(Newswire.net — May 19, 2016) — There are significant differences between how wealthy families and lower and middle class families live, some of which are conditioned by access to resources, while others are part of a legacy of financial management practices that helped create their wealth in the first place. This second set of differences are passed down in lessons from parent to child, teaching young people responsible monetary practices from an early age.
What sets the lessons children from wealthy families receive apart from the ones other children learn about money? The primary answer: wealthy children are taught that pursuing wealth is both possible and acceptable. The lower and middle classes tend to focus on the development of values beyond money, restricting their children’s perspectives on financial attainment and trapping them within the class status their families have held for generations.
Here’s a look at 3 of the core financial lessons wealthy families teach their children. Can you pass them on to yours?
Learning The Language Of Money
While the average family might teach their children about budgeting or take them to the grocery store to demonstrate what money is worth, wealthy families hone a different level of financial literacy. So while it may be too early to teach your children how to interpret their credit score, it’s worth the introspection to ask if you understand yours as an adult.
According to financial success guru Thomas C. Corley, 72% of wealthy individuals know their credit score, while only 5% of lower class individuals do. And knowing the number isn’t enough – you have to know what that number means and how to improve it.
Even though it’s too early to sign your 10 year old up for a credit card, you can teach them how to make a deposit in the bank, how to look up the status of their account, and introduce other financial literacy lessons as they become developmentally appropriate. An older child should be taught about interest rates and investing. Keep these lessons open and ongoing while being transparent about family finances – reticence around discussing money is another factor that holds back lower and middle class families and their children.
Dream Big But Plan For It
Financial planning is a big part of the ongoing success of wealthy families. They use consultants and financial planners to help them plan for retirement, handle estate issues, save for their children’s educations, and manage their taxes. With so much money in play, they turn to experts to make sure everything is running smoothly.
But that doesn’t mean that wealthy families hand over all the responsibility to these planners. Instead, because of their financial literacy, wealthy families teach their children that you should always be self-educated around these topics so that you know as much or more than your planners. If you want to get rich and stay rich, you have to be able to identify bad advice and untrustworthy planners. Wealthy young people are taught to never trust this help implicitly.
Lower and middle class families, on the other hand, due to their lower financial literacy, often instill in their children the perspective that they aren’t experts on the inner workings of money management and that these issues should be left to the professionals – it’s part of the play it safe perspective these families share. This leaves them vulnerable to unscrupulous help and can leave these families worse off than they were before.
Use Your Connections
If the current state of college admissions indicates anything, it would seem that all families are very concerned about education, viewing it as the road to opportunity. As it turns out, however, wealthy families are actually less concerned about institutional branding than their less wealthy counterparts. That’s because wealthy families know the value of their connections in helping their children achieve success and they teach their children the importance of these relationships from a young age.
This is unfortunate because lower and middle class families also have valuable connections that they can leverage – but they rarely use them and tend to resist allowing their children to status climb via relationships. Because the reigning emphasis is on hard work, using connections is sometimes seen by less wealthy families as dishonorable and grasping, seeking more than your share of wealth. Letting their children use these connections, on the other hand, can actually help strengthen community bonds while allowing young people to attain financial security more quickly.
None of these lessons are hard to teach, but they do run contrary to the reigning perspective of many lower and middle class families. But as young adult unemployment and underemployment continues to hold strong, it may be time for a change of perspective. Wealthy families are clearly onto something when it comes to teaching their children financial management and the rest of us should follow suit.