10 money lessons I wish my children will learn

Sadly there were very little taught about money during my school time and most info I learned about money when I was a kid was misleading and incorrect.

I do not mean that I am done learning (no way!) by writing this post; nor do I think I am 100% right. It’s just that it took me a long way to unlearn and relearn lots of things about money and since I’m an expecting father now so I guess it’s good to lay out some keynotes I learned about money – hopefully one day my children can benefit from this. I lived decades without knowing money really is and still think about “how nice would it be if someone can tell me this earlier!” now; I don’t want my children to have such regrets.

So kid, here come some lectures.

1. Never spend more money than you have 

If I can only teach you one lesson about money, this would be it: Dream big, but never spend big. Nothing is more important than the ability to control your desires and spend less than you can afford. Understand the differences between ‘needs’ and ‘wants’. Realize that it is human’s nature to always crave for something new and never feel fulfilled. Tame that beast in you that always hunger for more money.

After all…

2. Money is just a tool

Yes that’s right, money is just a tool. You don’t have to care about what other uncles aunties tell you about money, people tend to relate money to unrelated things like ego, power, luxurious but when you strip down all the sugar coating, money is just a tool.

At the very beginning, money is a tool to smoothen trades between individuals or organizations. Think about barter system taught in school – instead of livestock and manpower, we simply exchange money to get what we want from others in modern days. However that is not all. On a deeper level, it is more important to understand that money is also a tool for manipulations. Think about parents who use money as reward for their straight-As children, isn’t that a way of control? You bet – but in this case the “control” comes in a very small scale.

(Anyway don’t worry, you won’t get a dime from me for scoring straight As.)

We want to talk about the massive manipulation that can be done with money (or more accurately, monetary system). It affects how we live and die. Some uncles aunties will tell you that money is only a tool for the rich but that is not right at all. Fact is the rich wouldn’t be rich at the first place if they do not know how to use money as a tool!

Realizing the truth about money (that it’s just a tool) allows you to see the world with a different point-of-view. And, sooner or later, you will notice that…

3. It is good to own money (the more the better!)

No kid, I am not telling you to worship money (although we live in a world that do so but that’s another lesson); nor do I’m saying that money is evil.

Money is, literally, just a tool – a tool that helps us to achieve goals in life (read #2 again!). Education needs money; entertainment needs money; science research needs funding; helping the poor needs money; giving a good life to your family needs money. Accept the simple fact that money is part of the system and we need it in order to function in that system. The more tool we have in hands, the easier we can get the job done – that’s all.

I knows some weirdos (cynics, actually) are proud of telling others that they don’t need money (“Money means nothing to me!” they said). But then again if you understand what money really is, you should see that these guys are no different telling others that they are proud of making holes on wall without a hammer or a driller.

Oh man, you bet that sounds very foolish! But wait, don’t get papa wrong! It doesn’t mean that you are better just because you own more money than them. In fact you look worse if you can’t make holes with a driller in your hand. This is why you need to read on and learn that…

4. Money doesn’t buy you wisdom

We live in a strange world that people tend to worship money and people who own a lot of money.

I was brought up in an environment where my rich relatives will have the veto power in deciding what is right and wrong in life. Though a small kid I was, I find it very strange to see family members seek life advices from other rich relatives – it’s like the more money you own, the more you know about our world!

And, tell you a secret: I hated those rich relatives’ superiority and condescension (especially when you are living on the poorer side and everyone is telling you what is the right thing to do). I want to tell my elders that money doesn’t buy you wisdom. But as you know, we live in a culture where youngsters are not supposed to teach what the elders should do. So all I can do is teach you, as my child, that money does not buy you wisdom. If you want to be smart in something, learn hard. Rich or poor, we all have the same human brain and same 24 hours a day. Don’t think you are great just because you own more money; don’t feel inferior just because you own less.

Still following me? Next…

5. Work for full price or free, but never cheap

Money is not the main reason why we never work for cheap, self-esteem is.

We give our best when we are fully paid; we earn the sense of contribution when we work for free; but when we work for cheap, we degrade our values. Work for cheap simply makes you to be a mediocre person – “Why should I give my best since I am being underpaid.” When mediocrity becomes a habit, incompetency follows.

Mind-set (or self-belief) is everything. Even if you are just a little boy (or girl) you must learn that if you are unwilling to trust your ability, no one will; if you are unwilling to stand for what you are worth, no one will; and if you are unwilling to strike the best in your life, no one will think you are the best.

Work for full price or free, but never cheap; and best if you can…

6. Make money works for you

Nothing’s wrong with working hard for money. But smart people will do vice versa and have money work hard for them. Investing is a life-long lesson for everyone – the earlier you start the better. You already started by reading this post and perhaps the next stop should be Uncle Yap’s article about the miracle of compounding.

7. Money is not an asset (sometimes)

Simple definition: Asset is something that increases your wealth; liability is something that decreases your wealth.

By wealth I mean buying power.

For instance: You got two dollars from your angpow and with that money you can buy a pack of kacang puteh (a type of delicious Indian snacks in Malaysia) yesterday. Two days later half of the kacang puteh sellers decide to go on a strike and kacang puteh is now more expensive than usual. Unlike previously, the two dollars you have can only buy you half pack of kacang puteh. In other words, your wealth is reduced by 50% (in kacang puteh basis).

The lesson in this? Retaining your money doesn’t mean that you are retaining your wealth. Sometimes the more money you keep, the more wealth you lose. Check out what happened to the Germans during 1923-24 hyperinflation. Almost the entire nation (of course, except for the bankers and speculators who planned this) went into poverty because the money they are holding is eating their wealth.

So again, money != asset (sometimes).

(Kids, I assume y’all will understand simple programming symbol like this one?)

8. There is always risk when it comes to money.

Deflation risks, inflation risk, opportunity risk, sub-prime risk, credit risk, currency exchange risk – you know, there are so many different terms of risk in the financial world and I lost count how many dangers are there to haunt our sleeping time when it comes to money.

Now we know that waking up middle of a sleep is no good for health and we always want some good yummy sleep – we must find a way to handle this. The solution is not running away from risks. Unfortunately no one can run away from risk when it comes to money, so instead of worrying all night long about it, learn how to handle risk. It’s impossible to teach you everything about risks in on article (since they are so many) but for now, it would be just alright for you to keep in mind that there’s always risk with money and we’ll learn along the way.

And because there is always risk, this leads us to the next lesson…

9. It is okay to lose money

Yes you heard me right, it is absolutely okay to make mistake and lose money when it comes to business or investment.

You miscalculate and invest your money on the wrong side – so what? We can always earn back the money we lost and even if we can’t, remember that money is just a tool? Money certainly does not define our life or intelligence.

What’s more important is to learn what went wrong in our mistakes and never miss a chance to learn from it.  Losing money is forgivable, but losing money and the opportunity to learn from your mistake is not.

And last but not least…

10. Money can’t buy life

No, I did not create this one. These are the exact words a guy named Bob Marley left to his son Ziggy before his death. So in case you are feeling a little reluctant to learn from your old man here, learn from the legends who wrote this epic song.

And with that, I end my long winded lesson. Live life and grow healthy my children.

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