6 Ways to Teach Your Children About Building Wealth

Teaching our kids about money and building wealth at an early stage is so critical.

Apr 26, 2014 at 1:00PM


I normally talk about apartment building investing but I wanted to talk about another topic that I've slowly started to work on with my kids as they get a bit older.

I have four kids from 5 to 12, and while all of them are learning about money, I felt the two older ones (9 and 12) are ready for the next phase.

Here are the 6 ways I'm teaching my kids about building wealth.

Lesson # 1: Practice Delayed Gratification
Sit each of your kids down and put some kind of treat in front of them (I chose a HUGE marshmallow that requires a knife and fork to eat!). Tell them that they can eat the marshmallow now, or, if they wait for 15 minutes while you go off and do something else, they will get another marshmallow.

Then see what they do.

Some of my kids immediately ate their treat. The others sat there, looked out the window, or got a book, and they waited for their second marshmallow.

Use this exercise as a teaching lesson about instant vs. delayed gratification, and then look out for other opportunities to learn this important lesson in life and in business.

Lesson # 2: Learn to Handle Money
We give our kids a small allowance ($10 per month). While chores are expected to be completed and are NOT paid for, we do give the kids opportunities to earn extra money. We set a price for the project and if more than one wants to do it, we do a reverse auction: the lowest bidder wins the project!

We then use the 80-10-10 rule for handling that money: 80% of it they can spend as they wish, 10% is saved and 10% is to be donated. This teaches them the importance of saving and giving back, two lessons that even adults have great difficulty with.

Lesson # 3: Read Rich Dad Poor Dad
I read this book when I was 35 and I was like "where has this book been all my life?" and I vowed not to make that same mistake with my kids.

I made my daughter read this when she was 9 years old, and she wasn't ready for it ("It's boring, Daddy!"). But now she's 12, and I think I'll try again!

The important messages in this book are the difference between liabilities vs. assets, the importance of minimizing your expenses, and the idea of passive income. Wow, powerful lessons.

Lesson # 4: Live Within Your Means
This is such an important lesson from Rich Dad Poor Dad, but you also hear it from other places like your grandparents and places of worship. Unfortunately, our culture teaches us exactly the opposite, so instilling this value in our kids early on is so important.

You can teach this lesson in so many ways each day, you just have to be on the look out for opportunities. This involves delayed gratification, discipline and saying "no" every once in while. This won't be easy because most of the other kids get whatever they want.

Lesson # 5: Do a passive income project
This is a more difficult lesson to learn because it's a little more abstract. It will require time and more maturity for your children to really learn this. Use examples your kids can understand. For instance, one example of a passive income business could be a gum-ball machine. Let's say you buy it for $100 and put it into a busy grocery store. Ask your child to research the cost of the gum balls. How many gum balls do you think the machine could sell in a week? Have her calculate a profit and loss projection. Then talk about how much time this passive income business will require. Then talk about buying a second and third machine.

Lesson # 6: Make it Fun!
A lot of these lessons are so abstract and confusing to kids and so you'll have to look for ways to make it fun. One way to do this is to play games, such as Cashflow for Kids and Monopoly. Or help them start their first business, maybe a lemonade stand, cutting the grass, baby sitting or shoveling snow – or maybe even gum ball machines! All of these projects require planning, investment, marketing and execution. If you already have some real estate investments, begin involving your kids in the business.

Teaching our kids about money and building wealth at an early stage is so critical. Unfortunately, it's not taught in school (even college!) and so it's up to us.  Teaching our kids about building wealth is not only an important life lesson but presents us with great opportunities to spend more time with them.

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This article is Copyright 2014 BiggerPockets, Inc

Michael Blank's passion is being an entrepreneur and helping others become (better) entrepreneurs. His focus is buying apartment buildings by raising money from private individuals. He's been investing in residential and multifamily real estate since 2005. He is the creator of the Syndicated Deal Analyzer and the eBook "The Secret to Raising Money to Buy Your First Apartment Building".

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A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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