your child needs to learn how to read a cash flow statement if they want to be rich?

Cash Flow and the need to teach kids about money

Last night was more of a lesson to me about the need for children to learn about money, cash flow and how to make money than it was to the kids? I was really surprised.

Last night my daughter had a friend who was sleeping over - we didn't get a chance to play cash flow for kids last Wednesday night so I told her we were going to play this Friday night [ friend or not ]. Which she didn't mind.

After a few minutes of simple instructions on how to play the game - her friend, my daughter and my five year old started the game. After a few rolls of the dice my "girl' excited son was spilling the beans... "the way to win is not to get debt and get money" [ his interpretation of passive income ]. At first I was surprised how my daughters friend who we will call "silly" did not seem to understand the basics of the game. I kept jumping in to help her understand that the name of the game was to create income [ passive income ] thru building business' and other financial venues. It took a while but she started catching on.

It's so easy a caveman can do it
I love the Gieco commercials where they make fun of the caveman - you know: "it's so easy a cave man can do it". Well, even though silly was not yet understanding the concept of the game, she applied the time tested tradition of "monkey see, money do" method. Once she saw that by buying a business or investing can generate extra money - see cuaght on to the game.

It surprises me to see how when you compare what these kids are learning today - buy this, get it now and "credit" is the answer to everything - no wonder we have so many people facing poverty. The sad thing is - "silly" my daughters friend said - "If I go broke when I grow up I'll just marry a rich old dude"... I couldn't tell if she was joking or not?

Granted my daughter has read most of "Rich Dad Poor dad" and has played the game atleast 8 times by now - it still disturbed me how this young girl had no clue how to manage money or why building a business was better than just working at a job.... Ofcourse once she saw how fast her cash pile was growing when her "assets" [ meaning "business & Investment" ] were making her money - that even though she didn't understand the principal - she had no problem applying the principal in order to make more money in the game.

Easy way to teach kids about money [ cash flow ]
While reading the book "Rich Dad Poor" did make it easier for me to teach my daughter about money and to give her a simple understanding of how a "cash flow" statement works - you may want to take a different approach. Here is a basic simple definition I use:

Cash flow: is a report that shows how you make money and how you spend money. Plus it also shows you if you spend more than you make [ profit, break even or get further in debt ].

Why Cash flow is important: if you want to be rich or just live comfortable [ kids prefer "being Rich" theory ] you have to learn how to track your money so you know how to manage it. You need to know what makes you money so you can duplicate it. [ you can later teach about passive income verses earned income ]

Cash flow - Asset or liability: I prefer to stick with rich dads definition - "an asset puts money in your pocket, a liability takes money out of your pocket".

[ it's not about not buying nice things - it's about building a steady passive income first so your passive income pays for your nice things. We poor & middle class people work hard to buy nice things first and are overwhelmed by all our debts from our nice things... car, boat, furniture we soon replace a year or two down the road and we're still paying for...ten years later???]

** Even though I am an adult, like most parents I get a bit overwhelmed with trying to understanding all the complexities of finances, income statements, balance sheets and cash flow statements. My suggestion would be to teach thru a method that best suits your child. My daughter loves reading more than games - so I started with reading a book. Your child may be more hands on and may learn more easily through "interaction" with a game - use your judgment - but above all, their children so remember to keep it simple and at their learning pace.

Here is an adult version of the definition of the importance of cash flow:

Importance of Cash Flow Statement
A cash flow statement is a document that shows how much cash (or cash equivalents) comes into a business and how much goes out. A cash flow statement is considered a necessary companion to an income statement and a balance sheet when evaluating the financial condition of a business. A cash flow statement can be presented in several different formats. However, complete, concise and clear disclosure of the movement of cash is the only true requirement for a cash flow statement. Cash flow statements commonly cover periods of one year or more, with more or less detail, depending on the intended use of the cash flow statement. How to prepare a cash flow statement

Blank Cash Flow statement
here is a link to a blank PDF file of a cash flow statement for you to play with and use.
http://www.wflains.org/graphics/Monthly%20Cash%20Flow%20Statement.pdf