Personal Finance – Three Timeless Wealth Concepts To Impart To Your Children

Have you ever wondered why the rich are getting richer? Some say it’s because they can tap into greater wealth with each successive generation. However, for many people, the real reason is that the rich are teaching their children financial skills that will stick with them for life. These skills are then used more proficiently with each successive generation, resulting in increased snowball wealth.


Thus, this article sheds light on three heritage concepts that you might consider passing on to your children at an early age to give them a financial head start in life.


#Concept 1: Good Debt and Bad Debt

Today, many people are deeply in debt and on the other hand, some avoid debt as much as possible. A more balanced approach is needed. Debt is very important in our economy because it is used to finance large projects. Therefore, it is important to learn the difference between good debt and bad debt is the purpose for which it is used.


For example, credit card debt is bad debt when used to buy discounted consumer goods, while debt can be good debt if you can use it to buy real estate and start earning cash flow from it. the difference between the monthly rent and the monthly rent. mortgage payment. Therefore, teach your children to use their debts wisely.


#Concept 2: Cash Flow and Capital Valuation

Many people cannot tell the difference between these two concepts. There are generally two types of financial instruments and some hybrids between the two. Most financial instruments are capital appreciation instruments, which means that when the price goes up and someone buys you when you sell the instrument, you make money. (e.g. stocks and shares) So capital (the principal amount you paid) has increased in value, thus “increasing the cost of capital”.


On the other hand, there are instruments that give you a cash flow, that is, a share of the profits. Examples include real estate investment trusts and other mineral rights trusts such as oil trusts, where you receive a portion of the revenue from oil every month. These tools are great when you make a big enough amount from your capital appreciation instrument types and deposit some money into them for the monthly amount to actually use.

Children should learn this difference early in life so they can begin to learn how the freelance economy works.


#Concept 3: Take charge of your money

Analysts and fund managers want to tell you how they’ve outperformed the market. In fact, fund managers make money by managing your money. That’s what to say. they charge management or conversion fees and don’t take into account whether your portfolio is making money or not. This means they can mismanage your money and still get paid.


Studies have shown that many money managers may not end up making better money in the end than an individual picking rows and have reported that monkeys throw darts at random actions across the board darts could actually be better priced. So teach your kids to start learning more about investing and be responsible for your own finances and investments.


In short, teaching kids finance at an early age is great, and in fact, some of today’s best money managers talk about how their parents and grandmothers analyzed stocks in front of them as they childhood. Start teaching young children how to manage their own finances and how to understand how the modern economy works and they will grow up better positioned to manage the financial world.