“Working to help parents raise money-smart kids.”
Hello, friends!
On this Memorial Day, I’m thinking of two people.
The first is Hank Thomas, my late grandfather’s brother, who was killed in the Battle of the Bulge. This assault was the last major German offensive of World War II, which meant Hank was close to coming home alive.
The second is William “Clark” Hunter, the B-25 pilot my dad wrote about in Shot Down Over Italy. Hunter sacrificed himself for his crew, including my other grandfather’s brother, William Lanza. “Uncle Willie” lived to tell the tale to my dad. It’s a wonderful, well-researched story.
These heroes are my inspiration for this week’s “3 Ideas to Share & Save.”
— 1 —
Live Beneath Your Means: My maternal grandfather, Bob Thomas (Hank’s brother), trained pilots during World War II. And when the war was over, he became a commercial pilot for American Airlines and carved out a good living.
For me, his legacy includes two essential bits of wisdom that he shared and which I highlighted in my book, The Art of Allowance: Understand the power of compound interest, and live beneath your means.
As I chronicled in my book, it took me a while to understand these principles. That delay is in part why I write this newsletter for you. In fact, I encourage you to introduce both concepts to your kids early to allow more time for internalization.
Last week I shared my essay “You Don’t Need a Budget,” in which I make the claim that living beneath your means is more important than creating a budget. You simply can’t have one without the other: A budget will work only if you have the discipline to live within it.
On the other hand, compound interest is best demonstrated visually. Morgan Housel explains how time-dependent it is in this passage from his book The Psychology of Money.
Warren Buffett is a phenomenal investor. But you miss a key point if you attach all of his success to investing acumen. The real key to his success is that he’s been a phenomenal investor for three quarters of a century (my emphasis). Had he started investing in his 30s and retired in his 60s, few people would have ever heard of him.
Our kids can only experience the power of these principles over time, but we can start now with visuals. Truthfully, I love this graphic we created to get the point across. Feel free to share it with your young investing mavens.
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The Importance of Training: As pilot of a B-25, Hunter was responsible for the safety of his crew. Ultimately, he sacrificed himself to give them time to bail out. His training allowed him to keep his disabled plane aloft long enough for all of his comrades to survive. But sadly, time ran out to save himself.
It’s extremely unlikely that our kids will ever face a situation as grave as Hunter’s. However, they do encounter a myriad of choices regarding what to do with their money. That’s why we give them an allowance — to help train them to make decisions and, through their own individual experiences, to improve their abilities to make good choices over time.
And if properly trained, our kids can “level up” from the simple starter allowance to the Breakthrough Allowance when they transition to their tween and teen years. This new program introduces them to real-world choices, such as buying their own clothes, devices and food.
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Reflection: Memorial Day is an occasion to honor the sacrifices many have made to enable us to live as we do today. Admittedly, I haven’t always taken the time to reflect on this day. So I’m writing these words as much for myself as I am for you.
Similarly, we can take time to reflect on the choices we so often make about money, therefore modeling this introspective behavior for our kids.
A number of years ago, I was in the market for a new shoulder bag. I wanted one that didn’t flop over when I put it down and which featured a specific number of compartments. Although I found a contender that suited these needs, it was pricey. But after taking time to reflect on the potential purchase, I bought the high-end bag because I could find nothing else like it. I later discovered the bag was a needlet. And to this day, my family and I affectionately refer to this accessory as my “office.” All joking aside, I still use the bag every day, as it’s remained in tip-top condition.
As I talked with my daughters while I pondered purchasing the bag, I realized it’s a good idea to give voice to choices that might otherwise be invisible to kids. Hopefully doing so will help my own with their future decisions.
Enjoy your Memorial Day, and thank you again for taking the time to join me on this money-smart journey.
John, Chief Mammal
P.S. Please consult with a financial or investment professional before engaging in any decisions that might affect your own financial well-being.
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