4 books which will make a massive difference to your kid’s future financial wellbeing
With most schools not providing financial education to kids, it means that the responsibility lies with us as parents to teach our kids these essential life skills. The issue with this, however, is that many parents never got a financial education themselves so may find it hard to teach their kids the skills they too need. This is why I set up Blue Tree, to help parents gain knowledge and confidence about money so they can help teach their kids what they never had.
Whilst Blue Tree provides lots of blogs and articles to help parents learn about different money topics and teach these to their kids, I would still strongly recommend that parents read at least one of the following books. These 4 books are world renowned as some of the best money related books published. Regardless of your level of knowledge about money, you will definitely learn something new which will change your life and if you then take the time to pass this knowledge on to your kids, it will change their life to. They certainly had a big (positive) impact on how my wife and I manage our money and on how we live our lives.
I have mentioned this book in a number of my blogs as it is probably the best personal finance book I’ve read and is my number one recommendation for anyone who wants to get better at managing their money.
The book is set out in a fictional story format where Arkad, the Richest Man in Babylon, is asked by the King of Babylon to teach others how he came to be the Richest Man.
Arkad sets out the rules and mistakes he made over his life time as he went from being a poor youth to slowly learning more and ultimately becoming rich. The book is engaging as it goes through a series of mini-stories.
One key lesson is to ‘pay yourself first’ - “for each ten coins I put in, to spend but nine”.
The book also talks a lot about how most people will increase their expenses as they earn more. One of the most powerful quotes from the book is:
“.. thou do not all earn the same. Some earn more than others. Some have much larger families to support. Yet, all purses are equally lean …. ‘necessary expenses’ will always grow to equal our income unless we protest to the contrary”.
What I like so much about this book is that it talks about forming simple and powerful money habits. My wife and I have adopted these money habits and it is now paying dividends (literally for some of our money). One of the aims of Blue Tree is to help kids form these great money habits before they start to learn bad ones (which they most likely will if they are not guided). Inspired by this book, here are my top three habits to teach your kids about money.
The key to this book is making sure you write down what you learn and, starting to adopt these lessons. Get the book here.
You’ve all probably heard of this book as it is the most talked about personal finance book there is. If you haven’t read it then I would again strongly recommend that you do.
After reading this book I have no doubt you’ll change how you think about your money (and maybe your job).
The key story from the book is how his ‘Poor Dad’ would buy ‘liabilities’ - these are the things that most people spend their money on - including, cars, their home, clothes and other material possessions. These are called liabilities as they cost you money to buy and maintain. Most people don’t look at their home as a liability but it is a liability as it costs a lot of money to maintain and doesn’t make you any money unless you sell it and move to a cheaper home (which may never happen).
His ‘Rich Dad’ taught him to use his money to buy ‘assets’. Assets are things that pay you, i.e. provide a cashflow. These include investing in the stock market, rental properties or starting a business. The ‘Rich Dad’ would then only buy material possessions once his assets were providing enough cashflow to afford them.
Like the Richest Man in Babylon, the book is written in a series of mini-stories. These stories cover the many conversations he had with his ‘Poor Dad’ and his ‘Rich Dad’. It shines a light on the fact that most people act in the same way as his ‘Poor Dad’ but should start following lessons taught by his ‘Rich Dad’.
The book also covers different mindsets about the type of work you do, i.e. employee, self-employed, investor or business owner. Most people grow up learning to become a good employee without realising there are other options available to them.
I read this book in 2008 and since then I have been tracking my family’s finances to make sure that we buy assets and understand how much of our expenses are covered from the assets we have bought. As a result, our assets now cover a large proportion of our expenses which has given us many life opportunities.
What is the key message you can teach your kids from this book? It is that money can be used to make money, i.e. you can use your money to buy assets. For our kids, we highlight this point by encouraging them to save at least 10% of the money they receive for the long-term and, to invest this money (which we show to them as Blue Trees). This is set out in more detail in my blog, ‘How to teach your kids about: Saving money to make money’
As I said above, if you haven’t read it or have not read it for a while, I would strongly recommend you do. It could be one of the best investments you make for yourself and your kids.Get the book here.
One of the key money traits which is essential to learn but is super difficult to master is to “have little or no interest in what other people spend their money on”. The notion of ‘Keeping up with The Jones’’ leads to many people making poor money decisions.
The book ‘The Millionaire Next Door’ is a great book to help people see the benefits of ignoring what other people are doing. Those that are able to become rich have done so by holding on to their money and then growing this money. This means they haven’t gone out and bought the biggest and best house they can afford every time they get a big promotion at work.
The millionaires referred to in the book care more about their own wealth and development rather than caring about what other people think. It means that whilst you might live in a modest neighbourhood, you could be living next to a millionaire!
When talking to our kids, we try our best to highlight that just because someone has a big house doesn’t mean they are rich. Especially if all they have is that house and they have to work every hour under the sun just to keep it. As we never know anyone’s true financial position, we shouldn’t compare ourselves to others and instead, just focus on building our own savings (or growing our own Blue Tree forest as I refer to it for my girls). This is set out in more detail in my blog, ‘How to teach your kids about: Keeping up with the Jones'’
The book also provides some other thought provoking topics. For example, it talks about how parents that give their kids too much money (as they want to provide them with financial security) can actually do more harm than good over the long-term. You’ll have to read the book to find out more about views on this conundrum. Get the book here.
This book isn’t as well known as the three others listed above, however, it is an essential book for those that want to take some of the lessons from the books above and get money working for you. Tony Robbins and Peter Mallouk, set out how investing can be simple and they de-bunk a lot of the common misconceptions that people have about investing.
I’ve worked in the investment industry for many years, and advised some of largest investors from around the world, and in many cases the advice provided in this book is as relevant to them as it is for the everyday mums and dads. These include to focus on the long-term, keep costs low and make sure to spread your risks. Once you learn and accept these key lessons (which are clearly set out in the book) then you are going to avoid the big mistakes which could then result in an investment loss.
I now know a number of people who have successfully invested after I have recommended they read this book. You can then help your kids learn about the stock market using some simple examples which are set out in my blog, ‘How to teach your kids about: the stock market'
If you want to invest for yourself and your kids then this book is a great place to start. By the end you’ll have the confidence and knowledge to start investing in a simple and pragmatic manner. Get the book here.
There you have it, 4 books which will help you as parents materially increase your financial knowledge and, if you then teach these key messages to your kids, will materially improve your kids’ future financial wellbeing.
Take action and read one of these books over the next month:
Richest Man in Babylon - Learn the essential money habits of the wealthy
Rich Dad Poor Dad - Learn how what you spend your money on will determine your financial future
The Millionaire Next Door - Learn that your money is about you and not what others think or do.
Unshakeable - Learn that investing doesn’t have to be complex and scary
For more books and game recommendations to help your kids learn about money then please visit our resource page at www.bluetreeblog.com/resource.
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Note: For transparency, if you purchase these books through the links provided then I will receive a very small commission from Amazon which will go towards supporting Blue Tree to provide more content to parents to help teach their kids about money.