Investing In Our Future
Thursday, May 24, 2012 • 7:47am
My kids have been asking me about money lately. How to get it. How to invest it. How to avoid losing billions. The usual stuff.
I believe it is important to teach children the concept of money. Like a lot of parents I started my kids with allowances earned through daily chores. I helped them open savings accounts so they could watch their money grow. And each month I present them with their own personal statements direct from the vaults of JP Morgan Chase.
“Look at this,” I tell them excitedly, “you made almost three quarters of a penny by doing nothing!”
In fact, they make more sweeping the couch for loose change.
The problem is that the basic concept of money is too complicated today. The only people who really understand it are snarky talking babies who trade online and the 1% who don’t sleep in Zuccotti Park.
Heck, kids today watch a little Mad Money on TV and the next thing you know they are asking how countries can borrow billions of dollars and not pay anything back. They want to know how multi-billionaire Mark “Facebook” Zuckerberg can be worth more money than his company takes in. They want to know how their bank can hedge against risk and still lose 2 billion dollars.
These are not easy things to explain. Financial education used to be a lot simpler.
Before he died, my grandfather was given to unsolicited pronouncements about money. He would sit quietly in a chair and for no apparent reason say things like: “The trouble with the country is that everyone is after the almighty dollar.” He never explained what he meant by this, but I respectfully listened to his opinion.
One evening he shared his thoughts on the stock market: “Johnny,” he said—for some reason he liked to call me Johnny—“gambling money knows no home.” I thought about this a moment, and being a wiseass kid, I bet him five dollars it wasn’t true. He actually wrote my name on a five-dollar bill and told me to see how long I could keep it.
I think the Enron lawyers have it now.
Years later, during a summer job in college, my boss presented me with a hard-earned paycheck. He teased it out in front of me and gave me the option to cut cards for it double or nothing—if I pulled a higher card he would pay me double, if not he would rip up my paycheck.
I knew him well enough to know this was a test; he would never withhold a paycheck from me. But agreeing to his bargain would reveal something about my character, something, which I am sure, my grandfather would not approve.
Still, I thought about it.
In the end I went with my gut and snatched the paycheck from his hands. For me, it was too much risk. Not enough reward. It was my first lesson in financial decision-making.
I tried to teach my son a similar lesson about risk and reward. I bet him $100 that he couldn’t sink a twenty-foot putt. It was a tricky shot, but not impossible; not if he wisely banked his putt behind the high rock and timed the windmill blades correctly.
He tried to discern whether I was serious, but I put on my poker face; the same face that makes me so popular at games involving Texas Hold’em. Much to my chagrin he quickly made up his mind, carefully lined up his shot, and deftly tapped the ball. He was all business.
“OK, mister smarty pants,” I snapped, “let’s see you do it again. Double or nothing.”
I don’t know what the odds are holing number nine two times in a row at Golf of America, but they are clearly not high enough to learn about the downside of financial risk.
And of course, being an honest man, I had to pay him. “I will deposit the money in your college savings fund,” I told him seriously. He balked considerably but I told him he should have read the prospectus before investing.
After all, I had to teach him something about finance.
Over the years I have worked hard, earned a good living, and through thoughtful, prudent investments leveraged by an uncanny sense of market timing, I have methodically managed to lose money in the stock market, real estate, and many games of Texas Hold’em. At least it wasn’t billions.
So I guess I really shouldn’t be teaching my kids anything about money.
But that is not to say I don’t have financial advice to give. “Buy low, sell high,” I tell them with wise authority whenever they ask me to open my wallet.
You see, I am banking that my children will support me one day.