The Chinese proverb about wealth not lasting more than three family generations has stood the test of time for one main reason: it’s true.
The idea of money being passed down from generation to generation is mostly a myth. Sure, there are wealthy families that perpetuate their legacies, but according to wealth researcher, Thomas Stanley, most wealthy people are first generationally rich.
Scroll down the Forbes list of the world’s richest people and do a biographic search on them. Very few of them represent a third or fourth generation of wealth.
How Can You Help Your Children?
Teach your children the value of a dollar, and ensure that they become responsible consumers. Here’s an example of how one mother is passing on financial lessons to her young children.
Ensure that your children pay some of their college expenses. Don’t give them a completely free ride. For them to be successful, they’ll need to value money; if they have to pay for part of their schooling, they’ll stand a much better chance of being responsible with money.
Encourage your children to start investing money as early as possible. But make them earn the money they invest.
How Should Young People Think About Stock Market Movements?
Stock market assets represent pieces of real businesses. If stock markets drop, young investors should celebrate because they’ll have opportunities to buy companies (or total market indexes) at cheap prices. It doesn’t matter what your investments are worth next month, next year, or five years from now. If you won’t be retiring for many years, you should prefer to see sinking stock markets. Warren Buffett agrees.
Here’s an example of how I used fear and volatility to my advantage.
How Can you Ensure the Highest Probabilities of Success as a Stock Market Investor?
- Diversify your investments
- Ensure that you’re paying extremely low costs
- Don’t allow stock market swings to sabotage a solid plan. Keep on track.
Sample Suggestions for people in Singapore:
- Singaporeans creating low cost investment accounts
- Expatriate Brits creating low cost investment accounts
- Expatriate Canadians creating low cost investment accounts
- Expatriate Australians creating low cost investment accounts
- Expatriate Americans creating low cost investment accounts
If you can financially educate yourself and your children, you stand a far greater chance of building wealth (or maintaining it).
Then you can focus on using your wealth to make the world a better place, by selectively giving it away to empower others.