By Mark Quann
4 Tips to Raise Financially Intelligent Children
I was once told the secret to becoming successful:
“Find out what everyone else is doing, and do the opposite.”
This is never been truer today in the area of financial education. And finding good advice…from school, relatives or friends is like finding a needle in a haystack.
What is considered financial education? How about, “Save money and get good credit.”
Good idea? Bad Idea? Not sure?
You may be saying, “That’s what my mom told me to do, and my mom would not steer me wrong, would she?”
Well, I took that same advice and only found myself repeatedly in debt—while earning nothing in my savings account, and paying fees to my bank for any number of reasons.
Today, I learned a whole new set of rules:
1. Don’t save money
Banking has changed. 40 or 50 years ago when your family was told to save money the banks were actually paying a decent rate in savings accounts. They were not financial predators—trying to get you into credit card debt at the highest possible interest rate, and charging you fees because you were not saving enough in their bank.
Today, I use a credit union to save a few bucks for emergencies, but use investment APPs on my IPhone to invest, buying stocks and exchange traded funds’s (ETF’s). My money works hard for me, and I pay less in taxes than in savings accounts.
Teaching your children to “save money” makes bankers wealthy, not your children. Teach your children to invest rather than save.
2. Become a Deadbeat
If you have read Rich Man Poor Bank, you may recall what the mega-banks (behind closed doors) call their customers: revolvers and deadbeats.
A “revolver,” per the banks, is a customer that keeps a balance on their credit card each month—paying never-ending interest to the banks. These revolvers are the “sweet spot” for Wall Street mega-banks. They will rob your children of their future–laughing all the way to the bank.
The opposite of a revolver is a deadbeat. A “deadbeat,” again, according to the credit card companies is someone that uses their credit cards and pays the entire balance down to zero each month—paying ZERO in interest to the banks.
These deadbeats collect air miles and points for “free stuff,” and cash-back rewards while watching their credit score rise into the 800’s. If they need to use their credit, let’s say for a mortgage or auto loan, they get the lowest possible interest rate, and pay little or no interest.
I personally fund all my business expenses on my credit card and pay the full balance each month. I celebrate each month—being a professional deadbeat!
3. Keep Money From the Government
If you think the mega-banks have an endless appetite for stealing away your money, they are amateurs compared to the government. And the government can change the rules anytime they want.
Many Americans don’t know that your social security, introduced in 1935, was promised to be a tax-free benefit at retirement. But in 1985, the government decided they needed more money and started taxing your social security benefits. This is the same as stealing–similar to when Bernie Madoff stole Americans retirement money in an illegal Ponzi Scheme. Bernie went to jail. The government just changes the laws.
Today, Social Security is nothing more than a government-sanctioned Ponzi scheme—to steal away your money to fund the government’s retirement plans.
But wait, they are going to do it again!
I believe in the future, when the government needs more money (and they always do), they will target the greatest savers in 401(k)’s, 403(b)’s, and 457 plans. I call ALL tax-deferred retirement plans “government retirement plans”–as I believe when the government (employees) wants to retire, they will hammer the best savers with higher taxes.
Teach your children all the ways to reduce taxes—through the use of Roth IRAs, municipal bonds and Indexed Universal Life Insurance for tax-free growth; tax-free income; and tax-free transfer to your heirs.
But lets not forget the most important deduction of them all: running a business. My favorite deduction from running my business: tax-deductible sushi; and tax-deductible Starbucks. But that is a new post on its own.
4. The Rich Don’t Work for Money
Warren Buffett said, “If you don’t find a way to make money while you sleep, you will work until you die.”
Today I have found many ways to generate wealth, and you can too! Just start with something simple, and then upgrade your financial IQ to add more income, and more savings and investments.
The most basic plan if you are an employee is a 401(k) plan which may offer a dollar-to-dollar match. This will net you a 100% return on your money, which is not available anywhere else. Be sure you get the full match offered, but consider that contributing more than the match can mean even higher taxes at retirement–as you are saving taxes on the “seed” but will be taxed on the “harvest,” potentially a much larger amount.
Buying a home, and living in it for two years can give you tax-free gains when you sell it, due to an exemption in the IRS tax code. I learned this after purchasing my first condo 17 years ago. I sold it after two years, earning over $120,000 tax-free. I of course did this 2 more times. My favorite type of income is tax-free income.
Finally, search for passive income opportunities in business. I chose the financial industry because I am passionate about financial education. I also learned of the residual income possibilities from the sale of investments and insurance, and I earn residual income from the sale of books. I reinvest my income back into my business, and into mutual funds and exchange traded funds (ETFs), buying municipal bonds, and dividend paying stocks, many times managed by a “robo-advisor.”
Every dollar you earn is like an employee. Put your “employees” hard at work for you.