How to Teach Your Kids to Manage Their Money

Interview with Tom Corley

Tom Corley, author of Rich Habits-The Daily Success Habits of Wealthy Individuals and Rich Kids, explains how to teach your children rich habits even if you aren’t wealthy yourself and the most important financial lessons that you can teach the younger generation.

Douglas Goldstein: One of the things that I find in my day job as a financial advisor is, not to put kids down, but a lot of times parents and the older generation feel that the younger generation is not motivated to deal with money on their own, and they handle it really poorly. How would you suggest to start teaching kids to really get into good money habits?

Tom Corley: I think the whole reason I wrote Rich Kids was to help parents, grandparents, and teachers to become mentors to their kids in matters of money and in non-financial matters that will help them become successful in life. The reason I thought it was an important book to write was from all the research that I have been doing, it’s obvious to me that somewhere close to 95% of the population of parents out there just aren’t having the conversations they need to have with their kids. There’s a lot of reasons for it, but I think it comes down to not having gotten into the habit of mentoring their kids. It’s just not something that’s on their radar. They are rushing them off to supporting events and to some extracurricular activities, but nobody is actually having a conversation on the things that I talk about in the book, such as finding your main purpose in life and the kind of etiquette you need to have in order to be successful. When they get out there, if they go college and they are in the real world, they find out pretty quickly that the lack of etiquette holds them back in life. I thought that was important to include in the book. The reason I say they have to get into the habit of being a mentor is that it’s something that they have to do every day. The blueprint for this is really in my book Rich Kids. I kind of walk parents through it via a story. I love writing stories to teach the lessons from my research, and this way it’s interesting and they can pick up on some of the conversations they should be having with the kids which are in the book.

Douglas Goldstein: When a parent wants to teach his kid the right way, in the book the way it’s sort of structured is that there’s really a daily conversation with grownup kids, talking about these points head on. Is that what you’re suggesting, or is it possible just to kind of teach your kids through example?

Tom Corley: I can tell you that I picked up some good habits through example, just from watching my parents, but sometimes it’s not enough. What needs to happen is you need to walk the walk and talk the talk. So you got to do both. You can’t just let them see what you’re doing and hope and pray that they’ll emulate you. You want to have them see what you’re doing and then reinforce why you’re doing what you’re doing, in the hope of bettering your life and bettering the lives of your children. So you’ve got to have the conversation. I won’t say it has to be daily, but I would guess if you want to be effective, you’ve got to be having a conversation with your kids at least three or four times a week about different things, different issues that matter to success in life. If you don’t have that conversation, then what you’re doing is outsourcing it to someone else. If you don’t become the mentor to your kids, then somebody else will, and it may not be the kind of person you want.

Douglas Goldstein: A lot of people are just not particularly financially successful. They’re maybe single parent homes, they’re struggling themselves, and they’re thinking, “I’m a failure financially. What can I really teach my kid?” and the fact is they often just teach really bad lessons. What can someone in that situation do?

Tom Corley: What’s interesting is that in my research, there were 233 millionaires. 177 of them were self-made millionaires, meaning they came from households where their parents were either poor or middle class. So that parent’s household wasn’t a rich household, yet the parents taught these kids. These self-made millionaires taught them all these different habits even though they hadn’t learned about them until late in life. They nonetheless taught their kids these habits and reinforced them, and then their kids went on in life to have enormous success with these habits. They are in Rich Kids because really it’s the habits that these self-made millionaires’ parents taught them that enabled them to go from zero to in some cases $20 million in as short as 12 years. It’s like building a foundation for a house. When you teach your kids these good habits and the right mindset, the positive outlook, what I like to call wealth ideology, instead of the poverty ideology, if you teach them these fundamentals, then you’re building a solid foundation for them.

What’s the Connection between Gossip and Wealth?

Douglas Goldstein: I know that there’s a study that you pointed out that in looking at rich people, only 6% of them claimed that they get involved in gossip and talking about other people. Seventy-nine percent of poor people claimed that they get involved in gossip. Can you give us the connection between wealth and gossip?

Tom Corley: Gossip, for the most part, is negative. There are very few people running around saying, “You’re such a great nice person. Did you know that...?” It’s almost like we hardwired our brains, and this is actually neurologically factual. We’re hardwired for negativity. Our brain is always looking for negative signs out there to protect us. So that’s just the way we’re hardwired, so when we gossip, it’s always negative because that’s the way our brains are hardwired. When I did the Dave Ramsey interview, the hot button for him was the stuff that you just cited. The reason, he told me on the radio program, that it was so interesting to him was because he had in his office a no-gossip policy and the reason was just what I found in my research. Gossip is mostly negative. It destroys relationships. You’re inadvertently stabbing people in the back, and remember any relationship could have contacts in their relationship database with people that could open the door for you or your kids to get into a college or an internship, or whatever. So when you damage a relationship, you not only damage one relationship. You damage the 200 or so people that that person knows, and that’s an average from some marketing survey that was done 20 years ago that the average person knows 200 people. You completely lose the ability to tap into that person’s network. So that’s why, if you got to gossip, it has to be only positive uplifting things because the negative stuff gets back and the positive stuff gets back. But as a general rule, just avoid gossiping because you’ll destroy your relationships and that will hurt you and your family.

Douglas Goldstein: I want to focus on something else you wrote about in Rich Kids, which was the importance of finding your main purpose in life. I think a lot of times people think that’s just such a big hairy audacious goal. This is too much. So what do you mean for people to find their main purpose?

Tom Corley: What I found in my study is I can boil down the secret to success as being engaged in some passionate pursuit, focusing on that passionate pursuit persistently. and that’s really the secret to success. So the key is finding your main purpose. Sure, everybody out there, I think, would agree, “Easier said than done, Tom.” How do you find your main purpose in life? If you don’t actively try, you won’t, or you’ll have to rely on luck, random luck, to find your main purpose. So what I talk about in the book, is almost an algorithm, if you will, on finding your main purpose in life, and it involves really a few steps. What you want to do is engage in different activities, and I think six months is a good time frame for you to engage on a new activity. Then, after six months, if you are not just head over heels thinking about it 24/7, then it’s not your main purpose, so you move on to the next thing. Let’s say you do that for five years and you’re a 25-year-old person. At age 30, you’re talking about engaging in 10 different activities, and I promise you one of those activities that’s new and noble that you didn’t even pursue before is going to spark some interest in you or splint it off into another direction as it did with me. I wrote Rich Habits, the book, because I was passionate about the research I had done and the training that I was doing, and what ended up happening was that it splinted off into becoming passionate about writing books and doing speaking engagements, which I had never even thought about. Even if there’s a 20% spark of passion inside an activity, it could lead to another activity that you would’ve never been aware off if you hadn’t at least tried these new different noble activities. You can’t just wish it to happen. You can’t just sit back and say, “One day my main purpose will visit me.” That’s not how it works. How everybody finds their main purpose in life is by pursuing different activities and sticking to them after six months to see if it’s something you’re passionate about. If not, move on.

Douglas Goldstein: How can people learn more about what you’re doing, get your books, and continue to follow you?

Tom Corley: RichHabits.net is the hub. If you go there, you can not only get my books, but I put all of my research articles on there, and many of these research articles line up in Business Insider, Credit.com, Money Magazine, and so on, all the latest information that I’ve come up with. If you want to get some free ebooks, there’s a number of free ebooks you can download. There are number of free reports that are more extensive than the articles that I write, and you can download those. You can see all my media interviews, and there’s quite a bit on there so you can actually watch me on video talking about some of these important topics.