What My Four-Year-Old Taught Me About Investing
The following blog post is part of The Road to Financial Wellness blog tour. The Road to Financial Wellness is a three-month, grassroots campaign promoting financial empowerment on a national level and encourages people to pursue their dream lifestyle. Find out more about local events near you.
My son staunchly refuses to write the alphabet, but he is fascinated by exponential growth. Not that he knows this is what it’s called. To pass time he loves to ask, “What’s two twos? What’s two fours? What’s two eights?” And so on. Luckily he loses interest before I max out my mental math capacity. The other day while playing this game he said, “You can’t count to a million by starting from one. You have to count with different numbers.”
Forgive my mom pride, but I couldn’t help interpreting this statement as the best investment advice ever uttered by a preschooler. Advice that I simply didn’t understand for a long time.
I’m a saver by nature, but I didn’t receive the most thorough financial education, nor did I come from a “Rich Dad” household. I never realized that just about anyone can “get to a million” using time, compounding interest, and basic earning and saving disciplines.
I saved money, dollar by dollar, through high school and college. In fact, my emergency savings was probably over-funded. Had I invested the extra, even though it wasn’t much, it would’ve been an early start at exponential growth.
After college graduation I blindly accepted the default retirement contributions set up by my employer. When I left that job after a year, I withdrew my funds, paying hefty taxes. Luckily it was 2007, the market was favorable, and it went toward a house down payment. But I’m still kicking myself for that one.
I just didn’t get it.
The Light Bulb Goes On
Not until I watched the first DVD of Dave Ramsey’s Financial Peace University. To be honest, that’s the only one I watched, but it was enough. He lays out the comparison of someone who invests $2000/year from ages 19-26, compared to someone who invests $2000/year from ages 27-65. Guess who has more at the end? The second guy never catches up. Though it makes assumes an overly optimistic 12%, the point is clear: start investing sooner rather than later. (Check it out here.)
By the time I watched this, we were contributing Ramsey’s recommended minimum of 15% to retirement accounts. But I was 25 and saving for retirement sounded amorphous, almost mythical. I wasn’t the least bit motivated about it, let alone informed. Since then I’ve become more educated about investing by reading a couple books & lots of personal finance blogs, as well as through conversations with my husband, who’s always learning more about this topic.
Maybe I should have finished watching the DVD course, but we actually had a lot of smaller pieces of personal finance in place. We were good at following a budget and limiting our spending. We had life insurance and a solid income. What I was lacking was the bigger picture of where these practical pieces could lead us. I didn’t need tips on how to save money; I needed a financial education.
Our goal isn’t to become millionaires, but to continue increasing our financial flexibility so that our life choices center more on our values and opportunities, and less on money. Paying off debt, simple living, and planning for retirement and kids’ college are all part of increasing our flexibility.
We won’t gain the flexibility we desire simply by scrimping and saving one dollar (or $100) at a time. For a long time I saved money without gaining the financial education about how to grow wealth. I’ve never wanted to be rich, but I do want the flexibility to prioritize family, volunteer, be generous, and retire someday.
That’s why we’re “counting by different numbers.”
How did you learn about investing? What’s the next step on your road to financial wellness?
16 Responses to “What My Four-Year-Old Taught Me About Investing”
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- November 28, 2016 -
Your four year old is so cute! And he’s going to be one smart investor. We started investing young, the little that we could when we first got jobs. But now that we are making more we continue to ramp up those savings. It’s a long journey to FI but everyone starts at 1.
We hope he transfers his counting principles to investing one day! Starting early is a huge advantage.
Sometimes kids can give more insight into life (and finances) than we give them credit for. This is definitely good advice from your son. 🙂
I agree kids can be pretty insightful–even if they don’t realize it. Watching him learn about money has definitely led me to reflect on some of the spending choices we make!
I love this! Thanks so much for participating in the tour 🙂
Smart kid! I thought people who had it figured out by 25 were early bloomers.
I invested in our company stock through an employee stock purchase plan, it was the laziest way to start investing – write down a percentage of your salary you want to invest. About a year later, I saw how powerful money can be when invested and have been hooked ever since.
We’ll see if he applies his fascination with exponential growth to investing one day. That’s neat that you started out tentatively, but got motivated by seeing growth.
Smart advise sometimes come from unexpected sources, and often times they don’t make sense until later on when the situation is just right.
Thanks for participating in the blog tour.
Yes, I hope he applies his own advice to investing one day. Thanks, Jason!
I love the distinction you make between a financial education and learning to save more money. The latter is a small piece of the larger pie — and it helps to know what the pie is for. (Okay, dumb analogy — obviously the pie is for eating.) 🙂 But yeah, I feel like I learned the little pieces, the process pieces, way before I learned the big picture financial strategy, and I so wish I’d learned it earlier!
Yes, getting the big picture is a huge help, but probably most people take a while to put it all together. Once you get the big picture you can identify your strengths and work on your weaknesses, which is hugely helpful in my experience.
Out of the mouths of babes . . . What a smart little boy you have! That bit about starting at 19 makes me wish very much that I had started applying your son’s wisdom earlier, but I’m so grateful to have learned to “count by different numbers” even late in the game. Great post, and a great initiative you’re taking part in.
My granddad taught me. He suggested I open an investment account with a dividend reinvestment program. We bought arch coal, which soared from 38 a share to 63 a share and I sold it. It fell over the course of several years down to like $3 a share. He asked me what would’ve happened if the opposite had happened, and I didn’t have a good answer for him. Then he introduced me to Vanguard and the rest is history
Thanks for sharing your story! That’s awesome that your grandfather educated you about investing. I’m glad you sold at the right time, and the reverse didn’t happen! We definitely like Vanguard, too.