W is for Wonga – Becoming Money Literate

Question: “Do you love money?” Some people will say yes and some, believe it or not, will say no.

• I love money because it can buy me nice things.
• I don’t like money because money is the root of all evil.
• The more money you have, the more successful you are.
• Millionaires are always happy because they have loads of money.
• Money is like oxygen; you need it to live.
• I would rather be happy than rich.

Above are some statements that can be heard when the subject of money is raised but whatever your attitude towards money is, we have to face some facts – we need it to live but the earlier in life we understand financial literacy, the richer we will become.

Being literate is a great skill for reading a book or writing a letter but wouldn’t it be great to read money from an early age. It’s painful to say but financial literacy is a subject that isn’t taught in the school curriculum but is probably one of the most important life skills ever. How many kids would have a huge head-start in life if there were regular lessons on money management?

The Misconceptions of Money.
There is a belief that you need to be a millionaire to be successful and happy. Not true – there are many unhappy millionaires. Some people have lots of money but no time to dedicate to their lives.

Studies show that the most successful people in the world are the ones who live just below their means or those who make money work for them. If someone earns one million pounds in a year and spends two million, they are not successful, are they? If they spend half a million then maybe they are. The people who are the most aware of their spend and careful with their cash will enjoy success but enjoyment and generosity also come into play.

The story of the miser
A man with a huge bank balance could afford to live a comfortable lifestyle. Sadly, he was really tight with money and rarely went out of the house. He had very few friends and people who came into contact with him were usually greeted with a scowl. He was dirty and so was his modest, terraced house. He was loaded but had nothing. This person had little satisfaction in his life and went on to be very lonely indeed. All the money in the world could not buy him happiness because he would not allow himself to move away from his obsession with not spending money. Is that a good way to live? Erm, no!

The story of the Sir Spend-a-lot
One of our former students, a teenage worker got paid weekly, every Friday. He would go to the pub and celebrate payday, the weekend. Woohoo. He would also pay back his parents the money he had borrowed the previous week and then live it up on Saturday. On Sunday he would borrow some money off his parents to put petrol in his car and then throughout the week for similar essentials, until Friday would come around again. Yep, the same scenario would occur. This person is living on credit or loans and this is unsustainable in the long term. The spender lives from payday to payday and is currently battling to stay even. In the short term, it may be enjoyable but the day arrived where he could not afford to make the next step in life. He struggled to become a homeowner, experience luxuries and be free from financial worries because he was constantly paying off the next debt. He eventually became bankrupt.

The story of the super-saver.
Another student who was paid a grant of £30 a week in cash every Friday would immediately transfer three pounds into a savings account. Other students would laugh at him but he would proudly show off his bank balance as it grew slowly. He would say, “If I can save three pounds out of my thirty, then imagine how good I will be at investing money when I am earning mega bucks?” He was a shrewd young man who went on to be really successful in his career and is now living a great lifestyle from investments. This all came from his early respect for money. It doesn’t matter how small or large the amount, he started a savings habit.

Which one do you think is the most literate with money?

Wonga becoming money literate

Ways to Become Rich
It’s fascinating talking to young people and hearing of ideas of how they think they can become rich. A popular way is to get paid for doing absolutely nothing. Nice try but let us know when you’ve found someone who will pay you for that. Here are some other popular ideas:

1. Marry someone rich: To attract someone rich, you would need to hang out with rich people then convince them to marry you and give you lots of money. Good luck if you choose this option but it is a long shot.

2. Rob a bank or do something else illegal: There was a recent article about a multi-million-pound bank heist that took seven years to plan, the robbers got caught and were given twenty-two years in prison. If you don’t get caught the first time, you will always be on the run. We talked about X-rated illegal crimes and breaking the law in the last chapter; definitely choose another option

3. Inherit or win a fortune: The odds of winning the National Lottery in Britain are fourteen million to one. Inheriting lots of money requires someone dying and leaving the money to you, assuming they have lots of money to leave you. Again, these are long shots or require something sad to happen to someone rich. Also, a recent study in the USA showed that seven out of eight lottery jackpot winners ended up broke within seven years. Half file for bankruptcy within four years and the suicide rate is three times higher than the national average. Perhaps instant fortune doesn’t buy happiness.

4. Invest in a get rich quick scheme: Sounds good but these don’t actually exist. The odds of getting rich quick are normally similar to the odds of winning the lottery. The best advice on get rich quick schemes, if something sounds too good to be true, then it usually is and is probably best avoided.

5. Generate a relatively high income from what you do for a living and invest a proportion of that on a regular basis. This could be a winner, as you would not be relying on someone else. 

Option number five will lead you to something called “financial freedom.” 

There are two main types of income:

Linear Income – Time for Money.
You are paid for your time. If you earn £10 per hour and work ten hours, then you will receive £100. You stop working and you stop getting paid!

Passive Income.
This is sometimes called “royalty” or “residual” income and is where you earn money from something without having to repeatedly do some work. Ways of achieving this could be from:

Investments that pay an income – putting down capital (a large sum of money) into an investment, perhaps property, a bond or shares, for instance. Money is paid back in interest or income.

Royalties – this is where someone is paid over and over again for work they have done once – pop stars, authors, network marketing.

Assets versus Liabilities.

It is good to understand that assets make money and liabilities cost money.

A mobile phone or a brand-new car is a liability, because it is unlikely that you will ever be able to recoup your money from it, as it depreciates in value. For example, when you buy a new car, it automatically loses value the minute you drive it. It is unlikely to ever be worth anywhere near as much again in the future.

Property or stocks can be assets, as they generally increase in value. They can also decrease though and that is called financial risk.

Please note – a lot of investments are normally more successful long term and some carry risks of losing as well as making money. For example, stocks and shares can go down and even go bust altogether. This is where you really need to go and talk to a fully qualified and trusted financial adviser for more information.

Milo says, “look at ways to learn about how you can make money work for you. Whatever age you are, it’s not too early (or late) to start.” You can read more in our chapter W is forWonga from Don’t Get Your Neck Tattooed, available in our shop.

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