Recently Rober Kiyosaki said on CNBC if millennials want to have a step ahead, they should fire their saving account and jump into debt. “Savers are losers”, he says. I am a big fan of his book “Rich Dad, Poor Dad” but it’s hard for me to agree his idea definitely due to emergency funds problem.
We are living in a fast pace of changing world in which start-up entrepreneurship becomes a symbol of success, such as Facebook, Google or Microsoft, and plays an important role in people lives. It drives youths with fire to dedicate their time, knowledge and money to start-ups. Well, if you are lucky and talented to success with new idea in the market, you will get ahead in life, be rich with a trillion dollars asset no doubt.
However, the game always has winners and losers at the same time. You must come back to a humble starting point when being out of the spotlight. How can you manage to maintain a life after this fail and nurture the next idea? Honestly this question must be answered as long as you intend to invest on any start-up idea as an essential risk management.
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I don’t swim upstream of this trend but I believe how you treat with saving would matter. It would be fool as Kiyosaki says if I consider my saving as an investment. The low interest rates of saving doesn’t build wealth as Kiyosaki was young. In fact millennials only get 1% in return instead of 15% in 30 years ago. However, if I am saving an emergency fund as a primary backup plan of my other investment, the story sounds right. Because you are taking risk, you can’t predict everything would happen in business in a certain period of time, such as Brexit of EU referendum impacts all UK’s economy and pound rate.
What are emergency funds for?
Basically an emergency funds is a financial shelter when life throws your way any unexpected costly and stressful events. These following emergencies that any of us would face: unsuccessful business, unemployment, medical emergency, accident home repairs, car troubles,…
We must prepare in advance of encountering any of above events. The saving funds remain stress down while your finance is threatened, forces you to the financial edge. Well prepared emergency fund bounces us back to the needed confidence for escaping the threat.
In fact, average one in 3 American has no emergency savings, rising from 26% last year and highest rate in five years of survey citing to Bankrate.com. In details, 22% of those surveyed said they save to cover 6 month expenses while another 15% said they have savings of from 3-5 months and 21% is able to survive less than 3 months.
“There are always things happened out of blue which affects your finances. If you are always handling those with credit, you will never achieve what you want to do.” Clark Randall, founder of Financial Enlightenment, says.
How should we bend the idea practically?
His idea of stating a business while we are young is meaningful, but giving this advice without the context could be a disaster in practising. According to Moyak, over 50% of small businesses shut down within one year tells us that this is not for everyone.
Success and money desires could work for some millennials, however, others leave the field with high debts and income crisis. Without savings or emergency funds, we are going to taste the pain. Thus, before making any decision, millennials should take a breath and question ourselves what the particular plan is to pay off the debt and build a financial independence.