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How To Teach Your Kids About Money

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Most people are more comfortable talking about their life than their finances. 

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I like this quote by a British journalist: The easiest way for your children to learn about money is for you to not have any. Katharine Whitehorn. 

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On 11/25/2018 at 1:47 PM, sschullo said:

I like this quote by a British journalist: The easiest way for your children to learn about money is for you to not have any. Katharine Whitehorn. 

What did they mean by that?

My parents didn’t have money, which means they couldn’t teach me anything. I suspect children born into wealth have a huge head start on learning about money. 

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11 hours ago, EdLaFave said:

What did they mean by that?

My parents didn’t have money, which means they couldn’t teach me anything. I suspect children born into wealth have a huge head start on learning about money. 

af·flu·en·za
/ˌaflo͞oˈenzə/
noun
 
  1. a psychological malaise supposedly affecting wealthy young people, symptoms of which include a lack of motivation

 

 

It works both ways. Some  who I have known who came from "affluence" relatively speaking  had no inclination to learn about money because they didn't have to.They lack motivation  , ambition and direction in their lives. Daddy and mommy took care of everything.  They didn't have to lift themselves up.When you grow up without much money that often instills  in you a strong desire to succeed . Your parents financial situation as you grew up was probably a motivating factor in  how you,  Ed now conduct your financial behavior today. Look how much you know and how much you are saving. You feel the urgency. Would you have felt that urgency if you had grown up with every thing  being handed to you? I don't think so. But of course there are always exceptions to every situation. I get your understanding that a better educated, affluent family could possibly influence financial knowledge because I have seen that too.  

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12 hours ago, EdLaFave said:

What did they mean by that?

My parents didn’t have money, which means they couldn’t teach me anything. I suspect children born into wealth have a huge head start on learning about money. 

My parents did not have money either, but they modeled frugal living by running a small dairy farm in Wisconsin. When my father died, my mother saved and invested. She worked as an assembly line worker and bought 3M stock, the company she worked for 25 years (Minnesota Mining and Manufacturing Co.) and she bought US savings bonds. I did the same thing when I enlisted in the Marines and saved $500 in bonds by the time I was discharged 2 years later.  Immigrants did that sort of thing back in the first half of the 20th century in this country. 

It wasn't until my 40s that I realized that I learned a lot about building wealth and living a healthy wholesome life without crap all from my parents, they lived the frugal and investing life. I never earned much money until I was in my 40s, and so I kept up my frugal living, and I was lucky enough to find a spouse who had similar background and together we lived frugally, invested in California real estate, invested our 403(b) money in the stock and bond market, and did better a whole lot better financially than both of our parents together. My parents did not teach me in the usual sense. And I was smart enough to appreciate what they did. 

Anyway, that's why I like the quote. It means a great deal to me.  

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I grew up thinking we were much more poor than we actually were.  My parents never spent extravagantly on anything. It wasn't until my 20's I learned my parents had a bigger portfolio than I ever imagined.  By then it was too late, the frugality was already grained into me.  So I didn't learn specifics from them, just good habits.

 

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11 hours ago, MNGopher said:

I grew up thinking we were much more poor than we actually were.  My parents never spent extravagantly on anything. It wasn't until my 20's I learned my parents had a bigger portfolio than I ever imagined.  By then it was too late, the frugality was already grained into me.  So I didn't learn specifics from them, just good habits.

 

Exactly my experience. I inherited some of my mother's 3m stock that she bought in the 50s and 60s. I just sold them a couple of years ago. I kept them for sentimental reasons AND those stocks doubled in price by the time I sold them in 2015 (over 15 years). I was very lucky that they grew that much. What I have learned from individual stocks even from great companies, that the stock doesn't always grow. Cisco Systems is a great company too that I used to own back in the tech bubble mania, but their stock was CRAP from 2000 until just a couple of years ago when I finally broke 2000 high. 

It was pure luck for me that 3M grew as much as it did. I sold it for $166 and it is now about $200. I have ZERO regrets that I sold it too soon. Heck, I made a ton of money off that stock, and I'll take what I got. I don't play stupid games (will it go up or down?) with individual stocks. 3M was the last individual stock I will ever own.  Now I own it in Vanguards Total Stock Market Index! 

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35 minutes ago, sschullo said:

I kept them for sentimental reasons AND those stocks doubled in price by the time I sold them in 2015 (over 15 years).

The holding period isn’t explicit, but an investment in Vanguards S&P500 index fund nearly tripled in nominal terms from Jan 1998 to Dec 2015 (18 years).

42 minutes ago, sschullo said:

I sold it for $166 and it is now about $200.

From Jan 2016 until now the S&P500 is up 42.3% compared to the listed 3M gain of 20.5%.

...although in both of these calculations it doesn’t sound like you’ve accounted for dividends in the individual stock whereas the S&P500 calculations do. So the 3M stock probably did better than described above. 

...either way, what’s done is done and you’re so clearly right that concentrated risks are to be avoided with the use of total market index funds. 

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5 hours ago, EdLaFave said:

The holding period isn’t explicit, but an investment in Vanguards S&P500 index fund nearly tripled in nominal terms from Jan 1998 to Dec 2015 (18 years).

From Jan 2016 until now the S&P500 is up 42.3% compared to the listed 3M gain of 20.5%.

...although in both of these calculations it doesn’t sound like you’ve accounted for dividends in the individual stock whereas the S&P500 calculations do. So the 3M stock probably did better than described above. 

...either way, what’s done is done and you’re so clearly right that concentrated risks are to be avoided with the use of total market index funds. 

Hi Ed,

Not sure why you are posting this. I forgot about the value. As I said, I kept it for sentimental reasons, to remember my mom and her foresight who bought this stock decades ago. I learned what a stock was when I was ten years old. I wonder how many adults know what a stock is today?

Can any of us imagine any of our future relatives owning our investment 50 years from now! 

Steve

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11 minutes ago, sschullo said:

Not sure why you are posting this.

Two reasons.

When people hold concentrated risk, it is always interesting to see how it turned out. I love the threads on investment forums where somebody goes all in Tesla or shorts the S&P500. Having concrete comparison results makes the gamble more interesting.

Also it sounded like you were happy with the performance when you had it and maybe a bit envious of the returns after you sold it. It looks like you should have felt the opposite...unhappy with the returns when you had it and happy you avoided subpar future returns when you sold it. Although I can’t say that for sure because my calculations used insufficient data (dividend data and time span data).

At any rate, we agree. Total market index funds....buy them, hold them, and love them.

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