Wealth Education

Basic Financial Concepts

Empowering family members with basic financial knowledge is a role that is often ignored, yet it is essential to ensure effective wealth stewardship. The following ideas should be considered baseline requirements necessary to maintain and grow basic financial stability in one’s life.

Requisite Financial Responsibility

Foundational financial behaviors are often neglected but if communicated early in life they can have a profound impact. These typically include topics such as saving vs spending, the difference between assets and liabilities, losing money being easier than earning, reviewing purchases for long term value, being well diversified, encouraging spending of only interest and dividends rather than principal, and other similar basic financial concepts. Every generation needs this foundational understanding.

https://paulmerriman.com/how-to-invest-series-complimentary-download/

https://www.reddit.com/r/personalfinance/wiki/index/

https://www.investopedia.com/articles/retirement/09/retire-interest-only.asp

Living Below One’s Means

Although a simplistic concept, an important lesson to share is always spending well below one’s income level. This avoids debt while in turn creates the opportunity to save and invest. The result is exceptionally financially powerful over a lifespan.

https://www.nerdwallet.com/article/finance/live-below-your-means-without-feeling-deprived

https://livingonthecheap.com/get-rich-slowly-by-living-below-your-means/

https://www.reddit.com/r/personalfinance/wiki/budgeting/

The ‘Income vs Spending’ Spread

A potential savings rate is determined by the amount of income (wages, investment interest, business income, etc.) less the amount of expenses (spending, gifts, etc.). Focusing on simultaneously increasing income and lowering spending has the effect of quickly growing the spread between the two - building the amount to potentially be saved or invested. This simple insight can highlight how to grow a savings rate and empower the individual trying to save.

https://affordanything.com/the-12-essential-lessons-i-want-to-share-about-money-and-life/

Assets vs. Liabilities

The base understanding that an asset creates money and a liability consumes money, can help a young person establish financial clarity. This review can be applied to automobiles, homes, and various financial instruments, empowering better decisions about vacation homes vs rental properties, dividend paying stock, and whether a car loan might be a good idea.

https://www.investopedia.com/terms/p/personal-financial-statement.asp

Time is an Asset

Time has the ability to build formidable assets. Compound interest over time is a fundamental investing concept that is important to understand, and allows money to be made both on the initial principal amount as well as increasingly on the interest generated. Eventually, given enough time, the value of the interest surpasses and greatly exceeds the principal invested. Taking long periods to become substantial, the effect over generations includes the possibility of exceptional growth.

https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator