Redefining Wealth for Our Youth-and the Rest of Us
Jim Correll, director Fab Lab ICC at Independence Community College, Independence Kansas
Youth Need More Financial Education
"Youth need more financial education." I hear that one a lot, usually followed up with something like "All young people should know how to balance a check book." I certainly agree on the financial education but we'd better start saying "manage a bank account" instead of balance a check book. Most youth today barely know what a check is, let alone check book. In a world where bills are paid by debit cards and smart phones, managing a bank account is more about knowing how much money you have and if the withdrawals were authorized by you.
There's a deeper need for youth, and the rest of us, to better understand wealth building and why it's important to think about wealth building at an early age. Ask a bunch of young students what it means to be independently wealthy and you'll get all kinds of answers, perhaps centered around the idea that the term means one doesn't depend on any person or outside source of income.
"Independently Wealthy" Redefined
First, if your goal in life is to find something you love doing that helps other people, letting the money take care of itself, you don't need to have a goal to become independent of the need for income from an outside source. I think a better definition for independently wealthy would be to be in a financial position to take advantage of life's opportunities as they present themselves.
Three Kinds of People Regarding Wealth
Indeed, I believe we should define three kinds of people regarding wealth. First, the ones that are poor and will always be poor because they spend everything they earn. Second, the trapped, those that have too much debt for cars, houses and expensive toys they can't afford. Third, the independently wealthy who, no matter how much or little they earn, save at least ten percent for future opportunities including retirement. The part about helping others should go on, even in retirement. Being independently wealthy, due to all those years of saving ten percent, gives you the greatest flexibility in how you serve others in retirement.
The Trapped May Have No Savings
Many times the trapped have no savings and therefore are the least likely to take advantage of opportunities. In addition if the trapped find themselves in business or employment situations that they really, really don't like, they are afraid to leave because they will miss payments on the house, cars and toys while looking for the next opportunity. You don't have to talk to many adults before you find one or more who are really miserable in their employment but are afraid to quit and find something else due to their debt.
The "Independently Wealthy" Have Advantages
The "independently wealthy", those that have saved the ten percent of their earnings are in the best position to take advantage of opportunities that come along and get out of bad situations. The opportunity might be a car, house or business at a great price, if the buyer has cash. They have the confidence to quit a job they hate because they have enough money in savings to make the payments while they look for a new employment opportunity.
Save Ten Percent No Matter What
While there are all kinds of extenuating financial circumstances that we could use as an excuse not to save, no matter what happens, we should be able to put away ten percent without missing it. By the way, we should all be using insurance to militate against the worst financial calamities.
The overall goal in our life's financial planning should be to put ourselves in a position to act independently in our quest to help others while making our living. Even if the savings plan is not implemented perfectly, I can tell you from personal experience, your financial picture can turn out fairly well, with enough money to pay your bills and take advantage of financial opportunities, all while helping others as you go about your daily life of "making a living."
Jim Correll is the director of Fab Lab ICC at the Center for Innovation and Entrepreneurship on the campus of Independence Community College. He can be reached at (620) 252-5349, by email at firstname.lastname@example.org or Twitter @jimcorrellks.