15 Lessons Rich Parents Teach Their Kids
Summary
TLDRThis video script from 'alux' highlights 15 financial lessons that wealthy parents teach their children, focusing on mindset over resources. It emphasizes understanding money's value, distinguishing between assets and liabilities, and the importance of not feeling entitled. The script also covers the significance of social skills, increasing income over cutting expenses, and viewing money as a tool. It advises long-term thinking, valuing knowledge over money, leveraging money to work for you, and solving problems as pathways to wealth. Additionally, it touches on the efficient use of debt, the 80/20 rule, and the understanding that money doesn't equate to moral superiority. The script concludes with the importance of raising expectations for financial success.
Takeaways
- 💡 Understanding how money works is fundamental; rich parents teach their kids about money's value and financial literacy early on.
- 🏦 The distinction between assets and liabilities is crucial; assets generate income, while liabilities cost money.
- 🙅♂️ Entitlement is not a trait of the wealthy; they teach their children that success is not guaranteed and must be earned.
- 🤝 Being sociable and connecting with others is a skill that can open doors and opportunities throughout life.
- 💼 Focusing on increasing income rather than just reducing expenses is a key strategy for wealth accumulation.
- 🔄 Daily habits can significantly impact success; the rich instill habits that lead to wealth creation.
- 💰 Money is viewed as a tool for the rich, not a source of happiness or a problem.
- 🚀 Long-term thinking and patience are essential; wealth and success take time and consistent effort.
- 📚 Knowledge and skill development are prioritized over immediate monetary gains for long-term wealth creation.
- 💼 The wealthy understand that money should work for them, not the other way around, through investments and smart financial decisions.
Q & A
What is the first financial lesson that rich parents teach their children?
-The first financial lesson is understanding how money works, including the value of money, how people make money, factors determining salary or revenue, and the workings of taxes.
How do rich parents approach teaching their children about assets and liabilities?
-Rich parents teach their children to differentiate between assets and liabilities, emphasizing that assets generate income while liabilities cost money. They focus on acquiring more assets rather than spending on liabilities.
What is the significance of not feeling entitled to anything in the context of the script?
-The significance is to instill a sense of responsibility and self-reliance in children, understanding that success and wealth are not guaranteed and must be earned through performance and effort.
Why do successful people socialize their kids before the age of four according to the script?
-Early socialization helps children develop good relationships with others, which can lead to better opportunities in life, such as improved treatment by teachers, better job opportunities, and stronger social networks.
How does focusing on increasing income rather than lowering expenses contribute to wealth building?
-Focusing on increasing income allows for a larger cash flow, which can be invested to generate more wealth. Lowering expenses may lead to a more constrained lifestyle and less opportunity for wealth accumulation.
What is the importance of creating daily habits as emphasized in the script?
-Daily habits can significantly influence one's life. The rich teach their children to create habits that lead to wealth creation, while poor habits can lead to financial ruin.
Why do rich people view money as a tool rather than an end in itself?
-Viewing money as a tool allows rich people to use it effectively to exchange for material value and improve their lives, rather than attributing negative connotations to it or expecting it to solve all problems.
What is the role of long-term thinking in the financial success of rich individuals as mentioned in the script?
-Long-term thinking enables rich individuals to plan and work towards achieving their financial goals over extended periods, leading to significant progress and wealth accumulation.
How does the script suggest that knowledge is more valuable than money in the long run?
-The script suggests that knowledge increases one's value to the world, enabling the creation of value for others and, in turn, attracting wealth. Knowledge is a renewable resource that can be leveraged to generate income.
What is the main difference between how poor and rich people approach money as described in the script?
-Poor people exchange time for money and spend it, while rich people use money to create more money, focusing on investments and wealth-generating activities.
How does the script define good debt and bad debt, and why is this distinction important?
-Good debt is borrowed for investments that generate more money, while bad debt is spent on liabilities. This distinction is important because it determines whether debt leads to wealth creation or financial strain.
What is the Pareto Principle as it relates to the script's discussion on education and effort?
-The Pareto Principle, or 80/20 rule, suggests that 80% of outcomes result from 20% of actions. The script implies that rich parents understand that striving for top academic performance may not be as valuable as gaining real-world experience and skills.
How does the script suggest that having money affects one's character and values?
-The script suggests that having money does not inherently make one a better person but can solve certain problems. It emphasizes the importance of humility and respect, values that rich parents teach their children to maintain.
Outlines
💡 Wealth-Building Mindset
The paragraph emphasizes the importance of the mindset instilled by wealthy parents in their children, which is key to their success. It outlines 15 lessons that rich families teach their kids, focusing on understanding money, the difference between assets and liabilities, and the importance of not feeling entitled to wealth. These lessons are designed to inspire and guide future generations towards financial success.
🤝 Early Socialization and Income Generation
This section discusses the significance of early socialization and its impact on an individual's life, suggesting that being sociable can lead to better opportunities. It also highlights the importance of focusing on increasing income rather than just reducing expenses, as taught by wealthy parents. The paragraph encourages the development of daily habits that provide long-term advantages and the use of money as a tool for wealth creation.
💼 Long-Term Thinking and Knowledge Valuation
The paragraph underscores the value of long-term thinking and planning, contrasting the instant gratification mindset with the patience required for wealth accumulation. It stresses that knowledge is more valuable than money in the long run and encourages investing in oneself to increase personal value and marketability. The concept of money working for you, rather than you working for money, is introduced as a central principle of wealth-building.
💼 Problem-Solving and Real-World Education
This section focuses on problem-solving as a pathway to wealth, suggesting that addressing significant issues can lead to greater financial rewards. It critiques traditional education for its lack of real-world applicability and advocates for practical, skill-based learning. The concept of using good debt to generate wealth, as opposed to bad debt that leads to financial strain, is also introduced.
💰 The Pareto Principle and Humility
The final paragraph discusses the 80/20 rule, suggesting that a minority of efforts can lead to the majority of results, and encourages focusing on high-impact activities. It also addresses the misconception that wealth equates to superiority, emphasizing the importance of humility and respect as core values taught by wealthy parents. The paragraph concludes by inviting viewers to share life lessons from their parents and ends with a bonus fact about raising expectations for success.
Mindmap
Keywords
💡Mindset
💡Assets and Liabilities
💡Entitlement
💡Sociability
💡Income Generation
💡Daily Habits
💡Money as a Tool
💡Long-term Thinking
💡Value Creation
💡Passive Income
💡Problem Solving
Highlights
The importance of receiving the right advice at the right time for long-term success.
Wealthy parents instill a successful mindset in their children rather than just providing resources.
Lessons on understanding how money works are prioritized in wealthy households.
The distinction between assets and liabilities is crucial for financial education.
Wealthy individuals are taught that they are not entitled to anything and must perform to maintain their status.
The significance of being sociable and connecting with others from an early age.
Focusing on increasing income rather than just lowering expenses is a key financial strategy.
The power of daily habits in creating long-term advantages in life.
Money is viewed as a tool to be used for exchange and improving life, not a source of evil.
The importance of long-term thinking and planning for the future over instant gratification.
Knowledge is considered more valuable than money in the long run.
The concept of having money work for you instead of working for money.
Solving problems is identified as the quickest path to wealth.
The importance of not wasting time on things that do not correlate with real-world success.
The difference between good debt, which can make you rich, and bad debt, which makes you poor.
The 80/20 rule and its application in focusing on efforts that yield the most results.
Having money does not make one a better person but can solve certain problems.
Teaching children to raise their expectations as a path to success.
Transcripts
the right piece of advice at the right
time can make great differences in the
long run the kids of the rich have a
massive head start not because of the
resources they already have but because
of the mindset their parents instill
within them they start off with Decades
of wisdom from people who achieved
massive success these are 15 lessons
rich people teach their kids that the
poor don't welcome to alux the place
where future billionaires come to get
inspired number one
understanding how money works now this
might sound basic to some of you but
there aren't that many people who ask
themselves how do people make money why
am I being paid this much money by my
employer what factors determine my
salary or Revenue how do taxes work can
that be optimized what needs to happen
to improve my finances Now Rich parents
usually make it a priority to discuss
the value and importance of money in
their household as soon as possible
possible and this familiarizes kids from
a young age with the concept of value in
exchange for services provided they're
introduced to the household expenses and
put in real life situations where they
can figure out pretty quickly that money
is a lot harder to earn than it seems on
the other end of the spectrum the poor
never talk about money at home it's
usually a secret how much money the
parents earn or how much money is spent
the only time the kids hear about money
is when parents are arguing about not
having having enough thus associating
the entire concept with negative
feelings number two the difference
between an asset and a liability the
poor never know what's a good purchase
and what's a bad purchase after poor
people earn money they go ahead and
spend it that's how they stay poor let
us explain in as simple terms as
possible an asset makes you money while
a liability costs you money the problem
here is that poor people people never
realize what counts as a liability for
example both the car you drive to the
grocery store and the house you live in
are liabilities okay they don't generate
any revenue for you they demand money to
keep on running same goes with your new
iPhone fancy clothes your smart TV and
everything else you purchased without
thinking while the rich Focus all of
their time and money on acquiring more
assets buying an apartment that
generates rent writing a book that
generates Revenue purchasing parts of a
business that's doing okay and more and
while most rich people have fancy cars
and fancy houses the assets they have
pay for those kinds of luxuries rich
people never buy luxuries from their own
earnings they want a fancy new car well
they figure out how to buy two
apartments and then use the rent from
those apartments to pay for the lease of
the car that way when you get rid of
that car you still have money coming in
from the apartment rental this is a
crucial difference in behavior when
money starts coming in focus on buying
assets instead of spending
it number three they are not entitled to
anything the rich know the world can
take everything away if they're not
performing while the poor tend to look
for someone else to take care of them
being born into a wealthy family
definitely has its advantages no lies
there you've got access to better tools
and better resources you don't have to
worry about B basic needs but you also
open yourself up to new threats that
poor people don't have to worry about
there's a lot more for you to lose if
you're not careful so the pressure is
always on it's really important for the
wealthy to teach their children that
despite them getting a head start in
life the journey ahead is just as long
and they need to remain focused on
growth not just maintaining the pace
growth whether or not they'll be
successful in life depends on their own
actions and Daddy's Money can only take
them so far the fortune of a family
where children feel entitled well it
usually crumbles in the third generation
first there's someone who's really
hungry and works incredibly hard to
build wealth second their children grow
up with a sense that all they need to do
is maintain that wealth and lastly the
third generation has lost its hunger
feels entitled to success without work
or sacrifice and usually spends it all
pretty stupidly teaching your kids the
lessons from this video will help you to
avoid this type of
downfall number four how to be sociable
and connect with other people you would
think that more people would realize how
important it is to be able to have a
pleasant conversation with others
successful people socialize their kids
before the age of four not even kidding
okay here's why if your child gets
socialized that early other kids will
want to play with them if they behave
well with other kids well other parents
want to take care of them too while they
play with their own children and this
has a massive Snowball Effect throughout
life if people like you and like being
around you well this builds up and doors
start to open for you that otherwise
would stay shut teachers will treat you
better you'll get access to better job
opportunities you'll make better friends
there's an entire tree of benefits that
grows from early
socialization number five in increasing
income instead of lowering
expenses one of the most valuable
lessons a parent can teach their child
is how to generate more money it takes
the same amount of effort or work to
barely survive or to make a fortune this
might sound peculiar to some of you but
it is the truth okay the difference is
the approach and the knowledge you use
to back up that effort the smarter you
are from a financial perspective the
least amount of effort you have to
deploy into the real world that's why
Wall Street brokers earn so much more
than miners who between these two do you
think deploys the most effort poor
people are always focused on lowering
expenses as much as possible to the
point that life is almost not worth
living anymore do you think the rich
care about buying a $5 coffee from
Starbucks or not or spending $30 on a
movie instead the wealthy put all of
their attention into increasing the
amount of money flowing in if you
radically increase your income there's
always going to be a large amount of
cash left over at the end of every month
poor people teach their kids to lower
expenses while rich people focus on
increasing their income there's a major
difference here you combine that with
lesson number two on this list and you
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slapp number six how to create daily
habits that give them incredible
advantages
now one of the most valuable skills you
could teach your child is how to create
a habit for themselves habits are
amazing and once you realize how
valuable they can be your life changes
it normally takes around 21 days to
create a new habit and once you push
through that 21-day limit you're Off to
the Races okay that habit becomes a part
of you if you don't read enough
transform reading into a habit if you
want to get fit but never have the
motivation to go to the gym make a habit
out of it same goes for work if you make
it a habit to organize and optimize your
workflow large portions of your day open
up for other things the rich use the
Power of Habit to get ahead in life
while the poor nurture toxic habits
which lead their lives into ruin the
Power of Habit is a tool it magnifies
what you feed it the rich simply choose
wealth creation actions as their daily
habits while poor people pick negative
routines so be care careful of what type
of habit you instill in your child
because children learn from watching you
do what you do not from what you teach
them to do number seven money is a tool
and it's a good thing how many times
have you heard people say that money is
the root of all evil think back to the
person you heard saying that how
successful were they how happy were they
in their lives poor people blame their
misfortunes on the lack of money in
their lives and attribute an element of
negativity to the concept of money as a
whole and this is because even when they
get money it leads to more and more
problems which they don't know how to
tackle the rich do the exact opposite
okay they understand that money is
merely a tool which you use to navigate
your life it's just pieces of paper and
plastic with drawings on them okay that
we exchange for material value nothing
more nothing less stop taking money so
personal and use it for what it was
created for exchange it to make your
life better it's very similar to just I
don't know thinking about a pair of
scissors or something you could cut hair
with scissors or you could stab yourself
in the eye once you start thinking of
money as a tool the game suddenly
changes and you'll stop harming yourself
with it in the
end stop expecting immediate results and
avoid magical thinking we're all caught
up in this instant environment do you
want to watch a movie stream it do you
want to eat order in do you want instant
relationships swipe left swipe right but
most people don't realize that wealth
and happiness don't fall into this
instant category poor people expect to
get rich quickly to win a large sum of
money or inherit property they have this
weird expectation that their lives will
somehow magically become better But the
irony is even if they somehow got their
hands on a lot of money they're not
educated enough to know what to do with
it and eventually they'll blow through
all of it rich parents make it a
priority to teach their kids to play the
long game longterm thinking is one of
the differentiating characteristics of
the rich something really interesting we
discovered is how much progress you can
make if you think about life in large
batches of time say 5 10 20 years
there's a really great quote from an
interview Bill Gates did where he said
most people overestimate what they can
do in one year and underestimate what
they can do in 10 years the new year new
me campaign starts every January right
but instead of planning for the next
year why don't you start planning for
the next decade and maybe this time
you'll do something about it number nine
knowledge is more valuable than money in
the long run there is another quote that
we kept hearing a lot when we were
getting started and it took a while to
fully comprehend the true implications
it had but it goes like this invest in
yourself it pays the best dividends
sounds easy right you've heard us say it
before but it has very little to do with
going to school or reading books it has
a lot more to do with increasing how
valuable you are to the world the world
rewards people who are valuable because
valuable people can create value for
others and in exchange for that value
they can get whatever they want but the
concept of becoming a valuable person is
not taught to their children by the poor
even just a few of the wealthy bring it
up when their child is growing but those
who do see a higher probability of both
success and happiness there are many
ways to become valuable from filling a
position in the company to creating a
product or service that people use to
showcasing your talent to the entire
world the more valuable you are the
Richer you'll become the only way to
become more valuable is through the
increase of knowledge skill level and
time learn how to be better and then
practice being better at it for long
enough that you start to see noticeable
differences it takes 10,000 hours to
master anything that's why the rich have
their children try a bunch of activities
to get a head start on that number of
hours someone who has knowledge will
always be able to generate money because
they're valuable to the market
Marketplace but the opposite is not
always true sometimes knowledge can be
too expensive to buy number 10 don't
work for money have money work for you
this is the centerpiece of getting rich
right you can read as many books as you
would like go to seminars classes get an
MBA whatever you want it's all based on
this poor people exchange their time for
money and then they spend it the rich
use the money and they get to create
more money there are big differences in
the approach to finance these two
classes of people employ most people
stay poor because they believe you need
large amounts of money to invest
otherwise there's no point while the
rich are always looking for ways to add
the smallest drop in the bucket of
positive income they can find because
it's not about the amount as much as it
is about getting used to the idea of
growing something yourself you can start
a business these days with less than
$100 if you know what you're doing or
even for free as long as you're willing
to put in the time as soon as you
generate enough Revenue use that money
to pay for someone else to do the things
that you used to do to keep that
business running as you focus on growing
and other more important
things number 11 solving problems is the
quickest way to get rich something the
rich are quick to teach their children
is the fundamental difference between
getting paid and getting rich let us
explain so poor people get paid to take
care of something someone else needs
done for example deliver the newspaper
wash the car answer the phone that kind
of thing single activity jobs where you
basically do the same thing over and
over and over again the rich never do
repetitive work because it's easily
outsourced instead they focus on the
bigger problem the bigger the problem
you fix the Richer you become that's how
delivering the newspaper became content
think websites same results a lot less
hustle people will pay money for you to
solve their problems teach your children
that and they're Off to the Races number
12 not to waste time on things that do
not correlate to the real world sorry to
break it to you but nobody really cares
about your degree to be honest we feel
like the entire educational system right
now is pretty messed up they're just
repeating to you the same things that
used to make sense a while back with a
blatant regard for the future you're
basically getting into massive debt over
skills that don't have a direct
correlation to the marketplace and if
you're really passionate about anything
and put in the time to master it you've
got a better shot at making it on your
own anyway don't get degrees you'll
never be able to pay for for jobs that
no longer exist that's crazy right
that's what we've been doing for the
past 40
years number 13 how to use good debt
instead of bad debt bad debt makes you
poor while good debt makes you rich did
your parents ever mention this to you
when you were growing up probably not
right it's one of those lessons that the
rich have figured out a long time ago
other people and institutions will
actually help you get rich quicker if
you know the difference between these
two because it's all about the purpose
of debt poor people take out loans with
the purpose of spending that money on
liabilities they borrow money to get a
new car to get a new phone to cover the
Necessities the rich only borrow money
with the purpose of generating more
money Banks and investors love to lend
money to this kind of project as long as
you can clearly explain to them how your
money will be safe and how you'll be
able to pay it back because that's how
people build skyscrapers okay they don't
pay out of their own pocket for the
building no not even for the land it is
all on borrowed money the bank is
certain that you'll be able to sell it
or rent the building and that's why it's
willing to take on that risk with you
you'll just have to prove that first of
all you know what you're doing and that
you've done this successfully in the
past number 14 80% of the results come
from 20% of the effort Rich parents
don't actually want their kids to be top
of the class shocker right but it has to
do with the 8020 rule also known as the
parto principle or the parto
distribution which which states that 8
80% of the outcome is the result of just
20% of the action in business 80% of the
revenue comes from only 20% of the
customers 20% of your employees
basically do 80% of the work and so on
this is a mathematical ratio that's been
proven to be quite accurate in almost
all Enterprises and kind of life in
general but back to why Rich parents
don't want their kids to be the first in
class who take up too much time and
effort to improve with the smallest
deviation you would need to dramatically
increase the time you put in which
doesn't leave enough time for your real
life education there's more value to
take out of experimenting in the real
world than being inside studying all
night to just get 5 or 10% more on your
exam that kind of tradeoff just isn't
worth it and number 15 having money
doesn't make you a better person it just
solves some of your problems surprise
surprise when you're thinking of rich
kids you probably picture snotty
arrogant Pricks who believe that just
because they have money they're better
than everyone else but like look okay
that's not usually the case unless you
inherit your money you probably worked
your butt off to get to where you are in
life on the road to riches you have to
understand how valuable humility can be
and most rich people are very humble
individuals because they never forget
where they came from those values don't
get lost humility and respect for other
mothers are some of the first lessons
that rich parents teach their children
because well they know what it feels
like to be sitting on the other side you
should never be ashamed of having money
or being successful it's actually
something you should celebrate a lesson
most people figure out too late in life
is that you can't buy a clear conscience
no matter how much money you throw at it
money pays for Comforts of the body but
not Comforts of the mind or Soul now we
did a couple of videos a while back
where we went pretty deep into what
money can and can't buy but the question
we want to leave you with today is what
lesson did your parents teach you that
has served you well in life and if
you're so kind please leave that in the
comments for other people to benefit
from it as well and since you stuck with
us until the very end here's your bonus
fact number 16 rich people teach their
kids to raise their
expectations you want your kid to live a
better life than you have teach them how
to not put up with and raise
their expectations some people say the
secret to happiness is lowering your
expectations in order to achieve them
well the secret to financial success is
to raise them and then hit them the
majority of people settle for mediocrity
never taking big risks for big wins the
competition might be fierce at the top
but there are definitely fewer players
involved so think of it like this would
you rather have low expectations and
meet them them or would you rather fall
short of the highest expectations
possible if you compare both results
you're definitely better off with the
lad now if you've watched up to this
point in the video please write the word
risk in your answer to today's question
just to keep things interesting we'll
see you in the comments my friend until
next time take care
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