Back in episode #12 of the podcast, we talked about investing for your children. At some point, your children will leave the nest and take control of their own finances, and we believe that financial education early in life is a big advantage in navigating the world of money and investing! This week on the podcast, we’re joined by our good friend, Duniya, to talk about how parents can prepare their children to manage their finances responsibly and successfully.
Brian Feroldi slide deck:
https://docs.google.com/presentation/d/1YV3mou5FQDkfBgtu3eACMtSye3xadrtDlu_URBTA2JA/edit?usp=sharing
If you enjoyed this episode, please subscribe to the Telescope Investing podcast at anchor.fm, or on your podcast platform of choice
Transcript
Albert: Hi, this is Albert.
Luke: And this is Luke.
Albert: Today is Tuesday the 3rd of August.
Luke: Welcome to the Telescope Investing podcast.
Intro
Albert: Long-time listeners might remember the chat we had with a good friend, Ramesh, in episode 12 about investing for your children. Well, neither Luke nor I have kids, that we know about, but we think that this is a really important topic and we’ve wanted to revisit this for some time now.
Luke: I’m a happy uncle but we’re not experts on children, so we thought we’d welcome another close friend to this week’s podcast, Duniya, to chat about some of the tactics she’s employed to build her own children’s understanding of money, finance, and investing. Hi Duns.
Duniya: Hi, Luke. Hey, Albert. Really excited to be here.
Albert: It’s good to have you on, Duns. Luke and I are both uncles to Duniya’s two kids, Zen and Maya, and some listeners might remember Zen from our deep dive on CuriosityStream, where he gave us his opinions as a user of the service.
Luke: Man, my CuriosityStream position is in the hole. I blame Zen. He owes me some cash!
Albert: That’s a bit harsh, luke. He didn’t buy it for you. You bought it yourself.
Luke: He convinced me with his bull case.
Duniya: I knew better than to buy on Zen’s advice!
Luke: So before we get into this week’s important topic, we wanted to give a bit of a promo for our upcoming anniversary show. Today, listeners, you might note is episode 50 and that means it’s only a fortnight until we get to 52, one year in.
Albert: I can’t believe that we’ve been doing this for almost a year, Luke.
Luke: I’m shocked and surprised also. The time has flown past.
Albert: And I can’t remember anything we’ve talked about in the last year.
Luke: I look back at the show notes every so often and I’m like, did we really cover that topic? There’s a lot of smart stuff in there, Albert. These guys are geniuses.
Albert: Yes, I agree, Luke. And we have a few friends joining us for this anniversary episode. Are you going to join us, Duns?
Duniya: Yep, I’m going to try and be there.
Albert: Fantastic. And Ramesh from episode 12 will be joining us as well, and I believe he’s going to interview us with some listener questions.
Luke: I put out the shout on Twitter and to our subscribers on the mailing list. If you guys have got a question you’d like to put to Albert and myself, drop us a line and Ram will ask us the challenging questions. It doesn’t have to be about money. Can be anything at all. This is our “getting to know the hosts” episode.
You know, we’re also going to bring on one other new guest, my brother, Matt, and Matt is going to quiz Albert and myself on our own knowledge of finance and our model portfolio. It could be the start of a real grudge match.
Albert: I’m not sure I’m looking forward to that, Luke. It might show us up as people who don’t know anything.
Luke: You know, Alb, in any good challenge, there’s got to be something at stake. I’m going to wager you dinner. The loser buys dinner for the winner and their partner. How’s that sound?
Albert: How’s that going to work? Am I going to order a Deliveroo for you and you order a Deliveroo for me?
Luke: Deliveroo is not going to cut the mustard, young man. If I win the quiz, I’m expecting a proper dinner at a fancy-ass restaurant.
Albert: Oh, that we’ll have to wait until we meet in person, Luke. That could be a few years from now.
Luke: Well, you can send me the transfer or you can wait until I come and invade Hong Kong as soon as COVID restrictions are lifted.
About Duniya
Albert: Let’s get back to Duns. We should mention that Duniya is a very close friend of both Luke and I, but for the listeners, can you tell us a little bit more about yourself and your family, Duns?
Duniya: Sure. So apart from having to put up with you two for many years, I’m actually based in the UK. I’m a biochemist by training. So I know very little about investing apart from what I’ve taught myself over the years. And I devised a little strategy probably about 20 years ago and have been plugging away at it. For my sins, I have two kids. One is nine, she’s at primary school, Maya, and the other, Zen, who’s been on your show, is 12 and he’s just started senior school. He’s 12 going on 60 as you know, and I mean, they’re just regular kids really. So that’s where I’m at.
Albert: Yeah, Duns, I heard you like gold as an investment.
Luke: Albert, I promised Duniya we wouldn’t go there on today’s podcast.
Duniya: That was part of the terms and agreement that we signed prior to the show. No mention of my gold plummeting.
Albert: Ok! I wasn’t aware of that.
Luke: But let’s talk about the kids though, Duns. Zen and Maya, nine and twelve. What do you think their understanding is of money, saving, and investing?
Duniya: So Maya’s a regular nine-year-old. She understands… well, both of them understand how to negotiate very well for their wants. Not so great on the budgeting side I’d have to admit. She has an understanding of how much her pound can buy. She’s constantly on Amazon, scarily too much for my liking, probably has about 30 things saved for later, but she understands. She’ll come to me and I’ll say that’s too expensive without actually saying what expensive is at the moment. And so she tries to self-regulate herself. She doesn’t ever buy anything without approval. She’s getting there.
Zen, he’s a little bit more serious as you know. He saves his money. Try and buy the high-end stuff wherever he can, which is not a bad thing. Probably a little bit too serious. We try and encourage him to have a bit of fun. And he’s been very inspired by your podcast, guys. He’s trying his hand at looking at companies. Always coming to me and mentioning a company I’ve never heard of, which is great. He’s learning about the world. We’re having lots of fun conversations.
At the moment, they’re both having a little race on something called a trading simulator, which is run by the London Stock Exchange, and my husband, being a complete geek, has set them up on this and they’re just trying their hand on it. It’s hilarious.
Luke: Do you know how their trading’s going?
Duniya: I think, to be honest, Maya is working out how to actually buy the stocks on the simulator at the moment, but Zen keeps saying, oh, but it’s only down because I did this yesterday and I decided to buy this, you know. So, yeah, it’ll be interesting to see by the end of the month how they’ve gotten on.
Albert: Well, just make sure it’s a simulator or not a real trading app.
I have to say that I was really impressed by Zen’s understanding of investing during the prep we did for the episode on CuriosityStream. He really understands his stuff for a kid.
Luke: Duns, you hinted previously that Zen was advising you on potential individual company investments. Has he picked anything out for you yet?
Duniya: Apart from CuriosityStream, which I have to be fair, I didn’t buy but I probably should have to encourage his interest. He talks a lot about Airbus and this shows that he is still a 12-year old, which I love because the future is bright when you’re 12. Innovation equals growth for Zen at that age and so he is convinced it’s got massive long-term potential. I don’t know anything about it to be fair. I need to sit down and have a look at it with him.
Albert: Well, that’s a really interesting choice, Duns. I’m sure Zen’s aware that Airbus and Boeing are basically a duopoly and there’s very little competition. I actually read that Delta Airlines ordered an additional 25 Airbus A321 neos earlier this year, and this is on top of the 100 they ordered a few years ago. That’s a pretty bullish sign on the future of air travel.
Benefits of financial education
Luke: So, Duns, that’s great. In terms of fostering these interests, what do you see as being the benefits of having a personal financial education for your kids?
Duniya: So, I guess, like any mom, I want the kids to grow up happy and healthy and to have secure lives as adults, and we all know the benefit of having a financial education is that they’ll then have the knowledge and the skills to make sensible decisions about their money, and money affects every part of your life, doesn’t it? From choosing the right career, making the right investment decisions, even relationships, right? There’s a lot of research, actually, out there now which says that money is a cause of stress for a lot of adults.
So to me, teaching them about personal finance is to give them a backbone to then make decisions. They may be bad, but at least they’ve got the security of a good paycheque and some investments and savings to rely on.
Albert: Do you have any specific financial goals for your children?
Duniya: So, at this stage, because they’re still quite young, I think developing a saving habit is a good idea. I think having a saving habit means that they have to think about what they’re buying and whether they really want it. Is it a need? Is it a want? To stop a little bit of excess consumerism, you know, we could all do with a little bit less of that. So yeah, firstly a saving habit, then in the longer term I want to understand their own financial voice, to understand their individual choices and how it affects them.
We’re all different. I’m happy for them to go for the high-end stuff if he’s going to save for it and if it really does make a difference. I’m okay for Maya to buy all the blingy sparkly stuff she wants as long as she uses it. But then they can learn, actually, that didn’t quite work out for me, look, I’ve got nothing left to use for next month, I need to work on it. And I’d rather they blow their personal allowance and pocket money now than when they start the first week of freshers at uni and they’re left high and dry having blown everything. So that’s the longer term, to develop their kind of own personal voice, and then, of course, the simple things like teach them about what loans are and interest rates, blah, blah, all that kind of drier stuff, so if they understand what they’re getting into. In the long term, I want them to start investing as soon as possible.
Luke: That’s great and you started to touch on a few different aspects of this topic. I guess when we say money, right? It can mean a whole bunch of things. It can be everything from understanding the value of money and what money can buy you, and also the limitations of money, I suppose. Money can buy your love, Albert, can it?
Albert: Well, let’s say you can’t afford it.
Luke: What if I save and budget really hard? Like saving and budgeting are a key part of understanding the foundations of good money management as well though. Understanding bank accounts. What are loans, like good debt versus bad debt? Why is a mortgage a good thing? Why can credit card debt be very damaging? And I suppose also, you know, the guys play poker with us from time to time. We play a bit of a fun game, occasionally. Understanding the dangers of gambling perhaps, and how that can lead into a bit of a bad place from a money perspective.
Albert: Well, it’s really great that the kids have an interest in investing at such a young age. As we mentioned in earlier episodes, people like Warren Buffett are rich because they have been investing for such a long time, and Warren Buffett started when he was 11 and Zen is around that age, right?
Luke: He’s late. He’s 12. He needs to get some money in the market.
Duniya: He’s a slacker.
Albert: I think he’s starting earlier than most people and I hope that when he becomes a billionaire, Zen remembers that his uncle Albert helped him set up his train set when he was two.
Luke: Didn’t uncle Albert make him cry by attaching a camera to the front of the train and then the camera crashed? Actually, maybe it was uncle Luke.
Duniya: Actually, from what I remember, uncle Albert told Zen to stand aside while he actually fixed the train set because it wasn’t quite at the right angle.
Albert: Anyway, I hope he remembers that.
Financial education in schools
Luke: So, we touched on different aspects of money and finance. What is actually taught in schools as part of the national curriculum today?
Duniya: So, I think the curriculum doesn’t have a set subject. In primary schools, I think, they insert little bits of personal finance education into relevant classes. Like for example, maths, they may learn about how to calculate an interest rate. What’s interesting is my daughter came back and she said that she learned about how to be aware of banks scamming her, so I would say e-safety has been on the agenda, which makes a lot of sense. But no independent subject as such in primary school. And I believe in secondary school, the curriculum is quite crowded in the UK. So again, they’re doing the same thing. They’re trying to introduce personal finance and education into relevant subjects, and maybe one about budgeting, things like getting a personal loan, things like that are inserted into the curriculum.
But I think most kids who’ve been asked, would say, actually, I wasn’t taught much at school. So I think the stat is only four out of 10 children have said they were taught something about personal finance at school, which I think is very low. So there is a lot of room for improvement, especially in the UK.
Luke: You’re right that you can cram some of these topics into maths, but it’s a crowded subject, right? Understanding compound interest is going to be much more valuable than understanding trigonometry. Alb, when’s the last time you differentiated anything?
Albert: I know you’re joking, Luke, but I think the maths that I learned in school has proven to be incredibly useful over the years, especially probability and statistics. I tend to agree with you that not teaching financial literacy in school is a real failing of the educational system. Even though the maths and other subjects helped, I don’t feel I learnt anything specifically about saving and investing from school. And most of it was self-taught with a lot of trial and error, and another way to view that is like I made a lot of costly mistakes to learn how to invest.
Luke: Yeah, I remember these kind of vocational subjects like woodwork and cookery. Don’t get me wrong, they were fun and interesting, and it’s helpful to be able to be handy in the kitchen, but financial awareness is just much more relevant and important.
Albert: Well, you do need to eat, Luke. You don’t survive on saving your money.
Luke: You can buy dinner!
Duniya: But I agree with Duns that financial education is usually left to the parents, and I read a stat a few years ago that the children of millionaires are much more likely to become millionaires themselves, and that’s not just because they are given it or inherit it. I’m not sure where I read this, but it might have been from a book called The Millionaire Next Door by Thomas Stanley, which I highly recommend.
Luke: Yeah, I guess kind of nature [vs] nurture. If you grow up in a family that’s financially secure, you’re just going to be more confident with money. It’s not about maybe taking risks, but it’s perhaps about better understanding the opportunities that life might offer rather than feeling you’re kind of penned into a little box and your swim lane that only leads to the checkout line in a supermarket.
Pocket money
Albert: Well, that leads us on to the next question, Duns. What are your personal family practices on managing money?
Duniya: So, currently Zen and Maya don’t get pocket money and they will tell all their friends about this. So the money they have is money that they’ve got from presents or if, for example, I gave them some money because they were going to do something and they saved it. They would keep it. And if they need something then they ask us and we decide whether we’re going to buy it. If it’s a need, obviously we just pay for it. That tends to be sort of educational stuff, good videos, books. But if it’s a want, then we sit down and say, well, you know, why do you want this? And we look at the cost and how often they’re going to use it.
But having said that, Zen is now going to go to senior school and he’s going to be more independent so he needs to manage money; he needs to have some money on him; he’s going to be travelling by himself. So I will be introducing an allowance and funnily enough, coming on his podcast led me to do a little bit of research amongst my friends. And I think it’s about time that we did do a little bit of an allowance just so they can manage money and learn how to do it.
Luke: Are they both going to get the same pay rate? Equal pay for women.
Duniya: Oh, you know, don’t put me in that spot!
Luke: I’m fighting your corner, Maya. I’m fighting your corner.
Duniya: Yeah, Maya always gets everything three years earlier than she should so she probably will be under the same pay grade. But the way our money works is that we have a lot of conversations. Results in a lot of negotiation, a lot of chat, and we’ve learned that we can never say no. You say no and you’re setting yourself up for a stubborn child who’s not going to listen. So negotiation works, conversations work, but also I think the allowance will be useful.
Albert: I’m not sure I received pocket money either when I was a child, but it is a Chinese tradition to give lai see or red packets to children at Chinese New Year so I did have money when I was a kid and I also had a number of summer jobs. My uncles and aunts, they had businesses that I would help out at and they gave me some pocket money. It was like back-breaking work, like lugging boxes of beer and wine from the wholesalers to the shop, and things like that. So it wasn’t exactly fun, but I did get some money when I was a kid.
Luke: Yeah, same here. I think Matt and I got pocket money and we’d also earned some money for like washing the car and doing stuff like that around the house.
Albert: Well, do the kids do chores for money, Duns?
Duniya: So, no, the kids don’t get paid for chores because I expect them to take as much responsibility towards the house as I do and it’s about being a team. And that’s my philosophy but I would say after having done my research to come on your podcast, that most families do actually pay their kids for chores and, you know, whatever works for an individual family. We all have different ethoses.
Albert: So they don’t get pocket money and they don’t get paid for chores. I’m sure those kids tell their friends a lot of these stories, huh? But I think there’s good training for later life. No one pays you to do chores.
Duniya: Absolutely. But having said that, we are going to give them an allowance going forward as a game just to see where it goes. The way they are making money at the moment. One of the games that we thought we teach the kids is take out some of the stuff that you wanted in the past and bring it out and see if you actually used it or not and how many times you’ve used it. And actually, this completely backfired on me because they moved to the garage, both kids, and said, well, what about all this stuff in the garage that you and daddy haven’t been using for years?
So I’ve now promised them they can turn the garage into a games room if they clear out the garage. And they’ve been going through our stuff and realizing, look, they’ve never used this, and they’ve been recycling stuff on local websites, people picking stuff up. They’ve also been making money by eBay, which they’ve loved. Absolutely love that.
Luke: That’s great. Have you noticed other things in the house disappearing? Are they just selling all of your possessions bit by bit?
Duniya: Well, I was out with a friend yesterday and this picture of a vase appeared on my phone and Zen said, can I get rid of this? And it was a vase that was given to me at my wedding.
Luke: Mummy, you haven’t worn this wedding jewellery for 25 years. Can we sell this?
Duniya: Yes, let me sell your gold.
Financial education resources
Albert: You’ve mentioned several times now, Duns, that you’ve been doing research in preparation for the show. Have you found any resources that are good for parents?
Duniya: Yes, one which I find quite useful was something on a website which is called moneyhelper.org.uk, and it’s actually a website that’s linked to the Department for Work and Pensions. It’s got some very clear and sensible advice on there about how to teach your kids about money, and it’s great because it’s broken down by age groups. So even from three to four, they’ve got some information, all the way through to nine to 12-year olds and teenagers. And they give you various different things that you can do and games that you can play.
So the game I’ve just mentioned, where we looked at all our wants, was actually an idea that I got from this website. It’s packed full of interesting things you can do with your children to just playfully, help them learn.
Luke: That sounds great. We’ll put a link to that in the show notes.
Duniya: But I think by far the most important resource is actually other parents or just friends because I’ve talked to them and asked them, how do you manage finances with your kids? And I’ve had a whole outpouring of people sharing their kind of household’s innermost, you know, financial secrets with me. And also friends who don’t have kids who’ve just told me their own personal finance and how they were raised or how they wish they’d been raised. And I’ve actually learned a huge amount from this.
So that’s one thing. The other thing is I’ve then gone on and done a bit of research for accounts that I’d like to set Zen up with. One thing that’s come to mind which a lot of people are using is something called GoHenry, which is an app where parents can set up an account and then have multiple accounts linked to that account for their children, and it gives the children a prepaid card. It’s quite interesting because the app helps the children set up things to save for, how much they’ve got, all those sorts of things, but it does have a fee. So my husband typically said to me, well, why should we be paying a fee for an account? And look also, this doesn’t have an interest applied to it.
So he’s more of the option: let the kids just make their mistakes in a normal bank account because GoHenry has lots of backstops. And to be fair, I think he’s right having gone full circle because we won’t put much in the account to start off with, and if it goes, then they see it leaving their account and that might be a valuable lesson for the future.
Luke: Just make sure Zen doesn’t have a line of credit with whichever banking institution he signs up with.
Albert: You find out he’s trading on margin.
Duniya: I don’t think I actually have the technical abilities to now actually withhold him.
Luke: Well, we were doing a bit of research ourselves and listeners of the show will be very familiar with a FinTwit expert, Brian Feroldi. He put together a really brilliant slide deck a couple of years ago that could be used to teach kids about finance and about investing. We’ll put a link to it in the show notes as well.
Alb, I did go back and take a quick look at it again just to see how up-to-date it was. There’s a really ironic slide in there where Brian tries to show how stocks can go down as well as going up, and he calls out GameStop as the example, and he has a price graph of GameStop degrading by a huge percentage down to almost nothing at the end of 2019.
Albert: I believe GameStop has done quite well since that time, probably around a thousand times since then.
Luke: It’s something like that, yeah. So this lesson on don’t YOLO may have backfired in Brian’s deck. That slide probably needs updating.
Albert: To be fair, I think Brian chose the right stock at the time and I don’t think he intended to educate kids about Wall Street Bets and meme stocks.
Luke: Elsewhere in Brian’s deck though, he does try and pull out examples of companies that kids would know and love, companies like Disney. That’s one of the first stocks I bought for my niece. I wanted to buy her story stocks that I thought she’d understand. And my wife and I have given her a gift of a thousand dollars of stock on her birthday every year, and we’ve done that for about six years running now. You know, she’s running a CAGR of nearly 32%. Her portfolio is kicking the butt of my own and her dad’s. She’s looking pretty wealthy already.
Albert: Yeah, that’s beating all of us. I guess by story stocks, you mean stocks that she may have heard of and be interested in, stocks like Disney or maybe Starbucks or Nike or Netflix or even Amazon.
Luke: Yeah, those are great examples. Definitely, Amazon’s on the list. We started her off with Disney. I think we bought Shopify; that did brilliantly for her. my favourite, Intuitive Surgical. You know, we’ve got a great guest interview coming up on Intuitive Surgical in about a month’s time. And also Editas. Like I’m trying to use these birthday gift ideas to get her thinking about the world and the needs of the world of the future. And now each year I try and give her two options and then she picks the ones she likes best.
Albert: Calm down, Luke, she’s only about 12. It’s a bit early to know about Intuitive Surgical and Editas Medicine.
Luke: Alb, it’s never too early to understand the future of healthcare and medtech. That’s going to change our world for the better.
Albert: When I was 12, I think I would have been more interested in things like Nintendo and Sony.
Luke: Hey, you were pitching Nintendo to me the other day. We might need to deep dive that at some point. I’m very sceptical.
Key takeaways
Albert: Okay! So what do you think are the key takeaways, Duns, about teaching finance to kids?
Duniya: Well, I think the main thing is just to have some fun with your kids. Kids learn by playing and just involve them in as many conversations as you can. So my husband and I might be talking about something really dry like mortgages, you know, and what should we do with our mortgage, and Zen will butt in or Maya will butt in and say, what’s that? And we just involve them in as many adult conversations as possible. They just absorb everything you say. It leads to some fun conversations.
I also think the other thing is to point out good role models. So if you’ve got friends or family who are doing the right thing, send them to have a chat, get them involved. Don’t think they’re just kids. Let them go and have fun with it. And that’s why you two have been landed with Zen. And having conversations is the key. It’s not just about their own personal finance, but I think you’ve got to be aware that with their money, they’ve got to make good choices for themselves and, actually, for the future. I want them to be good citizens, minimize how much they consume, and make choices that furthers their own environment in the right way.
Albert: The fact that you talk to Zen about mortgages explains quite a lot.
Duniya: How sad are we?
Luke: Well, that’s great. Look, Duns, you’re a real role model parent. You guys are super smart and you’ve definitely brought up two very, very smart kids. And I think you’ve set them on a really clear journey to being financially independent at a young age. And that doesn’t mean that they’re going to kick back and live on a beach. It means that they can have optionality and shape the life that they want rather than the life that they need to have.
Duniya: And finally, even more important is kids are so tech-savvy, and there are so many more opportunities for them to spend money online than we ever did when we were growing up. We had to fill a purse and go out to the shops. They can just log on and it’s very easy to be tempted, so they really need to learn very quickly what a want is, what a need is, and how to budget,
Luke: That’s really wise advice, Duns. Hey, this has been a really fun episode. Really good to understand a bit more about the way you’re bringing up your little guys and hopefully, there’s been some interesting snippets in there for listeners.
Quote
Luke: So we thought we’d had a new little segment and we thought we’d pull an investing quote at the end of each episode. And I’ve got a lovely one to kick us off, Albert, which ties into today’s subject perfectly. It’s from that investing great, Benjamin Franklin, and he said, “An investment in knowledge pays the best interest.”
Albert: And I guess that doesn’t mean to rack up your student loan.
Luke: What did you spend your student loan on?
Albert: Probably beer in the Imperial College bar.
Luke: Yeah, me too I think.
Albert: I think that’s where I met Duns actually, the Imperial College bar.
Duniya: Spending my student loan.
Luke: Well, it’s an important part of the education as well, right, guys? You can’t just spend your money on textbooks.
Wrap
Albert: Before we go, I’d like to remind our listeners that in two episodes’ time, we’ll be doing a special anniversary show with our friends. In this show, we’ll probably kick back a little bit and talk about ourselves more than investing, and also our friends are going to ask us questions and do a little quiz.
Luke: Yep. So if you’ve got a question for either of us then drop us a line on Twitter or to feedback@telescopeinvesting.com.
Albert: And if you enjoyed this episode, you can find more content at our website, telescopeinvesting.com, where you can leave us a comment or a review.
Luke: And if this is your first time tuning in, perhaps consider subscribing to the website so you’re the first to hear about new articles and episodes as they drop.
Albert: Thanks, Luke.
Luke: Thanks, Albert.
Albert: And thanks to our friend, Duniya.
Duniya: Thank you.
Luke: Thanks, Duns.
Albert: Thanks, Duns.
