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“The pessimist sees the difficulty in every opportunity, the optimist sees the opportunity in every difficulty”. Winston Churchill.
I would say at the outset of this post, that it may be of particular relevance to those of you raising children or those with nieces, nephews, grandchildren and such. It is a real life tip of sorts (or rather an insight into a way of thinking about finance). In business as with life, mindset is crucial and that is what today's article is about. When I first came across this concept it really resonated with me despite its apparent simplicity. Firstly, I just want to preface by saying that finance to many people is a mystery and in most cases through no real fault of their own; it can seem to be a subject which only a few 'specially trained' people can fully understand and capitalise from.
Financial Education - Are We Failing The Youth Of Today?
'Money makes the world go round', or so the saying goes, yet finance and the subject of money is not taught in most schools until the senior years, if at all. Why is this? Well, the theories are aplenty, but the result is that most people are not as financially literate as they could or should be. I think it is important to try and introduce concepts of commerce, business and finance to children and am thankful I made efforts to improve my own financial literacy having remained fairly ignorant of the topic through childhood. Money was hard to come by, it was distant, it was fleeting, and the idea of financial independence was all but a lofty dream.
On the issue of financial education, please consider this statistic for a moment, bearing in mind the fact that the following people on average earn millions of dollars during their careers. According to a Sports Illustrated article (2009), 78% of NFL players either go bankrupt, or are experiencing serious financial issues within two years of retirement. The article also estimated 60% of NBA players, who likewise earn millions of dollars file for bankruptcy within 5 years of their retirement from the sports. Why? How? Well in large part it is because (generally speaking) we are not educated about financial matters resulting in what could be termed financial illiteracy.
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In my humble opinion such pitfalls can be avoided with knowledge of a few simple principles,and by learning about aspect of personal finance; such as tax laws, knowing the difference between what Kiyosaki calls 'good debt' and 'bad debt', for instance; understanding the importance of cash-flow and distinguishing between your real assets and liabilities. (All to be covered in more detail in further articles). By teaching yourself some basic finance you can avoid a lot of strife and you will not be as dependent upon the afore-mentioned 'specially trained people' as much. This means you will have more personal control over your financial situation in the long term at least and you will be wiser to the false promises and 'spiel' for which the financial profession is famous or rather, infamous.
Finance And Parenting
So back to the point, and rather than technical knowledge of financial matters, this is more related to the concept of thinking about finance in a positive and optimistic way. I was reading a book called Rich Dad Poor Dad by a chap called Robert Kiyosaki during my late teens and in it he discusses the importance of a very simple trick of semantics and positive mental conditioning. In the book he discusses a common 'Phenomenon' within the context of finance and parenting, which I am sure many of you will relate to as much as I did. The hypothetical scenario he mentions is that of a child out with his Mother or Father trailing round the shops, when inevitably the family come to the toy section, and then just as surely the question comes; 'Please can I have X'.
To this the reply comes from Mum and Dad, that unfortunately on this occasion they cannot indulge the little mite. 'Why on Earth not?'; I hear you ask. The parents reply is along the lines of, 'You cannot have X because we can not afford it'. And there, with the finality of that seemingly innocuous even mundane comment is the crux of the issue at hand.
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The statement 'We can not afford X', is a declaration of a position which in this context and in the eyes of the child is as fatal as the auctioneer's gavel. It cannot be argued with, and any further potentially creative thought processes related to the matter are immediately shut down, possibly followed by a period of sulking. Here's what you should be telling kids instead (in order to help them have a more positive outlook and a generally more competent level of understanding financial matters later in life).
Use Positive Reinforcement As A Motivator
Instead of the curt, thought ending, unarguable statement. Say something along the lines of 'No, we cannot afford X at the moment, but how could we afford X?'; (Lemonade stand, selling flowers, doing chores around the house etc). You see, this very subtle difference in delivery of the same message is in complete contrast to the former. Here we have a statement of fact followed by a question. So, instead of instantly seeing nothing but doom and gloom and endless miles of supermarket aisles, the child's mind will instead be abuzz with thought, and they will think instantly of ten ways to come up with X amount of money; some slightly more realistic than others of course, but all valuable ideas nonetheless, you will be helping them develop their critical faculties. It helps teach them to embrace a perceived negative financial position with a positive mindset in order to think of a solution to the problem and thus to further improve their own financial disposition later in life!
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Now this context is specific to financial matters and learning, but again, it boils down to conditioning your mind to seeing the multitude of possibilities in life rather than dwelling solely on the finite nature of things. In a nutshell, it stimulates and encourages further thought, which in turn leads to greater understanding and in time, the ability to think one's way out of potentially negative situations, financial or otherwise. This of course, is a crucial component to success in business, careers, family life, relationships, health and fitness or anything. Although I mention the importance of teaching children to think in a critical way and to actively work on creating their own solutions to problems, you will help their development in other areas too. Of course the earlier a child is exposed to this kind of positive mental conditioning the better, but it is still also relevant to you, it is never too late to improve your level of financial education and understanding.
A Change In Mindset Can Change Your Life
The earlier you begin to start thinking in this kind of way the better your problem solving abilities will become. It was shortly after reading Kiyosaki's book that I created my first business which you can read a little more about here. I was in need of some money and was at a loose end for a few months, so I asked myself. What can I do? I found out! I didn't just have to settle for getting a job stacking shelves (which I had done as a 16 year old and that I disliked immensely). 'Where there's a will, there's a way!' Thanks for reading.
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