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How Financial Literacy Skipped A Generation

financial literacy

 “The best time to plant a tree was 20 years ago.”

 My grandmother was a tween on a plantation during the Great Depression. Her widowed mother, an immigrant, was extremely frugal and disciplined in her kakeibo (Japanese household budget), adding water and rice to create extra portions of stew, altering discarded flour and rice sacks to craft dresses and pants, and often, going to bed without supper.

Eighty years later, as a child in grandma’s shopping cart, I rarely saw her purchase items that weren’t on sale and never saw her NOT use a coupon. However, she was not a “cheapskate”- her New Year’s “red envelopes” to us were stuffed with cash.

But grandma did not want her daughter (my mom) to live a harsh life. So, she inadvertently spoiled her and ended up raising a child who was “wanton” regarding budgeting her money.

And I’m not going to lie; I’m someone whose childhood was also “drenched” in money. Although I didn’t live in a mansion, I never went hungry. My parents always had the wherewithal (or so it appeared) to pay for heat during the winter, trips to the sports stadiums, multiple vehicles, and fancy restaurants.

However, because my grandmother used to babysit me, some of her “Depression Generation” frugality and kakeibo rubbed off.

Financial literacy skipped a generation.

As a tween, I came across my parents’ credit card bills and was stunned at their five figures of interest debt!  Now, their loud and sometimes violent arguments about money made sense.  My adolescent mind reacted by peddling backward to being a “penny pincher” like grandma.

I started “fixing” my worn-out shoes with duct tape. I bought small items in bulk, like candy, to resell at school so that I could fill my pockets with coins and dollar bills. I became obsessed with grandma’s adage, “It’s not how much money you make, but how much you save that counts.”

The point is, I wanted to educate myself.

Although I wasn’t the kid whose “odds were stacked against him,” I knew I didn’t want to be one of those people whose carelessness resulted in debt.

So, I started asking my Asian friends’ immigrant parents for personal finance tips because money can predominate East Asian culture; young children are taught that frugality is an admirable practice.

In Chinese Taoism, we have a money god called “Tsai Shen Yeh.”

During Chinese New Year, we greet our families and friends with “Gong Xi Fa Cai,” which translates to “wishing you enlarge your wealth.”

Even the Chinese value for prosperity is “Rong Hua Fu Gui” or “Work Hard to Make Money.”

I began implementing my newfound knowledge and creating a better financial future for myself.

… and so should you.

An ounce of prevention is worth a pound of cure

You are going to face financial challenges every day of your life. If you are not prepared to confront them, your imprudent decisions, or lack of decisions, will erode your bank account and your mental state.

So be wary of the emotions that stimulate rhetoric fallacies, not logic, to influence your decisions- think about both the process and its consequences.

For example, when you face financial adversity, your guilt and remorse may cause anxiety. And anxiety creates the need to self-medicate yourself with services or products.  However, these home remedies of logo products and boutique shopping bags have a price tag. You know what I’m talking about.

You justify to yourself that “eating out one more time” or “buying one more trinket” is okay because it is an “instant gratification” that temporarily alleviates the anxiety and unhappiness that weighs you down.

… Until the weight of debt’s emotional baggage reappears on your shoulders.

Because you know your financial circumstances are crummy, your income did not increase, and it’s not a good time to be financially inept.

But you also understand that if other people can put their financial house in order, so can you.

Ultimately, the question becomes, “Are you willing to take the necessary steps to improve your finances?”

If your answer is “No,” perhaps you feel hopeless about the future because you see your savings account dwindling to $0. Maybe, it’s time to admit to yourself that you are an “Instant Gratification Addict.”

That said, you might not be able to erase your desire for instant gratification, but you can redirect it.  The first building block of frugality is choosing to be emotionally gratified in less expensive ways, i.e., with inexpensive items or activities, free outings, emotional connection, etc.

Or to choose items that are an asset, not a liability, and have long-lasting, not temporary value, such as a tool you need for work, a good kitchen knife, prescription eyeglasses, etc.

Remembering the proverbial, “An ounce of prevention is worth a pound of cure” may help you!

Read a book or two, speak with your prudent friends, or watch a few YouTube videos — then implement your newfound knowledge to understand the value of “Deferred Reward.”

Because improving your financial skillset will build competence. When you build competence, you are building confidence. And when you are competent and confident, you can handle your money better.

Let’s move on.

Traveling the world becomes manageable if you budget your money.

Right now, the financial habits I learned as a child and the fact I’m working every day are helping me sustain my lifestyle— traveling the world. Plus, I’m able to save towards retirement, so that’s a good reward.

But how am I doing it?

First, I choose countries with a significantly lower standard of living, and currency conversion, compared to America. Emphasis on significantly.

Next, I use “kakeibo” for budgeting my money.

I spend 80% of my income on necessary items: food, airfare, rent, phone, Wi-Fi, transportation, money building skills, etc.…

10% of my income pays for my “passion,” Brazilian Jiu-Jitsu. Sometimes, I can save that 10% by exchanging my techniques for the free use of the gym facilities.

Meanwhile, the other 10% is put towards my future retirement.

I purchase as many of my clothes and household necessities as possible from thrift stores. And I can’t remember the last time I bought a $5.00 barista coffee.

But I would also like to point out; I’m lucky that I don’t have any student loans and I always try to “live within my means.”

Now, you could argue that not everyone can afford to travel the world or live my lifestyle.

That’s fine. You don’t have to live it.

But you do need to be aware of these statistics:

  • 40% of Americans are unable to find $400 to cover an unexpected expense or emergency.
  • Millions of Americans don’t know their credit cards’ interest rates (this is quite absurd), with the average U.S household carrying $6300 in credit card debt.
  • 65-year-old couples who retired in 2019 will need $387,644 to pay for all health-care services for the remainder of their lives (HealthView Services).

Ultimately, if you don’t change your spending habits, you may end up being such a statistic.  If you don’t put the time and energy into becoming financially literate, your situation will not improve.

Just spare 30 minutes a day to learn about money, don’t be lazy.   Read financial articles, look at YouTube videos; it’s just 30 minutes a day.

Insert your own cliché quote about the power of consistency.  

What About the Power Of Compounding?

If you take advantage of the power of consistency, it will only be a matter of time before your ability to manage money improves.

You might as well take advantage of my favorite financial tool, compound interest.

Understanding how to use this tool to your advantage will improve your financial literacy and help you save more for retirement.  First, you work for the money, but then compound interest makes the money work for you.

Tom Gardner, CEO of The Motley Fool, says compound interest happens when you reinvest your previous earnings.

Essentially, it means “interest on the interest” and is the reason why so many investors are successful.

For example, if you invest $500 a year in a low-cost index fund and it earns 5% interest, or $25 a year. That $25 is reinvested and becomes part of your investment.

Now, you have $525 invested at a 5% interest rate, and you’ll receive $26.25 the following year.

So, your total after two years is $551.25.

Now, let’s say you invest a greater amount of income per year, and you keep investing a similar amount over the next 30 years. Your net gain could be exponential.

Not only that, but the more time or rather, the earlier you begin letting your money compound, the greater the potential return will be around retirement time.

Basically, the value of your money will change depending on what time you invested it.

According to Arch Stone financial,

“Your dollar amount today is worth more than the same amount at some point in the future. This results from the impact of inflation.”

Wait, But Isn’t Inflation Bad?

Inflation can be bad.

When prices rise over time, that’s when inflation occurs. And when inflation occurs, the purchasing power of your money decreases.

Another way to say it is, your dollar today can buy more now than in the future.

But don’t worry. If you earn an interest rate that exceeds the inflation rate: you can invest your money and offset the effects of inflation, resulting in more money in the future.

Oh! And by the way, the stock market has historically beat out inflation!

Still not convinced?

Even Warren Buffet said, “My Wealth has come from a combination of living in America, some lucky genes, and compound interest.”

Inevitably, you need to understand that your income can accumulate over weeks, months, and years.

But, most importantly, that is remaining financially ignorant will annihilate your long-term chances of peacefully retiring.

And if you can’t afford to allocate any money towards your retirement, start figuring out how to reach that point!

So, I implore you to listen to the proverbial “early bird gets the worm.”

And if you don’t know what else to do, check out this article right now. Then, go look up the other financial tools that you can add to your toolbox.

Finally, you may want to copy the financial habits of the East Asian people in your network— chances are— they are thinking decades ahead of you.

As my grandmother would say, “The best time to plant a tree was 20 years ago.”

Gong Xi Fa Cai.


About Max Hsu

After graduating in May 2018 with a B.S. in Cyber Security, Max Takaesu Hsu decided to explore untrod paths. He became a highly competent travel hacker who is a freelance content writer on Upwork with crackerjack SEO experience. This digital nomad goes by the nom de plume, the Wandering Warrior Poet and, is currently working from Serbia. This year alone, he traveled through three different continents while financially sustaining himself. You can follow the Wandering Warrior Poet on Instagram and Twitter.



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