In honor of Father’s Day, we asked MTI’s Tyson Clayton to share the best money lessons that he and his wife have passed on to their two young adult sons. Since 2004, Tyson has taught thousands of students while serving as a full-time trader, international speaker and markets instructor. For more information, join his Money Flow Trading Room or Equities on Demand sessions.
Here are Tyson’s top tips for parents wanting to teach their children how to save and manage money.
1. Always work hard.
“I’m going to support my sons in whatever they do. I don’t care what they do for a living, but the number one thing I taught them is that you need to work hard. There’s nothing that ever overtakes hard work. However, you have to do something that gives you some satisfaction, or at least that you don’t despise doing.
Because then by doing that hard work, you’re going to get better at your job and that hard work will lead to a better job. But it starts with hard work, and the best path would be to combine that hard work with something that you’re passionate about. If you’re not doing something you are passionate about right now, continue to work your butt off anyway because the cream rises to the top and you’ll be rewarded eventually.”
2. Be a super saver.
“One of the hardest lessons for young people to learn, and one of the best lessons that any parent can teach their kids, is for them to learn patience. Kids should know that they don’t need to spend their money today, so just be patient.
The way we raised our kids is they had to have a job. They didn’t play sports. So guess what? We told them they were going to do something productive rather than just sit at home and play video games. So they always had a job and we would give them 15% of their paychecks.
It’s still all their money, but we have a bank account set up to save the rest. And we said, “Okay, you only get 15% of your checks every two weeks in spending cash. The cash is yours to spend however you want, but you’re going to have this other 85% sitting in the bank account.”
Both of my sons graduated school with $25,000 of their own money. I didn’t give that to them. It was their own money because we forced them to save that money. And the reason we did that is because they didn’t know what they were wanting to do in life. I don’t think that the average person really knows anything about life and what they want to do until they’re probably 21, 22, 23 or 24 years old.
So now they have a financial cushion to figure out what they want to do without getting themselves in debt. Now, you might draw that money down, which is okay, but that’s what it’s there for. It’s there to give you a couple of years of cushion, so you can figure life out and then establish yourself.”
3. Avoid debt or pay it off quickly.
”I think there are a lot of younger people out there that are investing while they’re still in massive debt. So my advice is to pay off your debt first to become debt-free. Don’t accumulate debt.
And if you do get in debt, the best investment you could ever make is paying it off soon because that helps you to be more productive. It also creates more mind space overall in your life when you don’t have that looming worry hanging over you.
There’s a little bit of a psychological aspect to debt in this whole capitalistic world we live in. Some people say, ‘Debt is good for you because it makes you work harder.’ Well, it’s unfortunate that people think that way.
Don’t be that person who has to work so hard because you’re in a bunch of debt. Work hard because you’re doing something you love to do instead. So pay off or try not get yourself in debt, which means sacrificing today for the life you want tomorrow.”
4. Invest cautiously.
“I taught my sons that there are massive wealth-making opportunities within the market, but there are also money-losing opportunities if you don’t know what you’re doing. They’ve seen both sides as far as with my investments. They’ve also seen both sides with their own investments because they both bought some Bitcoin at the bubble time in 2017 and watched it tank down. They watched their $200 go down to $20. They saw the losses that could happen.
They learned that first you must make sacrifices, work hard and pay off any debt before you start investing. Better yet, you can avoid debt by living a basic lifestyle and creating a money surplus. And when you have a surplus, that’s when you can start to invest and the faster you will get to that point in life where you can afford to take more risks.
Whether it’s at age 20, 24, 30, or even 35, you’re still young enough so now you can start to take some investment risks. You don’t take risks on the money you need to live. But now you can start to look for those stocks and those investments that will pay off big as long as you’re not putting yourself into debt.”
5. Don’t over-diversify.
“There are probably 300 or 400 stocks in the market that not a single day trader in the world could beat. If all you did was buy those top stocks and hold them for 15, 20 or 30 years, you’d be set for life. There’s no day trader in the world that could turn $1,000 into $16 million like buying Walmart stock in 1970 has done.
So, the lesson for young people is to look for those types of great long term opportunities. Find the stocks that you believe in and find the things that you like, then invest in them. Play the long game. You shouldn’t be focused on just one stock, but you also don’t need to be invested in 82 stocks. Don’t be so over diversified, focus on a few of the best stocks with the most upside potential over the long term.”