15 Lessons Rich Parents Teach Their Kids

The right piece of advice at the right time can make great differences in the long run. The kids of the rich have a massive head start, not because of the resources they already have, but because of the mindset their parents instill within them. They start off with decades of wisdom from people who achieved massive success.

These are 15 lessons rich people teach their kids that the poor don't. Welcome to Alux, the place where future billionaires come to get inspired.

Number one: understanding how money works. Now this might sound basic to some of you, but there aren't that many people who ask themselves, "How do people make money? Why am I being paid this much money by my employer? What factors determine my salary or revenue? How do taxes work? Can that be optimized?" What needs to happen to improve my finances?

Now, rich parents usually make it a priority to discuss the value and importance of money in their household as soon as possible. This familiarizes kids from a young age with the concept of value in exchange for services provided. They're introduced to the household expenses and put in real-life situations where they can figure out pretty quickly that money is a lot harder to earn than it seems.

On the other end of the spectrum, the poor never talk about money at home. It's usually a secret how much money the parents earn or how much money is spent. The only time the kids hear about money is when parents are arguing about not having enough, thus associating the entire concept with negative feelings.

Number two: the difference between an asset and a liability. The poor never know what's a good purchase and what's a bad purchase. After poor people earn money, they go ahead and spend it. That's how they stay poor.

Let us explain in as simple terms as possible: an asset makes you money while a liability costs you money. The problem here is that poor people never realize what counts as a liability. For example, both the car you drive to the grocery store and the house you live in are liabilities. They don't generate any revenue for you; they demand money to keep on running.

Same goes with your new iPhone, fancy clothes, your smart TV, and everything else you purchased without thinking. While the rich focus all of their time and money on acquiring more assets—buying an apartment that generates rent, writing a book that generates revenue, purchasing parts of a business that's doing okay, and more.

While most rich people have fancy cars and fancy houses, the assets they have pay for those kinds of luxuries. Rich people never buy luxuries from their own earnings. They want a fancy new car? Well, they figure out how to buy two apartments and then use the rent from those apartments to pay for the lease of the car. That way, when you get rid of that car, you still have money coming in from the apartment rental.

This is a crucial difference in behavior: when money starts coming in, focus on buying assets instead of spending it.

Number three: they are not entitled to anything. The rich know the world can take everything away if they're not performing, while the poor tend to look for someone else to take care of them. Being born into a wealthy family definitely has its advantages—no lies there.

You've got access to better tools and better resources. You don't have to worry about basic needs, but you also open yourself up to new threats that poor people don't have to worry about. There's a lot more for you to lose if you're not careful, so the pressure is always on. It's really important for the wealthy to teach their children that despite them getting a head start in life, the journey ahead is just as long, and they need to remain focused on growth—not just maintaining the pace.

Whether or not they'll be successful in life depends on their own actions, and Daddy's money can only take them so far. The fortune of a family where children feel entitled usually crumbles in the third generation. First, there's someone who's really hungry and works incredibly hard to build wealth. Second, their children grow up with a sense that all they need to do is maintain that wealth. Lastly, the third generation has lost its hunger, feels entitled to success without work or sacrifice, and usually spends it all pretty stupidly.

Teaching your kids the lessons from this video will help you to avoid this type of downfall.

Number four: how to be sociable and connect with other people. You would think that more people would realize how important it is to be able to have a pleasant conversation with others. Successful people socialize their kids before the age of four—I'm not even kidding.

Here's why: if your child gets socialized that early, other kids will want to play with them. If they behave well with other kids, well, other parents want to take care of them too while they play with their own children. This has a massive snowball effect throughout life.

If people like you and like being around you, this builds up and doors start to open for you that otherwise would stay shut. Teachers will treat you better, you'll get access to better job opportunities, you'll make better friends. There's an entire tree of benefits that grows from early socialization.

Number five: increasing income instead of lowering expenses. One of the most valuable lessons a parent can teach their child is how to generate more money. It takes the same amount of effort or work to barely survive or to make a fortune. This might sound peculiar to some of you, but it is the truth.

The difference is the approach and the knowledge you use to back up that effort. The smarter you are from a financial perspective, the least amount of effort you have to deploy into the real world. That's why Wall Street brokers earn so much more than miners.

Between these two, do you think deploys the most effort? Poor people are always focused on lowering expenses as much as possible to the point that life is almost not worth living anymore. Do you think the rich care about buying a $5 coffee from Starbucks or not, or spending $30 on a movie instead? The wealthy put all of their attention into increasing the amount of money flowing in.

If you radically increase your income, there's always going to be a large amount of cash left over at the end of every month. Poor people teach their kids to lower expenses, while rich people focus on increasing their income. There's a major difference here.

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Number six: how to create daily habits that give them incredible advantages. Now, one of the most valuable skills you could teach your child is how to create a habit for themselves. Habits are amazing, and once you realize how valuable they can be, your life changes.

It normally takes around 21 days to create a new habit, and once you push through that 21-day limit, you're off to the races. Okay, that habit becomes a part of you. If you don't read enough, transform reading into a habit. If you want to get fit but never have the motivation to go to the gym, make a habit out of it.

Same goes for work. If you make it a habit to organize and optimize your workflow, large portions of your day open up for other things. The rich use the power of habit to get ahead in life while the poor nurture toxic habits, which lead their lives into ruin.

The power of habit is a tool; it magnifies what you feed it. The rich simply choose wealth creation actions as their daily habits while poor people pick negative routines. So be careful of what type of habit you instill in your child, because children learn from watching you do what you do—not from what you teach them to do.

Number seven: money is a tool, and it's a good thing. How many times have you heard people say that money is the root of all evil? Think back to the person you heard saying that. How successful were they? How happy were they in their lives?

Poor people blame their misfortunes on the lack of money in their lives and attribute an element of negativity to the concept of money as a whole. And this is because even when they get money, it leads to more and more problems which they don't know how to tackle.

The rich do the exact opposite. They understand that money is merely a tool which you use to navigate your life. It's just pieces of paper and plastic with drawings on them that we exchange for material value—nothing more, nothing less. Stop taking money so personally and use it for what it was created for: exchange it to make your life better.

It's very similar to just, I don't know, thinking about a pair of scissors or something. You could cut hair with scissors or you could stab yourself in the eye. Once you start thinking of money as a tool, the game suddenly changes, and you'll stop harming yourself with it.

In the end, stop expecting immediate results and avoid magical thinking. We're all caught up in this instant environment. Do you want to watch a movie? Stream it. Do you want to eat? Order in. Do you want instant relationships? Swipe left, swipe right. But most people don't realize that wealth and happiness don't fall into this instant category.

Poor people expect to get rich quickly, to win a large sum of money or inherit property. They have this weird expectation that their lives will somehow magically become better. But the irony is: even if they somehow got their hands on a lot of money, they're not educated enough to know what to do with it, and eventually, they'll blow through all of it.

Rich parents make it a priority to teach their kids to play the long game. Long-term thinking is one of the differentiating characteristics of the rich. Something really interesting we discovered is how much progress you can make if you think about life in large batches of time—say, 5, 10, 20 years.

There's a really great quote from an interview Bill Gates did where he said, "Most people overestimate what they can do in one year and underestimate what they can do in 10 years." The new year, new me campaign starts every January, right? But instead of planning for the next year, why don't you start planning for the next decade? Maybe this time you'll do something about it.

Number nine: knowledge is more valuable than money in the long run. There is another quote that we kept hearing a lot when we were getting started, and it took a while to fully comprehend the true implications it had. But it goes like this: "Invest in yourself; it pays the best dividends." Sounds easy, right?

You've heard us say it before, but it has very little to do with going to school or reading books. It has a lot more to do with increasing how valuable you are to the world. The world rewards people who are valuable, because valuable people can create value for others, and in exchange for that value, they can get whatever they want. But the concept of becoming a valuable person is not taught to their children by the poor.

Even just a few of the wealthy bring it up when their child is growing, but those who do see a higher probability of both success and happiness. There are many ways to become valuable—from filling a position in the company to creating a product or service that people use, to showcasing your talent to the entire world.

The more valuable you are, the richer you'll become. The only way to become more valuable is through the increase of knowledge, skill level, and time. Learn how to be better and then practice being better at it for long enough that you start to see noticeable differences.

It takes 10,000 hours to master anything. That's why the rich have their children try a bunch of activities to get a head start on that number of hours. Someone who has knowledge will always be able to generate money because they're valuable to the marketplace. But the opposite is not always true. Sometimes knowledge can be too expensive to buy.

Number 10: don't work for money; have money work for you. This is the centerpiece of getting rich, right? You can read as many books as you would like, go to seminars, classes, get an MBA—whatever you want. It's all based on this.

Poor people exchange their time for money and then they spend it. The rich use the money and they get to create more money. There are big differences in the approach to finance these two classes of people employ. Most people stay poor because they believe you need large amounts of money to invest; otherwise, there's no point.

While the rich are always looking for ways to add the smallest drop in the bucket of positive income they can find. Because it's not about the amount as much as it is about getting used to the idea of growing something yourself. You can start a business these days with less than $100 if you know what you're doing, or even for free as long as you're willing to put in the time.

As soon as you generate enough revenue, use that money to pay for someone else to do the things that you used to do to keep that business running, as you focus on growing and other more important things.

Number 11: solving problems is the quickest way to get rich. Something the rich are quick to teach their children is the fundamental difference between getting paid and getting rich. Let us explain.

So poor people get paid to take care of something someone else needs done. For example, deliver the newspaper, wash the car, answer the phone— that kind of thing. Single activity jobs, where you basically do the same thing over and over and over again. The rich never do repetitive work because it's easily outsourced; instead, they focus on the bigger problem.

The bigger the problem you fix, the richer you become. That's how delivering the newspaper became content-write websites. Same results, a lot less hustle. People will pay money for you to solve their problems. Teach your children that, and they're off to the races.

Number 12: not to waste time on things that do not correlate to the real world. Sorry to break it to you, but nobody really cares about your degree. To be honest, we feel like the entire educational system right now is pretty messed up. They're just repeating to you the same things that used to make sense a while back, with a blatant regard for the future.

You're basically getting into massive debt over skills that don't have a direct correlation to the marketplace. And if you're really passionate about anything and put in the time to master it, you've got a better shot at making it on your own anyway. Don't get degrees you'll never be able to pay for, for jobs that no longer exist.

That's crazy, right? That's what we've been doing for the past 40 years.

Number 13: how to use good debt instead of bad debt. Bad debt makes you poor, while good debt makes you rich. Did your parents ever mention this to you when you were growing up? Probably not, right? It's one of those lessons that the rich have figured out a long time ago.

Other people and institutions will actually help you get rich quicker if you know the difference between these two because it's all about the purpose of debt. Poor people take out loans with the purpose of spending that money on liabilities. They borrow money to get a new car, to get a new phone, to cover the necessities.

The rich only borrow money with the purpose of generating more money. Banks and investors love to lend money to this kind of project, as long as you can clearly explain to them how your money will be safe and how you'll be able to pay it back. Because that's how people build skyscrapers.

Okay, they don't pay out of their own pocket for the building. No, not even for the land. It is all on borrowed money. The bank is certain that you'll be able to sell it or rent the building, and that's why it's willing to take on that risk with you. You'll just have to prove that, first of all, you know what you're doing and that you've done this successfully in the past.

Number 14: 80% of the results come from 20% of the effort. Rich parents don't actually want their kids to be top of the class. Shocker, right? But it has to do with the 80/20 rule—also known as the Pareto principle or the Pareto distribution—which states that 80% of the outcome is the result of just 20% of the action.

In business, 80% of the revenue comes from only 20% of the customers; 20% of your employees basically do 80% of the work, and so on. This is a mathematical ratio that's been proven to be quite accurate in almost all enterprises and kind of life in general.

But back to why rich parents don't want their kids to be the first in class: who take up too much time and effort to improve with the smallest deviation? You would need to dramatically increase the time you put in, which doesn't leave enough time for your real-life education. There's more value to take out of experimenting in the real world than being inside studying all night to just get 5 or 10% more on your exam. That kind of trade-off just isn't worth it.

Number 15: having money doesn't make you a better person; it just solves some of your problems. Surprise, surprise! When you're thinking of rich kids, you probably picture snotty, arrogant pricks who believe that just because they have money, they're better than everyone else. But like, look, okay, that's not usually the case.

Unless you inherit your money, you probably worked your butt off to get to where you are in life. On the road to riches, you have to understand how valuable humility can be. Most rich people are very humble individuals because they never forget where they came from.

Those values don't get lost. Humility and respect for other mothers are some of the first lessons that rich parents teach their children because, well, they know what it feels like to be sitting on the other side. You should never be ashamed of having money or being successful. It's actually something you should celebrate.

A lesson most people figure out too late in life is that you can't buy a clear conscience, no matter how much money you throw at it. Money pays for comforts of the body, but not comforts of the mind or soul.

Now, we did a couple of videos a while back where we went pretty deep into what money can and can't buy. But the question we want to leave you with today is: what lesson did your parents teach you that has served you well in life? And if you're so kind, please leave that in the comments for other people to benefit from it as well.

And since you stuck with us until the very end, here's your bonus fact: Number 16—rich people teach their kids to raise their expectations. You want your kid to live a better life than you have? Teach them how to not put up with and raise their expectations.

Some people say the secret to happiness is lowering your expectations in order to achieve them. Well, the secret to financial success is to raise them and then hit them. The majority of people settle for mediocrity, never taking big risks for big wins. The competition might be fierce at the top, but there are definitely fewer players involved.

So think of it like this: would you rather have low expectations and meet them, or would you rather fall short of the highest expectations possible? If you compare both results, you're definitely better off with the latter.

Now, if you've watched up to this point in the video, please write the word "risk" in your answer to today's question, just to keep things interesting. We'll see you in the comments, my friend. Until next time, take care.