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Achieving financial freedom is a family affair.

Wednesday, January 8, 2014

"Don't worry about money. Concentrate on your studies. Leave money matters to us."

This is something well meaning parents might tell their children but this is an example of how a good intention might actually be taking a step backward.

More enlightened parents will encourage their children to save money, highlighting the virtues of saving. This is probably the most basic level. Parents who don't even do this are doing a poor job of parenting. I won't mince my words here.

Financially savvy parents might, then, take their children's savings and invest in income generating assets. This will help to build a stronger financial foundation for their children. If the parents do a very good job, the children could have an easier time in adulthood.

Financially savvy and more enlightened parents will teach their children the ways to make money work for them as early as possible. This is a case of teaching someone how to fish and not just giving a basket full of fish to him. Parents who fall into this category are probably very rare. Well, at least I have not met any yet.



I blogged about how I got my primary school going niece interested in investing before. She understands not only why she should be saving money but also how she could use her savings to generate passive income now. It is not enough to save money, she has to make the money work for her.

Some might tell me that children should enjoy their childhoods and I am being too realistic. Well, I never did believe in Santa Claus as a boy. Seeing how my dad's business almost went bankrupt and the problems it caused for the family when I was in primary school forced me to grow up rather quickly. No Santa Clause came during Christmas to drop us any goodies.

We could have financial problems one day if we do not do the right things today. Be realistic.
 
Financial problems will not magically disappear. Be realistic.

What is the best thing to do?

Be prepared and get everyone in the family involved, yes, including the children.

I see some parents coddle their children to the extent of spoiling them. I am sure examples of such parents are pretty common in Singapore. I see them all the time.

The economy has been chugging along in Singapore and unemployment rate has been low and many people are drunk on cheap money. Conspicuous consumption has risen.

If you buy things you don't need, you will soon sell things you need.
- Warren Buffett.

If you are reading this blog post, I gather that you are interested in achieving financial freedom. If you have children or when you have children, please take the next step.

Your children will thank you in future.

Related posts:
1. Teaching young children financial literacy.
2. At what age to start investing in stocks?
3. Rich Dad, Poor Dad: 2 are better than 1.
4. Little Book That Beats The Market.
5. Warren Buffett: Illustrated.

22 comments:

sillyinvestor said...

Teach the value of money.

Money has no value, it's value come from how it is spent. $10 for a coffee drink, or use it to buy seeds and beans for children under world vision?

I used to be quite a spendthrift. When I do volunteer work, there is no funding, we fork out money from our own pockets although we are still schooling. But accumulating $80 with fellow volunteers so that we can just book a bus to marina bay to let the chronic ill patients enjoy flying kite, is the day the value of money dawn on me.

How to spend 80 meaningfully, when u get down, u will not spend like there is no tomorrow. When u need to ask your brother to sponsor 10 dollars so as to buy kites? Get pass that, u will never want to live a life o left hand in, right hand out

AK71 said...

Hi Mike,

A great topic for a guest blog, perhaps? ;)

Oh, for sure, money is just a tool. We must not fall in love with money which is something some might do, unfortunately.

Money is not the root of all evil. The love of money is. -.-"

I am all for doing charity and I regularly support 6 charities in Singapore through donations. We must not forget to have a heart and help those who are severely disadvantaged. :)

SGYI said...

Kids are spoilt by their rich parents. Giving them whatever they want. Even if a parent is rich, should just give their kids everything. Financial literacy should be taught at homes.

This goes to show maybe a lot of those rich parents out there are not financially savvy. They may earn a high income and live in big houses plus drive luxurious cars but when they stop working, its another story.

The society definition of rich is all about material possessions but many do not realise really rich people do not care for all these. They live a simple life, live in a simple house, drive a normal car and live frugally.

AK, you're a good uncle. Your niece is fortunate to have a uncle like you. I'm sure she will benefit from all your wise teachings over the years.

We need to teach the real meaning of financial freedom. It is not equal to having a lot of material possessions and loving money.

Small Time Investor said...

Hi Ak71

The thinking of " focus on your studies , Leave the money to us " is on the parents of the past tradition which then passed down later generation.

Parents as in nature would shoulder major responsibilities in the family .

If there is a Santa Claus , be a Santa Claus yourself :)

Regards

Small-Time Investor

AK71 said...

Hi SGYI,

I am kaypoh. When I see something I feel strongly about, chances are I will speak up. These days, I try to control my impulse to speak and even my impulse to blog. :)

I feel that my niece's father is not financially savvy. It is due to severe financial problems, amongst other things, which led to the family breaking up. So, I suppose this is where I come in. She is a sensible kid. I am sure she will turn out well.

I am happy for such a thing as a blog which has enabled me to reach out to a bigger audience and to be a bigger kaypoh. ;p

AK71 said...

Hi Small Time Investor,

I don't have an army of elves to help me and I will make a very poor Santa Clause. :(

Of course, this does not mean that I stop being charitable. :)

When I was a private tutor, I would tell parents that I only spent 2 hours a week with their child. They could not expect a tuition teacher to perform miracles and they must do their part as parents.

Parenting is not easy and not for the faint hearted.

SGYI said...

Hi AK,

Oh no, its ok for you to be kaypoh. The more kaypoh you are the more people will be helped :p
I'm sure its a good thing

That's sad to hear that the family is broken up. It always hurts the child the most. Glad you came in to be a fatherly figure in her life. :)

Financial problems is still one of the most common causes for marriages breaking up. More needs to be done. Your blog has done that in many ways ;)

Singapore Man of Leisure said...

AK,

I don't think anyone would be surprised that I belong to the "chill, let children have their childhood" camp.

However, after your sharing of the context and perspective, I just have say its good to have siblings and family members who can come together to give support to each other in our hour of need.

AK71 said...

Hi SGYI,

She still gets to spend time with her dad twice a week. The only difference is that her parents don't stay together anymore.

I can never be a father figure. I am not a good candidate for fatherhood. :)

Thanks for the encouraging words and I really hope that my blog will continue to do more good than not. :)

AK71 said...

Hi SMOL,

If we all do the right things, then, "hours of need" will become less common. :)

A stitch in time saves nine.

It is a lack of financial literacy or simple financial prudence that is the cause of much grief for some. I know it has caused me grief in the past. :(

INVS 2.0 said...

Sadly, the financial literacy among youths today is very low. It is the culture of young ones to be spendthrifters. I was taught from young to save until I became a miser and attracted no friends.

Well, at least now I am in a more comfortable financial position than them.

AK71 said...

Hi INVS 2.0,

There are always extremes and I am learning to avoid being an extreme saver now. ;p

veronika said...

"Knowing the cost of everything
and the value of nothing"

If I have 2 homes, 2 million in cash,
1 million in shares ( +/- ).. 2 kids, no car, good health..
retired, holidays 3 x a year ( 1 long 18 days or more and 2 short 7 days or less)what else would I want?

More?.. no thanks! That is sufficient for me till I die and enough to pass on as legacy.

What on earth would I need more for?
That is enough to enjoy life for the next 30 years, health permitting.
Buy a car?.. and fight over parking lots and get annoyed with high beam lights?.. no thanks!

I would rather hire a car during my holidays... in places that is car friendly.. like south africa, aussie, usa, canada, chile, even Finland.
Some places you can hire a car and a driver!.. sri lanka, india, pakistan... even china, vietnam.

Talk about value... sri lanka is a value holiday destination.

AK71 said...

Hi Veronika,

Seems like you have your life all thought out. I like the sound of it. :)

For sure, if everyone should own 2 properties, have $2M in cash and $1M in stocks, that should be quite enough. Have to work towards having all that first. I definitely do not have all in your list yet. -.-"

EY said...

Hi AK,

Teaching the kids to be financially literate is not only a family responsibility, it's a social one! That's part of inculcating in them good values to become responsible citizens of our society. I wish my grandma had done her job properly and my mum had made the decision your sis did!

I try to provide 'immersion' opportunities. Hard to say how much they would appreciate, but at least it is an attempt in getting them acquainted with some ideas. What you did with your niece is great!

I got my boys to be involved in my property hunt - teaching them how to search for properties on Propertyguru, read reviews, check URA website. Discussed with them the concept of profit maximisation (the goal of the developer/seller). Showed them how I negotiated the deal and the tenancy. My younger boy also used to check stock prices for me.

I think if we inculcate the importance of prudent spending, then savings will happen naturally. I do tell the boys to to put aside part of their weekly allowance as savings before they start the week. They do that and only to spend their savings on 'Transformers' when there is a sale. My elder boy bought a Transformer which orginially cost $165.90 for $49.90 last week. That's their concept of savings! =.=" Can't blame them. That's the logic that I have operated on for the longest time. Bad role model. :P

AK71 said...

Hi Endrene,

A $165.90 price tag and your boy paid only $49.90. I believe he got superb value for money! You have done a great job parenting!

You have helped to lay the foundation for financial security which will benefit your boys all their lives. They are fortunate indeed. :)

I consider myself a late bloomer as I did many things wrong in my younger days. I definitely lacked proper guidance. Thank goodness I have been lucky and things have not turned out too badly.

Well, our parents did what they thought was best and we really should not blame them for how things turned out. However, this does not mean that we cannot talk about it. ;p

Schools, I heard, will start classes on achieving financial security. Hopefully, this will compensate for any lack of guidance at home on the topic. Better late than never. :)

EY said...

Hi AK,

Haha. Yes, we shouldn't blame our parents the way things turned out or anyone or anything for that matter. Everything happens for a reason. Just have to try and make the most positive interpretation out of every situation. :)

If I hadn't become financially independent at 17 years old, partly forced by circumstance, I wouldn't have got this far (actually not that far also :P). What we learnt, we try to pass it on.

Talking about do wrong things with our finances? You sure you can beat me at that? I doubt so lor. Hahaha.

But you sure beat me at doing the right things!

AK71 said...

Hi Endrene,

Well, I am not sure that everything happens for a reason. Many things are quite random really. Of course, human beings are gifted with the power to rationalise. LOL.

I don't really want to remember the stuff I did wrong but I can still remember quite a few of them. Sometimes, they just pop into my mind for a visit and I would give a little yelp, shocking people who might happen to be next to me. ;p

Yah, I am sure I am not totally sane. :)

tec said...

Hi AK71,

I have 2 kids (5yr and 2 yr), I have the intention to let them learn about investing early.

Can you share at what age do you start to teach your niece about investing? What topic do you start to get the kid interested?

Thanks

AK71 said...

Hi tec,

Your kids are 5 and 2? You might be interested in related post number 1 found at the end of this blog post. It will be a fun way of getting them interested. :)

I introduced my niece to the world of investing when she was 9. She was old enough then to understand the importance of saving money and investing it for income.

The very first thing I taught her was how delayed gratification is a good thing and how she could buy things she want without ever touching her savings. :)

I am careful not to subject her to any overload of information. So, I share with her ideas as and when they occur to me instead of giving her classroom style lectures.

I try to show her how everything I told her has relevance to the real world and how they will impact her life. :)

Sammy said...
This comment has been removed by the author.
AK71 said...

Hi Sammy,

You are a fine example of what higher income and frugal habits can do for an individual. Gambatte! :)

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