Among many other things, I want my kids to be financially literate. I know that it will not happen by itself, and it certainly will not happen if I rely on the school system to teach it to them, as curriculum on financial literacy is woefully inadequate. As any parent knows, our kids learn by example. My sons watch how I spend, save and splurge. As an avid investor with a goal of raising financially literate sons, I am taking proactive steps to teach them the principles of investing. According to one of my favorite books on the subject, called “Rich Dad Poor Dad,” most people struggle financially because they don’t know the difference between an asset and a liability. Simply put, the former puts money into your pocket, while the latter takes money out of your pocket. “Rich people acquire assets. The poor and middle class acquire liabilities, but they think they are assets.” The distinction can be muddy sometimes, but it’s a critical one to understand.
Additionally, we have the opportunity, if not the duty, to pass along financial advice to our clients where possible, especially at settlement or post-trial. If you see a cycle of poor decision-making, as is so often the case, speak up and do what you can to break it.
Obviously, the largest expense for most people is their mortgage. The home can be an asset, but the expenses of maintaining the home can make it a much greater liability. The concept of a house being a liability, especially in today’s housing market, is an appropriate conversation to have with a client. The point to make is: when you want a bigger house, you should first buy assets that will generate the cash flow to pay for the house and the expenses, such as insurances, taxes, utilities and maintenance that come along with it.
The bottom line is: teach your kids about money. Teach your clients about money. Show your children how to invest and acquire assets rather than liabilities. By demystifying the idea of money and investing, you can encourage your children, and your clients for that matter, to take the first small step toward building a secure financial future.
Jay Fisher co-founded Vantage Capital Consultants to purchase structured settlements and annuities the right way – with the plaintiff’s best interest in mind.