put the money in the jars.
The idea being that he has to learn that money is not free and has to be earned, and valued as a medium of exchange for the hard work and effort.

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When we give him a few dollars he has to decide where to put the money and how to divide it, if it’s dividable, we explain his top priority jar should be the savings jar, the larger part of what he makes should go in this jar first as he doesn’t have expenses of his own, we tell him he can save to buy something big like a bike, but ultimately it’s his choice where to put the money. The spending jar is for things like juice, snacks and toys, the spending jar should receive less money than the savings jar, as he doesn’t really need to buy anything much. We explain to him that when he spends money on something, he must find the best value, meaning good quality at a low price, and that, that doesn’t always mean the cheapest item, it’s about learning what value is, how good is the product for what you pay for it, be frugal, don’t spend it all at once, if you buy a small tub of ice cream, eat some and save some for tomorrow.
The sharing jar is for buying things to share, that could be with us, his sister, his friends, a birthday present for someone and things like that. The sharing jar only receives money after something has been put in the other two jars first. The idea here is that this teaches him to share and not be selfish but to also take care of himself first.

Soon, in about a year or two we will add a fourth jar. The fourth jar will be for investment capital. The first investment made from this jar must be to invest in himself. This should be the money saved to allocate toward some sort of entrepreneurial activity that will give him back in return more than he invests, something simple like a lemonade stand, making and selling something in a market, raising chickens and selling the eggs or one of many other simple businesses that a small child can do to begin to understand how business works by providing a service or product of value in exchange for payment in money. We want him to fully learn the concept behind the other three jars before we add the fourth one, but we have started to make small wood toys with him as a way to stimulate ideas of creating/producing and selling.

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There’s one final point here, we also want him to understand that ultimately it’s not about the money, money is a medium of exchange only. It is something that’s in a format that’s readily useable to exchange for something else that you want or need, we do not want Liban to grow up having a love for money, rather we want him to understand how money works and how to manage it so that it grows over time into wealth.

To be continued,

Frank

The importance of Teaching your children how to invest and thrive for the future.

We left off part one with the simple idea of taking action to incrementally increase our savings and invest our money to start making at least some money work for us instead of us working for it.

Financial literacy is not something that’s only reserved for the fortunate few lucky inheritors of fortunes, in-fact without financial literacy even they end up broke again within a generation.

Think of generational wealth as first and foremost being about financial literacy, rather than about the actual money itself. It’s the process of educating yourself and your children how to manage this aspect of life that is vitally important.
The money comes as a result of basic financial principles.
I often question why these basic concepts aren’t given any mention at all within institutional education? Shouldn’t even a very basic education include some simple lessons on financial literacy ?!

“Produce more than you consume and the surplus becomes wealth over time”

Money is the store of wealth from the transactional value of the goods or services that you provided to those who wanted them (the consumer).
Be the creator more than you are the consumer, produce more than you consume.
Choose a lifestyle that enables you to consume less than you produce, therefore your able to save the remainder, in other words “live within your means” don’t max out your credit cards on shiny new toys!

Don’t think that a small relatively insignificant few hundred dollars can’t grow into generational wealth over time, it can and it will with the right mindset, consistency and dedication.

With my first $500 investment capital i opened a brokerage account and invested in 3 companies I thought had good potential at the time.
While I grew up with absolutely no knowledge of even the concept of financial literacy, I had an interest in investing and at some point began reading and doing some basic research, and eventually years later I was ready to give it a go.

Partially I got a lucky start, one of the three companies I initially put money into handed back 556% returns within a few months, the other two didn’t do much, but that was good enough for me, I was convinced this was doable. I continued to add a hundred here and there as much as I could over the first year.
I bought more positions in other companies and by the end of the year when I calculated what I’d initially invested in each position, (some winners and some losers) taken away from my total balance I had an overall return on investment of 57%
I was very happy with that as I knew id done better than I could have expected from any broker, CD, savings account, high interest vehicle, or even most charter services. So I decided then and there to continue and I’ve being doing it ever since, and slowly but surely it is building up nicely,
I tell my own story here to demonstrate it is possible to start with not much at all, get it working for you and see the rewards within a year or so, from there you just have to keep at it.

….But back to financial literacy and generational wealth….,

If you’r lucky enough (or have worked hard enough in your life) to have a steady job as an employee or as a small business owner to have savings and essentially some capital you could deploy to work for you then you’ve got a head start.

If not then you need to think about how you can both increase your income and decrease your living costs (even just a little bit), save the remainder each month.
How do you begin to produce more of whatever it is that you do and consume less in your lifestyle so you can have a surplus?!
you might want to look at monetizing a skill or two you probably already have as an extra income source?
Most of us can if we really try, cut out one or two small expenditures that aren’t absolute necessities from our monthly budget, use this little cash to start your savings.

Yes….the word “budget” comes up here, I spent the majority of life without understanding the importance of having a budget! I’d be way ahead by now if only I’d cared enough to figure that one out.

If you currently live paycheck to paycheck and want that to change then you need to seriously think about creating a realistic budget and sticking to it!
You budget and your lifestyle should always cost less than what you make, keep it that way

To be continued……

The importance of Teaching your children how to invest and thrive for the future.

Generational wealth is that which is past from generation to generation, most of us probably weren’t lucky enough to be taught the importance of putting your money to work for you instead of working for your money.
probably because many of us were born into family’s without much money in the first place.
our parents could not teach us what they did not know which is financial literacy.

It’s something that seems to have a distant air of “that’s only for the rich to teach their children” some sort of fantasy we all shrug off like it’s something that’s not realistic for the rest of us??

I have to ask…..what’s the plan then?
Wait for a few million to drop on your lap and then start to learn how to manage your money?

Stats show in cases where this does happen, (which is statistically rare) like the lottery, (essentially just luck) the probability is so small it’s barely worth buying a ticket other than to try your luck.
Lottery winners are majority broke again within five years. so how much time did the winner spend learning to be financially literate after the money landed on their lap? None!

The point is, if you ever have a hope of building your wealth to be anything meaningful and then maybe one day pass it on to your children, you’d best start learning how to make your money work for you now, not later…..so don’t put it off any longer.

It doesn’t matter if you can barely scrape together $500 in savings over a few months, even $500 is enough to make a start.

Speaking from personal experience that’s all I had when I made my first investment some years back, over time with self education and direction it will grow…..and grow….and grow.

The first step in learning to be financially literate is to take action!
If nothing changes in the way you operate your day to day life then nothing changes in your financial life either, I’m not talking about massive changes or commitments just small incremental efforts that over time add up to something and have a positive impact.
If you like the idea of putting your money to work for you instead of working for your money and want to start investing then start by investing in your own savings.

Add at least something every week or month until you have at least a few hundred dollars, then invest that and repeat the same process over and over, this action alone will compound over time into a decent nest egg.

To be continued in part two.