What is Financial Intelligence?


Financial Intelligence is being number smart and acknowledging that those numbers have a monetary value.  Basically it is about how to make money, keep money and grow money.

 

According to Robert Kiyosaki of Rich Dad, Poor Dad fame, Financial Intelligence is 10 % technical skills and 90% Emotional Intelligence.

 

Why should this interest you?

 

As we get older we know that we must look after ourselves ie we cannot expect our families or government to pay our bills.  So by learning basic principles we can look after our future.  Eg In the classic book ‘The Richest Man in Babylon’, we hear about the golden slaves, and those slaves having their children and grandchildren for us.  In modern terms that is compound interest.  Even low interest rates allows our money deposited in banks to grow, and that compound interest is added to the principal, so the growth is exponential.

 

Then there is active income versus passive income.  Most of us either work for others as an employee or have our own small business where we are self-employed and we trade time for money.  This could be as a brickies labourer or a doctor. Our time is limited so our income is limited.  The goal that better benefits us is passive income where rather than working for money, our money works for us.  This is most commonly investing in property or shares.

 

 

Is there an age you believe is good to start learning about money?

I have come to believe it is never too early to learn about money.  Eg Recently I was visiting a girlfriend and her six year old daughter had helped her mum grow some plants.  She had a small stall selling these plants.  We had a play at her shop and agreed on a price.  I then gave her pretend money as is usual when playing games with small children.  She got upset then her mother explained that she really does sell them.  Her mum negotiated a new price, equivalent of $1, and we were both happy with the sale.  Initially I had been shocked but then I thought “Why not?”

 

Another example could be children or teens designing their own rewards system in the home.  Household chores can be exchanged for tokens which equal whatever the desired currency. Eg cleaning the toilet + doing the dishes every night for a week = 1 special stationary item, or a certain number of hours playing the chosen game.  Again teaching children and teens the concept of trading time and effort for rewards.

 

These questions and answers form the Notes from the interview on ABC Radio, Goldfields Western Australia – Part 1

With Lisa Van Oyen, Saturday 16 July 2011, 7.15am

 

CLICK HERE for the next post – Gift of Work which is Part 2

Your thoughts? Do you agree or disagree?  Start a conversation on this important topic by commenting below.

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