Did you know that the number one cause of stress is money? According to several studies, more people worry about money compared to health, family, work or relationships. This is true regardless of age, citizenship, gender, career, educational attainment and even amount of income. There is only one explanation to all this, most people do not have a deeper understanding on how to handle money. After all, not all parents teach their children how to handle money. In addition, money management is not part of the school curriculum. If only it was taught in school. We would not have to learn the hard way. For this reason, there are some money lessons you wish you learned in school.
The Rat Race
Have you heard of the rat race? In finance, a rat race is the endless pursuit of money. It is called a rat race because it is likened to a mouse who keeps on running around in circles chasing the cheese. People in the rat race will have financial difficulties if they stop working. Unfortunately, most people are in the rat race. Worldwide statistics show that out of 100 persons who will retire, only 3 persons will be comfortable and only one will retire wealthy. Life would have been financially better if only we learned about financial literacy long before we started earning. How about you, what will your retirement look like?
Money Lessons You Wish You Learned in School
1.Money is Just a Tool
Mindset is the single most important thing that makes a person rich or poor. Thus, personal finance lessons should always start with instilling the proper mindset. Our mindset is a product of our environment. It is our belief based on what our parents and teachers taught us. Do you have a millionaire mindset or a poverty mindset?
In order to be wealthy, you got to think like the rich. One of the ways in which rich people think differently is the way they view money. For the rich, money is just a tool.
Have you heard of the saying that “Money is the root of all evil”? Most people believe that money is something bad and that rich people are greedy. This belief came from misconceptions on some bible passages. It is not money per se which is bad; rather, it is the love for money. It is people’s attachment to the trappings of wealth that makes it bad. Money should be viewed as just a tool, not as something negative. If you have money, you will be able to buy things that you need and want. Money can also be used to help other people.
2. Money Buys Choices
Money does not buy happiness, what it does buy are choices. With money, you will have unlimited options. You can choose the job that you want, where you are going to live, what car you want to drive, where do you want to go and how you are going to spend your days without constraints and worries. In short, money gives you freedom to choose.
3. There are Other Streams of Income Aside from a 9-to-5 Job
Since young, we have been programmed to do the following:
- Study Hard.
- Get Good Grades
- Earn a Degree from a Prestigious University
- Get hired into one of the Top 500 Companies
- Climb the Corporate Ladder
- Save Money
- Buy your Dream House and Car
- Retire and Receive Retirement Money from Company
There is nothing wrong with this formula except that it is NOT the only roadmap to success. There are many other streams of income aside from being an employee. You can earn a living by starting your own business. You can earn from different kinds of investments like stocks or stock options. Nowadays, you can even earn money by becoming a professional blogger, YouTuber or online gamer. There are endless possibilities available out there.
4. You can Make Money Work for you
Schools teach students how to work for money. In school, students learn different knowledge and various skills. Most of them are catered towards the specific field of your choice. Engineering students learn technical and problem-solving skills. Medical students study about the human anatomy and physiology and illnesses. Law students specialize about the laws and legal issues. After school, students are well- equipped with all these technical skills, but how many are really ready for the real world? As a result, many people ended up working for money. Unfortunately, a diploma from a prestigious university is never a guarantee of wealth. But rather, it is all about understanding how you can make money work for you opposed to learning how to work for money.
Out of all the graduates, how many actually learned about money management? How about debit and credit? How about investing? These are crucial finance lessons that one needs to know to be successful in the real world.
Without any formal personal finance instruction in our high school or college curricula, many college seniors who graduate in the red continue to make common financial mistakes that only exacerbate their debt burdens.– Alexa Von Tobel
5. Saving Money Alone is Never Enough
We were taught the importance of saving money even at a young age. However, did you know that saving money is never enough because of an economic phenomenon called inflation? Inflation is more than just a number. It affects all of us. That is why it is important that you understand what inflation is and how it affects your finances.
Inflation happens when there is a persistent increase of the prices of goods and services which will ultimately lead to the decline of the purchasing power of your money. This means that every year the value of your money is decreasing. That is why savings alone is not enough. You need to learn to invest your money too. As a rule of thumb, the interest rate of your investments should be greater than the inflation rate.
Click here to read more money lessons you wished you learned in school.
Edited Version. First published in Pinoy Smart Living on 09.17.2019