What Investing Lesson Do You Think Is Most Important to Teach Kids?
May 3, 2021
It’s not always easy to talk finance with your kids but if you don’t, they may not learn those lessons in school. Kids need to understand budgets, how many works, what things cost, and so much more that’s generally not taught in schools. The 7investing team shared the lessons they believe younger folks should be taught — whether it be by parents or at school — on the April 30 edition of “7investing Now.”
The most important takeaway for parents may be that it’s important to have these discussions and to make sure your children understand the value of money, planning, long-term investing, and making sure you’re prepared for a rainy day.
There is a full transcript after the video.
Dan Kline: We’ve got one more topic here on 7 on 7. If you have any last questions you’d like to ask because it could be anything. We’ll have a few minutes at the end of the show. But we appreciate you watching 7Investing Now. And I’m going to go around the room. I’ll go first because I don’t know that Dana, and Dana if you want to opt out, I don’t think you were expecting to be here. So feel free to pass on this if there isn’t one you’ve thought about.
But what investing lesson do you think needs to be taught either at school or by parents to their kids? And for me, the number one thing and I have a kid who can be very material, it is live below your means. One of the things we have always done is not spent every dime we could on a house. Not purchased new cars. Can I afford a new car? Yes. Do I drive a new car? No. Because if things go wrong, there is more of a cushion there. If an opportunity comes up to invest or to go on a trip or who knows what living below your means, allows you to do that. I will let Matt Cochrane, you have the most kids. So we’ll go by like most kids to least, Matt, what advice do you want to pass on to kids?
Matt Cochrane: Well I think your lesson is a great one. Dan, definitely live below your means is right up there. The other thing I would say is the magic of compound interest. Right? I mean, like, one, I think there’s there’s two great lessons from that. Well, it’s not intuitive to know to understand at least it wasn’t for me, like the magic of compound interest. When like I was really trying to grasp it, I almost did it by hand for like several years out just trying to really, really understand it. And one, what that does is it really incentivizes them to start young, like get that time on your side, because that magic you don’t see right away, right? Like it happens in the second, third, fourth decades of investing, not the first.
And, two, it’s encouraging to know because when you start off, and I remember this, I remember starting off with a couple $1,000 to invest. And when you have $2,000 in the market, you make 10% your first year, you made 200 bucks, which you can really be like, well, what’s the big deal I made 200 bucks, like all that for $200. And then you know a little bit later on a few years later, it’s 20,000 bucks, and you made $2,000. And then you know, on and on and on. And then soon you have $200,000 in the market and and you make $20,000 that year from your 10% gains. And just to see that and understand that to know that like, okay, it’s starting off small, but I understand that this is going to be a snowball and that the more I put in now the quicker that snowball is going to get going. So I just think under making sure they understand compound interest.
Dan Kline: And it’s the good kind of snowball, not the Hostess kind of snowball, if I could go back in time and tell myself anything that would be 16-year-old me put $1,000 in the bank, whatever you have to do to get $1,000 not in the bank in the stock market invested. Even if that’s all I did 47-year-old B would be really happy it looks at charts of what the return is. And we probably should have grabbed one but we didn’t because I didn’t know what any of us were going to be talking about here. Look at what that $1,000 turns into over 40 years.
Matt Cochrane: It’s amazing. I look back all the time, I didn’t get started investing until I was in my mid 30s. And I think about all the money I wasted, essentially wasted in my younger days, and it’s a hard lesson to learn. But I hope my kids don’t repeat it.
Dan Kline: These are lessons we’ve learned. And I hope my kids will learn these lessons. I can’t force them to do it in another year when he’s 18. Right now I can drive it home as much as possible. Steve Symington. Now you have multiple children, what is the one lesson that you’re trying to get across to them or wish they were taught in school?
Steve Symington: I mean, both those lessons are fantastic already. But one of the big things I’m trying to do with my own kids is to ensure to not be scared of it. Right, don’t be scared of investing. It doesn’t have to be an intimidating topic. And for a lot of people it seems like ‘Oh, the stock market you know, that’s what rich people do.’ This is one of those things that everybody’s kind of scared of doing because they’re scared of losing money. They’re scared of taking risk and I think just really exposing them to investing early and
There’s more tools than ever to do that now. So stockpile I believe it is has a neat little app, where you can actually open up an account for your kids and they can download it and say, I’m the kid logging in and, and pretty slick, actually, that they can look at this and they can track their purchases, and you have some control over what they do, you know.
I have a Capital One account, and they’re actually advertising a checking account for teenagers now. And there’s all kinds of tools to really get to where you can say, this is how you get money in a brokerage account, from that checking account. And this is how you buy and this is how you sell, these are the things you should learn along the way. And just little lessons along the way to expose them early and make it so it’s not intimidating.
Dan Kline: It’s very much like that scrubbed from history episode of The Cosby Show, where Bill Cosby and his family set up explaining to his older son, exactly what things cost by you know, giving them X amount to pretend money, showing them how rent worked. I talk a lot about this with my son, like, he wants to buy things, the second he has money, and I will explain to him, you can do that, because I pay for the stuff you need. So if I said, “Hey, you need new shorts, great, you got birthday money, go buy shorts,” then he would not have money to buy a $200 pair of sneakers or hoodie or whatever it is.
So we actually try to make big purchases like that something that are thoughtful no matter what the financial situation is, because as I’ve talked a lot about as a parent, We’ll come to Simon in a second, Dana Abramovitz has left the building, she has to go teach a class. But that being said, I’ve tried to explain to my son that I have money, he doesn’t have money, like he doesn’t have a job, he doesn’t pay rent so just because he got some money for his birthday, doesn’t mean it’s time to run out.
We don’t have a lot of kids in my family. So he gets an excessive amount of birthday presents, at least from my father’s side of the family. But Simon Erickson, you’re a little early in the game here. You’re more like piggy bank and allowance stage. But as your child grows older, what what lesson are you as the leader of a investing company? I feel a lot of pressure about this, because of what we do. What lesson Are you hoping to impart?
Simon Erickson: All of those are fantastic lessons, the only one that I’ll add that hasn’t been spoken about yet is risk versus reward. When you’re young, you’re allowed to just kind of say, hey, I want to go after the sexiest fastest growing company out there, I want to go invest in this and make a ton of money, you’ve got to remember the risk side of that too. There is no free lunch in the stock market. That’s fine to take those big swings for the fences, but make sure you know what you’re getting yourself into. That would be my lesson.
Dan Kline: These are all great lessons. These are themes we’re going to talk about a lot. We’re gonna bring on some younger investors and talk about how they get started. And what their journeys like the stock market wasn’t something I’d heard of like when I was 17. I did not know what the stock market was other than newspapers had page after page of stock market listings.
But I couldn’t have explained to you what a stock was. It’s out there now there is much more transparency on what the stock market is, it is much easier to get into the stock market. Let’s take this last question from D and then we will hit our finisher question. “ml learning and deep learning workloads are growing exponentially. Which companies are poised to take advantage of this trend?” I won’t answer this one. I will throw it to Simon and then Steve because they are gonna sound a lot smarter than I would
Simon Erickson: Pytorch, TensorFlow. Pick your AI platform that you want to talk about in cocktail parties. Now. Steve has been doing this for 20 years. I know that, you know a better than most out there, Steve, but this is no doubt. Workloads are moving to the cloud. And they’re starting to use AI to take advantage of more information that’s available. So which companies are primed to take most advantage of this trend?
I mean, can we put up 7investing.com/subscribe at this point. Follow Steve’s picks, which are basically a lot of them, at least based on AI. Steve, you had an AI as a service company that we were talking about not too long ago. I mean, like we’ve got a collection of picks, maybe we don’t reveal all of them right here. But I know that opportunities that are out there for sure.
Dan Kline: So you actually took this exactly where I wanted you to take it because what you get from the subscriptions is you get that answer you get the what is our topic in travel in AI and machine learning. And if you subscribe and you look at the site go How the hell do I find that you send an email to firstname.lastname@example.org and as a subscriber? Steve answers that question and says, well I’ve picked these few.
The other thing I will really warn people about because I think we’re all guilty of this. There is no one magic company in this space. Everyone in 5G and machine learning and AI they they want us to give this like company they’ve never heard of that’s going to be this like, you know 100 bagger and that happens. But what’s more likely is you’re going to own five of Steve picks seven of Steve’s picks, whatever it is, and a percentage of them will do very, very well, we can identify who’s likely to win, we can’t always identify every winner and how big they’re gonna win. Steve, I’ll give you the last word here.
Steve Symington: Yeah. I mean, the other thing that I’ll note is there are literally hundreds of ways as an investor, you can take advantage of machine learning and deep learning workloads. I mean, you could invest in the companies that provide the internet infrastructure that will support a lot of the cloud computing efforts, you can invest in chipmakers. That’s, they’ll create chips that are well suited to machine learning and deep learning tasks, you can invest in the software as a service companies on that side of things. There are a lot of different ways.
And then, like Simon mentioned, you know, some of the a lot of the companies that are scorecard that we picked for this reason, exactly. Big Data companies. So I won’t single out, you know, just which companies are primed to take advantage of this trend, as you asked, because there are so many. And I mean, literally dozens of fantastic investment opportunities. And I think part of what we do at 7investing for subscribers is determine when it’s timely to to add, you know, or open or add to position in certain companies. And so that’s a that’s a loaded question. And we can spend multiple weeks talking about that question, particularly so pretty broad.