The other day, I had the absolute pleasure of having my favorite meeting of the year (so far). It was with, hands down, my cutest, most energized, and yet also my smallest client (in size I might add, since I can’t break client/advisor confidentiality).
You see, I had the joy of spending a half-hour answering questions with Ava, my 9-year-old client. (Her parents also happen to be clients, I may add.) At Diversified, we truly want to help one’s entire family, be it Ava, her parents, or your kids or parents. Family wealth planning should include just that… family!
The real question at hand is, what do kids want to know about money and investing? To answer that, let’s take a minute to recap our adorable and informative meeting.
For starters, I asked what is it that a 9-year-old is saving money for? Ava was very clear in her mid-term goals. She’s saving up for a car (a blue Nissan) and a house. This is where I started to educate her about the difference between short-term and long-term investing. Also, it was a great opportunity to discuss what money she should be “investing” and what money should go to her savings account. You see, Ava also wants to buy more rocks and Robux. (If you have to ask, you’re considered old in Ava’s eyes).
This presented a great opportunity for me to educate Ava. We discussed the longer-term goals we want to be investing for, so there’s more time for growth in the markets. Whereas those shorter-term purchases, we’d be better off putting in her savings accounts. This was a great moment to understand saving for desired goals.
Then we discussed compound interest. (This is a hard concept to describe to a 40-year-old, let alone a 9-year-old.) As the 8th wonder of the world, compound interest is a concept every investor must understand. In describing it to a pre-teen, we had to really break it down into basics. I started doing math problems with little Ava, and quite frankly, she picked it up amazingly fast. (It must have been her great teacher.)
I described the concept then asked if she took her money and left it in cash, how much would it be in 10 years from now? We all agreed, on the same amount that it is today. Then I asked, what if we had $1,000 and it grew 10% in a year, what would it be worth then? We all agreed on $1,100! Then, if we got 10% on that $1,100 what would it be worth the following year? This is where we realized that by the time she bought that sharp, blue Nissan, her money has the potential to be worth substantially more than it is today. We then got very deep and said when her allowance stops, and her work stops, it’s very important that she saves enough so her investments can provide her a retirement allowance to live.
The last big question of the day came when she asked, “How does it all work? You know, finances?”
“Great question, Ava. You see, finances, or financial planning, is where we talk through what you want to accomplish with your future and your life. Then, we figure out how to support that life utilizing money and careful planning.”
It was a great question, and the answer, I realize, is the same if you are 9 or 99. How can you accomplish anything of importance if you don’t give it the right amount of time, planning, or attention to do so?
I can only envision that after this blog goes out, my next month is going to be chock-full of 9-year-old’s wanting appointments! Oh well, what can you do, right?
In any event, where I left it with Ava was that finances, and financial planning should be a family process. If your family is impacted by your finances, let’s bring them in the fold at some level.
For Ava, I sent her a book to learn more about this tantalizing subject. However, the more important thing I gave her is an open door to me, and all my resources, to talk about finances any time she wants. Of course, for the next few years, mom or dad will likely be involved (since I don’t think she has her own email yet or phone), but eventually, it will turn into her having a direct line to a team of financial professionals. Because, as the old tagline of Olive Garden, “when you’re here, you’re family!”
Hope you enjoyed hearing about Ava, and as always, stay wealthy, healthy, and happy!