‘Don’t take risks — play it safe!’
What rich people know that poor don’t.
While I am searching for a real estate to invest in, my father recently told me — play it safe, don’t put big money in it.
Made me realize that financial literacy and risk appetite are the educations that most people lack, that prevent them from becoming rich.
Financial Literacy: People who have earned money through generations are immensely financially literate. Rich parents impart financial education to their kids that usually poor parents will seldom teach. Poor people work for money, while rich people make money work for them. Rich people learn how to add assets to their portfolio that will work for them and reduce debts and expenses, poor people often consider many liabilities as assets and end up traversing the circles of debt and poverty.
Risk appetite: To win big, one must play big. The risk taking appetite of rich people is much higher than poor people — which when combined with financial literacy will yield much higher returns. Even when poor people make risky financial decisions, they are typically based on emotions or peer-pressure rather than on sound education. Poor people think education is the way out of poverty (and in many cases it is) and advise their children to stay in school and achieve good grades and play it safe. Rich people encourage their kids to take risks early in their lives and learn, rather than failing later on or playing it safe all their lives.
Learning to play big, and the rules of the game are exactly what rich people know that poor people don’t.
For further reading:
a. Poor Economics — Abhijit Banerjee and Esther Duflo
b. Rich Dad, Poor Dad — Robert T. Kiyosaki
c. The Psychology of Money — Housel Morgan
