~ Robert Kiyosaki ~
You’ve probably heard of the phrase, “the 800-pound gorilla in the room.” If not, it simply means there is something—a topic or an idea that carries some weight or needs to be reckoned with—that everyone knows about, but no one wants to talk about.
When it comes to our kids, I believe that there are four gorillas they will face that will significantly impact their financial future. Few people talk about these gorillas, but they’re out there. It’s vital that we prepare our children before they encounter them later in life.
800-pound gorilla #1: The new problem of growing old
It used to be that 65 was considered old. Today, “65 is the new 45″—or at least that’s what us baby boomers would like to believe.
With advances in medical technology, the new old for your child may be 90 or even over 100. This makes for new opportunities…and new problems.
Getting old is expensive. Most people rely on programs like Social Security and Medicare to assist them financially as they age. But there’s a problem, both programs are unfunded liabilities that won’t be liquid by the time our kids grow old.
Even worse, our kids will have to support the generation before them who will be on these programs, requiring hundreds of trillions of dollars. Where will the money come from?
800-pound gorilla #2: Accelerating national debt
Most of us have probably heard of the power of compounding interest. Albert Einstein is often credited with referring to it as the “most powerful force in the universe.”
A parallel concept is the miracle of compounding debt. Your child will face the tyranny of compounding debt as well as the compounding interest on that debt.
In the year 2000, the US national debt was over $5 trillion. By 2012, it had risen to over $16 trillion.
In 2011, riots erupted in Greece when the government of Greece declared bankruptcy. The US, England, and Japan may not be far behind.
Your children’s future will be one of increased financial turmoil as nations face compounding debt and financial pressure.
800-pound gorilla #3: The New Depression
History records two types of financial depressions:
- The Great Depression of 1929 in the US
- The German hyperinflation of the 1920’s
Summarized in simple terms, the American depression was caused by not printing enough money. The German hyperinflation type of depression was caused by printing too much money.
In 2002, Federal Reserve Chairman Ben Bernanke said, “The U.S. government has a technology called a printing press [or its electronic equivalent today] that allows it to produce as many U.S. dollars as it wishes at no cost.” Since 2007, it has been clear that Chairman Bernanke favors printing too much money to fight the financial crisis, having pushed trillions into the global economy. But is there really no cost?
Hyperinflation is a period of rapid inflation that leaves a country’s currency virtually worthless. For people who work for money and savers who believe in saving money, hyperinflation could wipe them out.
If the US keeps printing money like it is, our kids may very well face hyperinflation. In that scenario, the old rules of money to get a job and save cash won’t help them. They’ll need to be equipped to survive and thrive in this new reality.
800-pound gorilla #4: Higher taxes
Every time central banks print money, two things happen:
- Higher taxes
- Higher inflation (which is another type of tax)
As the previous three 800-pound gorillas unfold in our children’s lives, one thing is for certain: taxes will go up—significantly.
Because of this, parents should talk with their children as early as possible about who pays the most in taxes—and why.