The Millionaire Next Door is one of those books that really opens your eyes on how to manage your finances. The authors Thomas Stanley and William Danko are college professors who have conducted extensive research on millionaires and their lifestyles. The most important lesson to learn is that most millionaires do not live flashy lifestyles like those you see on reality TV. In fact, a good portion of them live in the same neighborhood as you and drive regular cars. Here are five key lessons millionaires teach their children.
1. Don’t tell your children that you are rich/wealthy. Children that are told they are wealthy are more prone to spend money on lavish lifestyles. They think ” hey! we are rich, we can afford it” without realizing how difficult it is to earn money. These children grow up feeling entitled and spoiled, they become accustomed to a certain standard of living and when they become adults, they aim to maintain the lifestyle even when their income does not support it.
2. No matter how wealthy you are, teach your children discipline and frugality. Financial habits are picked up from parents. If you’re a spendthrift, it’s very likely your children will also be excessive spenders. Teach them to work hard and not waste. Teach them the value of a dollar and the effort that goes into earning it.
3. Emphasize your children’s achievements not their status symbols. Encourage your children to work hard and celebrate their achievements. Don’t hand them a chunk of money to pursue their dreams, let them work hard and earn that dream. It is in the working hard that their character grows. From earning their own money, they learn that money should not be wasted.
4. Tell your children that there are a lot of things more valuable than money. With all the bling and flashy things on social media, it’s easy to get sucked into a high consumption lifestyle. But remember, there is more to life than money. Don’t get me wrong, having money is great, it can buy a lot of things…including freedom. But it certainly cannot buy a loving family and relationships.
5. Don’t give your children everything you didn’t have, instead teach them things you didn’t know. If you grew up in a frugal home and are now relatively wealthy, its tempting to want to buy a lot of things for your children. Especially, things you wished you had growing up. Instead of buying things, spend time with your children, teach them things you didn’t know. Build up their confidence.
The points above are a very brief snippet into the “The millionaire next door.” This book has a wealth of knowledge in it and I would highly recommend it. If you don’t have the time to sit and read, you can listen to the audio version. I thoroughly enjoyed listening to the audio version of this book and gained a ton of insights.