Goran-Bogicevic/ShutterStockMy wife and I recently welcomed a child into the world. His only interest right now is keeping us awake 24/7. But one day, he’ll need to learn something about finance. When he does, here are some suggestions.
1. You might think you want an expensive car, a fancy watch, and a huge house. But you don’t. What you want is respect and admiration from other people. You think having expensive stuff will bring it. It almost never does—especially from the people you want to respect and admire you.
2. The road to financial regret is paved with debt. Some debt, such as a mortgage, is OK. But most spending that results in debt is the equivalent of a drug: a quick hit of pleasure that wears off, only to drag you down for years to come, limiting your options and keeping you weighed down by the baggage of your past.
3. I hope you’re poor at some point. Not struggling, and not unhappy, of course. But there’s no way to learn the value of money without feeling the power of its scarcity. It teaches you the difference between necessary and desirable. It’ll make you learn to enjoy what you have, fix what’s broken, and shop for a bargain. These are essential survival skills.
4. If you’re like most people, you’ll spend most of your adult life thinking, “Once I’ve saved/earned $X, everything will be great.” Then you’ll hit $X, move the goalposts, and resume chasing your tail. It’s a miserable cycle. Your goals should be about more than money.
5. Don’t stay in a job you hate because you made a career choice at 18. Almost no one knows what he or she wants to do at that age. Many people don’t know what they want until they’re twice that age. (These are the signs you’re in the wrong career.)
6. The best thing money buys is control over your time. It gives you options and frees you from relying on someone else’s priorities. One day you’ll realize that this freedom is one of the things that makes you truly happy.
7. Change your mind when you need to. I’ve noticed a tendency for people to think they’ve mastered investing when they’re young. They start investing at age 18 and think they have it all figured out by age 19. They never do.
8. Some people are born into families that encourage education; others are from families that are against it. Some are born into flourishing economies; others, into war and destitution. I want you to be successful, and I want you to earn it. But realize that not all success is due to hard work and not all poverty is due to laziness. Keep this in mind when judging people, including yourself.
9. Your savings rate has a little to do with how much you earn and a lot to do with how much you spend. I know a dentist who lives paycheck to paycheck, always on the edge of ruin. I know another person who never earned more than $50,000 and saved a fortune. The difference is entirely due to their spending. Living with less is the most efficient way to control your financial future.
10. Don’t listen to me if you disagree with what I’ve written. The world you grow up in will have different values and opportunities than the one I did. More important, you’ll learn best when you disagree with someone and then are forced to learn it yourself. (On the other hand, always listen to your mother.)