How often have you said – “If only I knew then what I know now, how differently things would have been.”. Well as Michael Yardney points out, it might be too late for you and I but he gives us 9 lessons about money we should be teaching our kids.
Kevin: Often in our program, we get to talk to a lot of very talented people around Australia about money, finance, about investing, and one of the questions I love to ask them is what are they teaching their children about property investing, about saving money and building their wealth?
I’m going to pose that question today of Michael Yardney, because I know Michael has done me a favor and he’s listed down the nine top tips or important steps that he believes all people should be teaching their children about financial control and independence.
Michael, welcome to the show.
Michael: Hello, Kevin.
Kevin: I thought it would be wonderful if you could just take us through what you see as those nine important steps, Michael.
Michael: It’s important to teach your children about money because we’re not born knowing how to do money. And the apple doesn’t fall far from the tree, so we learn a lot of our habits about money and wealth from our parents – the things that they say but also the things they don’t say and also the way that they do things with it, whether they’re savers, whether they’re teachers.
So, I’m sure the conversations around Kerry Packer’s home, James Packer’s table when he was young was very different to what you and I heard from our parents when we were young, Kevin.
Kevin: Indeed, mate.
Michael: And that would have influenced him very much so.
I think as a parent, it’s important to teach your kids about money, and I think it’s worth looking at those points. What I came up with, the first one is that today’s debt equals tomorrow’s slavery.
When we’re young, we tend to think in really narrow time increments. We’re really looking for immediate gratification, and often delaying something that we really want is too hard to do. But unfortunately, this leads a lot of young people into a credit trap, because they can buy things with credit cards, with store cards, with no interest for so long, but today’s debt is robbing them of tomorrow’s lifestyle.
I think one of the early things one has to teach people is to limit your debt obligations when you’re younger, which means you’re going to have more control of your life when you’re older, Kevin.
Kevin: Yes. The second one you say is he who dies with the most toys is not the victor, and that is a great lesson in life, isn’t it?
Michael: Kevin, I liked my toys when I was young; in fact, I still like them now.
Kevin: Who doesn’t?
Michael: Of course. But they are a difficult enemy, because we tend to spend on short-term gains, short-term pleasure, things that decrease in value. But it’s so difficult when you see these things on TV, you see the glossy magazines, consumerism is all around us. But it takes the lessons of life as you get older to learn that true wealth is what you’re left with when you lose all your money, when you lose all your possessions. It’s a hard lesson to learn as you’re young, Kevin.
Kevin: It is. And point number three, taking responsibility, which is a key thing, I think. We need to teach our kids how to do that, because that makes you the master of your own destiny, Michael.
Michael: Very much so, Kevin, because it’s so easy to play victim and blame others. Kids do it; adults unfortunately still do it as well. What you have to do is be responsible. You are where you are today because of all the decisions you’ve chosen to make and all the decisions you’ve chosen not to make. So, rather than blaming the system or the education or other things, be responsible, be in control of your life.
I guess you should be the pilot of your life rather than just a passenger being dragged along by the world.
Kevin: Indeed. Michael, one thing we do talk about is this younger generation. I know that’s a broad term and I shouldn’t use it, but the younger generation seem to want everything at once. Patience is a virtue, isn’t it?
Michael: It is, but it’s really hard to learn. A lot of psychological university studies have shown that those who are successful later in life have the ability to delay gratification. They’ve even done these studies with young kids where psychologists put them in a room with marshmallows and said, “I’m going out and I’m coming back in five minutes. Those of you who actually don’t eat them now but can wait five minutes can have an extra one.” Some kids couldn’t hold off, and I guess that may have been me when I was young, if you were to put a marshmallow or a chocolate in front of me.
Kevin: What are you talking about – when you were young? You do it now.
Michael: Yes, I know. I saw you thinking that as I was saying it.
But really, what happened was it was shown that those who could delay gratification as a kid were able to do it later in life and that actually opened up a whole wide range of other opportunities.
So, those who are able to invest in their education, to go to university, or to go and get a trade and do an apprenticeship, later on in life will be rewarded for it. Yes, patience is a virtue, Kevin.
Kevin: Another one that I think needs to be taught, too, is that people who do well in life are not necessarily just lucky.
Michael: Sure, luck does come into it a little bit, but really, I see people who get lucky and win the lottery or get an inheritance, and that they don’t keep it, either. You actually have to be the right person – in other words, with the right headspace – at the right time and understand and appreciate that, as well.
I think luck has very little to do with it, and hard work has a lot more to do with financial success and success in other areas of life, Kevin.
Kevin: Earlier, Michael, we talked about patience. Number six I think deals with risk, doesn’t it? You don’t need millions to achieve financial freedom. Interesting that so many wealthy people actually have a lot of debt, too.
Michael: Yes, they do. I think the other point here is that to feel wealthy, you actually have to feel gratitude. We all know millionaires, multimillionaires who are all miserable sods and don’t enjoy or appreciate life and people who don’t have as much money enjoying life.
One of the lessons I’ve taught my children – and I suggest others do – is be grateful and appreciate what you have, because unless you have gratitude, unless you appreciate your life, you’ll never be wealthy, no matter how much money or how many properties you have, Kevin.
Kevin: Michael Yardney from Metropole Property Strategists sharing here with us the nine lessons that everyone should teach their children.
Lesson number eight, a very simple one, but I’ve heard you talk a lot about it before: spend less than you earn and invest the rest.
Michael: It’s a golden rule of financial freedom that if you spend more than you earn, you’re always going to owe other people money. So, the suggestion is to invest or save at least 10% of your money right from the beginning. Build that habit early in the piece, then invest, and when you have got enough, you can reinvest. And then eventually, you’ll be able to appreciate and enjoy life.
It really means that in the short term, you’re going to actually have to make some compromises to be able to enjoy the later part of your life.
Kevin: Michael, the final one – number nine – is one that I wish I’d been told when I was young, because it is so true. Tell me about it.
Michael: What I said was that youth won’t last forever, so use it wisely. I think the comment here is enjoy it in two ways: number one, enjoy the journey, because if you don’t, you won’t actually enjoy the destination. But the other is take advantage of time and compounding. Because if you would have bought one property 20 or 30 years ago, it doesn’t matter where almost in Australia, look how much better off you’d be today.
Who wouldn’t like to have bought their parents’ house for the price they paid 30 years ago, and then just used the benefits of timing, compound, leverage? One of the things that Albert Einstein said is that leverage is one of the most powerful forces in the universe.
So, the message to my kids is to start saving and investing early in life, because that’s much more likely to secure your financial future.
Kevin: Wrap it up for me, Michael. Give it to me in a nice, neat parcel. What’s the bottom line?
Michael: Wealthy people do certain things every day that set the apart from everyone else. Wealthy people have good success habits that they’ve learned from their parents. These habits are the reason for the wealth gap in Australia – and, in fact, all over the world – the reason why the rich keep getting richer.
As parents, we’re likely to be the main mentors of our children when they’re young, and we’re definitely going to be among the most influential one for our children. So, unless we teach our children good money habits to help level the playing field, the rich are going to continue to get richer and the poor will continue to be poorer.
It might pay them – literally – to give them a bit of your time, Kevin.
Kevin: Indeed, it will. Michael, thanks once again for your insight and your time. Michael Yardney from Metropole Property Strategists, and of course Michael’s blog, Property Update.
Thanks, Michael. We’ll talk to you again soon.
Michael: My pleasure, Kevin.