Archive

Apr 22

Cultivating Work Ethic

By NickNo Comments

I had the pleasure of listening to a recent lecture by a researcher in child psychology. One of the most interesting findings involved an experiment of 7th grade students.  All students were asked to perform a set of some moderate difficulty math problems.  After completion of the problems, one-half of the students were complimented on how smart they were for being able to solve the problems.  The other half were complimented on how hard they worked to get to the solutions.  Though the problems that each group worked on were unchanged, those kids who were complimented by the effort they exerted as opposed to some innate intelligence were substantially more likely to choose to do a more complex set of math problems when given a choice of a new assignment.

This finding is fascinating to me.  It demonstrates that work ethic and the willingness to work hard and take on new challenges can be cultivated in children.

Wealth creation is the result of a collection of habits founded on fundamental premises.  Habits such as spending less than you earn, performing due diligence and managing risk can be brought about by education and practice.  But if the fundamental premises behind wealth creation are not observed or not believed, no amount of education and training can help your child down the road to success.  This means that one of the most important tasks for any caring parent must be to instill a strong work ethic and cultivate a belief that usually hard work dedicated to a good purpose over time is a great recipe for success. 

We have the benefit of living in a time in history where our society can afford a great deal.  Not long ago, young boys and girls of age 10 were busy planting and harvesting crops or performing the household laundry.  Families needing to eat had to hunt or fish or grow their own food.  Our lives of convenience are truly blessed, but with our increased time for ourselves, what do we do with this time.   Our children in many cases live lives of comfortable privilege free from the cares of daily life.  As a parent, I wish that my children never know pain or hardship, but we forget that pain is an important part of the learning process.  When my son hits his head on the edge of a table and he cries, he will know next time to be more careful and mind where the table’s edge is.  Similarly, nearly all families and individual at one time or another will suffer some financial hardship.  But hardship is not permanent condition.  I, myself, learned the hardest financial lessons in a time of hardship.  These lessons have only tempered my resolve to pursue success and the hardship itself has forced me to make decisions that have propelled me further down the road. 

Parents, to cultivate a strong work ethic in your children it is important to keep in mind several items

  • Money must be tied to effort – Reject the concept of an allowance.  Demand that your children perform some of the household tasks in exchange for any money you provide them.
  • Encouragement – Periodically, be sure to encourage your children to continue to work hard by recognizing the effort they put in.  Reinforce that success is a pattern of reward that follows achievement.
  • Share how the family works through hardship – Whether you realize it or not, your kids are watching and they know when things are tough for mom and dad.  So let them know, to the extent that they can understand, what is happening and how you are working to resolve the problem.  You may be working longer hours or doing extra jobs or giving up on luxuries that you used to enjoy.  Explain these things with a smile.  Let your children know that work is one of the best companions you have on the road to success, because work can help you solve nearly all financial problems.
  • Work is life – Most importantly, it is important that your children learn early on that it is only through our contributions that we make the world a better place.  Anything of value ever created throughout human history has been brought about by the efforts of individuals working in solitude or in concert with others. 

Children want to change the world; but the world has never changed by itself.  It changed because of the desire and effort of the former 7th grader who once chose the harder set of math problems.

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Oct 26

Seven Financial Dwarfs – Are Your Kids Getting Off the Right Track?

By NickNo Comments

Although I wouldn’t characterize myself as necessarily religious, there are often a number of great lessons one can learn by looking to biblical wisdom.  The seven deadly sins tell us that many things that are inherently beneficial to our souls and spirits can rapidly degrade into destructive behavior if driven to excess.  Self confidence is good, but excessive pride is a detriment.  Slowing down to enjoy life is great at helping us to appreciate what we have and where we are, but sloth prevents us from moving forward.  Eastern religions also revere the concept of balance.

Much like the seven deadly sins, there are seven types of financial “people” which although based on a good foundation, will cripple your child if he or she relies too much on one type of character.  Like everything else, balance is the key.

Scroogy – Like Scrooge from A Christmas Carol, when these kids get their hands on a dollar, they tuck that dollar away.  They enjoy watching their hoard of gold grow.  Saving is a great skill to master, but Scroogy kids take saving to an unhealthy level.  Money is a tool.  If kids hoard their money, they are not developing the skills to manage it.  Money is a medium of exchange.  You can’t eat money.  Kids must learn to use money to fulfill their needs and to the extent practical their wants.

Spendy – Like all people, kids like stuff.  Our commercialized culture sends our kids messages on a continual basis that consumerism is the way to happiness.  Adults, with supposedly more refined critical thinking skills, often fall victim to the messages, so is it any wonder that our kids are often more susceptible.  Spenders believe that the stuff they have will bring them respect and acceptance from others.  These kids need to learn that stuff won’t bring them happiness and the good feeling they get from showing off something new will quickly fade.  Kids must learn what adults must learn if they ever want to get ahead. The race to keep up with the Jones’s is one that only produces losers.

Scrapy – Scrapy kids are ones that have taken the concept of frugality to an extreme and have crossed over to cheap.  They beat up vendors on price and they don’t like spending money at all.  Rather than go to the movies with friends, they’ll stay home and watch TV.  Frugality and bargain hunting are good skills to develop, but should not take a back seat to enjoying the zest of life.  These kids turn into adults that have a hard time indulging themselves in anything.  They lose out on opportunities to connect with others.  Finally, they have a hard time giving.

Wanty – All of us have wants.  One step on the road to maturity is the concept of delayed gratification.  Another is the realization that sometimes wants must go unfulfilled in life.  Asking for what you want is not necessarily a bad thing.  Desire is healthy, but that desire must be matched by a work ethic that will push our child to achieve those desires.  The sooner kids learn this, the better off they are going to be.

Givey – Some kids are just naturally generous.  They give away everything.  I, myself, gave away a bag full of matchbox cars to a friend down the street when I was about 5.  They know it intrinsically feels good to give and they know they get great messages of approval when they do so.  Generosity is noble, but generosity without a willingness to look after oneself through life actually promotes lower self esteem and an unhealthy level of altruism.  These people are ready made victims for con artists, moochers and abusive spouses.  When your children choose to give, make sure also to give them messages that promote self worth and how worthy they are to keep things too.

Whiny – Whiny kids have achieved success in nagging parents about things they want until the parents finally relent.  They are learning that “work” consists of scheming or begging others until someone else fulfill their needs and wants for them.  The epitome of the entitlement culture, these kids are on course to becoming passive souls clutching at victimization to explain their lack of success.

Trader – Kids are excellent negotiators.  Few parents have not had an experience where the reflect upon a conversation with their child and ask themselves “Why did I agree to that?”  It’s hard to say no to our kids and most kids know this.  Traders, however, take advantage of this excessively.  These kids learn that everything is negotiable, without regard to the merit of the idea.  Parents who tolerate their kids to be Traders run the risk of their kids becoming amoral – people who truly believe the ends justify the means.  Negotiation skills are important to develop, but kids who are used to always getting what they want through bargaining often end up without a moral code, because they’ve never had to fight for what they really wanted.

Conclusion

Take time to observe your kids.  Chances are your kids show signs of one of more of these characters.  Remember that balance is what to strive for.  Balance is what will help kids to become well rounded, mature kids with good notions about handling money, versus kids with significant financial blind spots and life-long money problems.

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Oct 02

Book Review: Rich Dad, Poor Dad

By NickNo Comments

For this review, I discuss another great book on financial education.  The first book Robert Kiyosaki wrote, Rich Dad, Poor Dad, presents simple, but powerful lessons on managing personal financial affairs using simple stories and easy to follow concepts.

Rich Dad Poor Dad: What the Rich Teach Their Kids About Money-That the Poor and the Middle Class Do Not!

This book does the wonderful task of explaining such dry accounting concepts of income statements and balance sheets in a very readable and understandable format.  It shows the cash flow patterns of poor people, middle class people and rich people.  It also shows how from a strictly financial standpoint that it is the middle class cash flow pattern that is the absolute worst one to have.

But more than the accounting concepts, it discusses that rich people just think differently about money, how to use it, the powers of it and virtues of it.  I have long observed that the United States is a country which craves success, but hates successful people.  Too often, I have seen people vilified whose only crime is that they worked hard and achieved success and wealth.  When I was younger, I, too, shared many of these opinions.

Granted, there are a few people, who act as leeches and make a living sucking the financial marrow out of the lives of others (pay day loan people and many sellers of financial product come to mind), but by and large, most people who have achieved wealth have done so through hard work and being of service to others.

One of the most powerful concepts is the fact that you will only earn so much by working for a paycheck.  It is possible to get rich working for others if you start early and manage your cash flow well.  However, if you open your own business on the side, the potential for reward is much higher as a business owner.  In addition, as an employee, you serve the employer in a designed role.  This means that, most likely, the role was not designed specifically for you and consequently, wasn’t designed to take advantage of your unique gifts and talents.  It is only when you have the opportunity to craft a role just for you, will you have the best opportunity for success.  Finally, when you work for a paycheck instead of profit and you can count on a safe and steady stream of income, you often subconsciously turn off part of your creative centers of your brain.  When your financial well-being is tied to generating new ideas, you will be surprised how much more you can dream up and give life to.  Unless you are trained to look for opportunities, you will pass them by.

The most vital learning to gain from this book is a realization that the employee mindset is a limiting one. The employee as is largely understood today is a relic from the industrial era and the factory culture.  Prior to the industrial era, money was generally earned by farmers and tradespeople buying and selling the fruits of their labor.  In effect, everyone was self-employed.  In the 1800’s and much of the 1900’s, roles were designed for people to act as cogs in the manufacturing process.  Tasks were developed by managers into established procedures and the last thing the managers wanted was for an employee to use their brains to redesign the system or dream up ways to change things.  In exchange for doing things exactly the way the managers told you to do them, the employee was paid a wage.  The belief in the infallibility of management decision making has thankfully gone away in most workplaces, modern management thinking is moving much more in the employee designed workplace that is paid based on performance and production.  But the factory/employee mindset is still alive and well.  It is very dangerous to have in economic climate of the 2000’s.  To remain competitive in a global economy, you need to be able to leverage the talents and creativity of your people and the employee mindset is a real obstacle businesses need to overcome.

By rejecting the employee mindset and adopting a self-employed mindset (even if you are an employee) you are not only going to distinguish yourself to your employer, you are also going to continue to exercise and grow your creative muscles and your ability to identify and capitalize on opportunities.

Rich Dad, Poor Dad is a great book that brings you several great lessons.

If I have inspired you to pick up Rich Dad, Poor Dad, I encourage you to click on the links in this post or on my page.  YouthFinancialEducation.com is not only a great place to learn how to succeed financially, it is also a place that I am constantly leveraging my creativity and skills to bring you value.  By clicking on links from here, you help reward me for bringing that value to you.

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