Early Lessons in Saving Money

My 16 month old daughter is likely to be better off and wealthier than her dad, as I am when compared to my dear old Pa who was a truck driver who left this earth many years ago with less than zero, bar his life experiences. This seems to be the way that progressive generations develop.

I am keenly aware of money primarily because as a child we didn't have any!

This is probably (no it is definitely) why I have such an interest in investing and the stockmarket today.

As parents though we can instill in our youngsters from an early age the value of a buck, what it takes to earn one, how to hold onto it for as long as possible and perhaps most importantly, how to make it work for you rather than the other way around.

Anyone can do it too, rich or poor or in between.

My girl seems to have taken an early shine to actual physical paper money, not just because kids like to screw it up and listen to the sound it makes but because she has seen her Mum use it many times when going shopping and clearly she has figured out that this paper must be actually something of value if people use it so much!

My wife commented the other day that it must be in her DNA (mine) and I dismissed it at first but then who am I to poo poo something I have little knowledge of ?

There is something that we can all do though to help our little ones onto the ladder of financial success.

Teach then about the value of money early.

There is nothing more exciting (well there is but we are talking money here) than seeing a child excited about earning interest on the money they have in their bank account and our little girl has more money in her bank account now than I did at 15!

She has just over $1000 dollars at the ASB in a savings account, thanks to some generous relatives handing over dosh and it is likely to be a sizable sum (depending on how I invest it for her - she may have some input into this as she gets older) when she turns 21 and I "give" it to her - there will be various incentives and restrictions placed around this sum of money as I said it is likely to be a very large figure.

We are going to show our girl while money certainly isn't the most important part of life it is so integral that earning it and using it wisely will make her life better and hopefully easier in the long-run.

The earlier you start teaching them about money and how it works the better. It wont happen in schools, it is your job if you are a parent to get them to value it as a compliment to life and if you can teach them about the power of earning, saving and investing money from an early age - specifically the power of compound interest - then they will be able to take care of themselves in the future and everything else will fall into place.

I started saving money in the bank as a 5 year old from money earned collecting bottles off the street and then a job at a bakery as a 11 year old and that taught me if I really wanted something I would save most of what I needed to get it and sacrifice my short term gains for long-term ones while still having money to spend on Star Wars (The 1977 Original) Ice blocks and the luxury of a 20c can of Coke from time to time.

Go on and teach your young ones the value of money. Above all it will give them choices for the future.


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c Share Investor 2010

Investors can learn from my stupidity

What was one of those pithy comments that your mum used to make to you when you were growing up?

One of my mum's favourites was "if you don't learn from your mistakes you are doomed to repeat them in the future". To be fair, mum's phraseology contained some four letter words and was knowhere as concise or fluent, but she just might have had something there.

When it comes to investing in shares, my mistakes have taught me not to go there again, even though on occasion I may have made the same boo boo twice, and I thought I might share a few of my investing nightmares with you dear readers, in the hope that you may take something from them, file them away and use them for future reference.

I started investing in shares in 1997, my first purchase being Restaurant Brands [RBD] , the New Zealand fast food operator, the price per share was $NZ 2.20 and I bought 1000 shares.

I purchased initially because I loved KFC and thought the shares were "cheap". I feel dumber than dumb just reading that back.

Little did I know, the company had been performing badly for a number of reasons and I neglected to go further than the glossy prospectus for impartial information.

I bought around 60000 shares up until late 2002 and sold them all at the end of that year for a small profit, around $2000.00-not a good investment.

Two other things I learn't from that sojourn into fast food, don't fall in love with a stock and don't be afraid to cut and run if you know you might have made a clanger in the first place.

The second lesson I learn't, and probably the most cutting for me, is that you shouldn't get greedy, follow the herd mentality and plunge oneself into something one doesn't understand (Warren Buffett would spank you for that).

On Jan 25 2000, I bought shares in a "tech" company called Strathmore. I had no idea what they did who they were and whether they were making a profit. I just bought because I thought I should be in that sector,everyone else was buying, shares were going up and would continue to do so(duh!) and once again the shares were cheap.

I outlayed NZ$3900, plus $24.95 brokerage, for 6500 shares and I think they may have gone up to about 65c at their high. 13 October 2000 I sold 5000 odd at 18c and left the rest in some other company Strathmore had morphed into and lost the rest latter.

The herd mentality struck me again big time on Sept 11 2001. I remember I was in such a frenzy to sell, I spent the morning of the 12th here in New Zealand selling my whole portfolio. After around 1 hour I sold everything! A NZ$80000.00 portfolio gone at crazy prices. I didn't lose alot , if anything at all but current and future gains were erased, as we know that the market rebounded soundly months after that ill fated day.

September11/12 was a turning point for me of sorts, although I was to repeat my stupidity less than a year latter, when markets were nervous about greedy corporate "Gordon Gekko" types fiddling company books, when I sold a very large holding in Sky City Entertainment[SKC] because I thought markets were going to spiral down to nothing. They didn't.

So it has taken me around 5 years to get over my emotional ties to "Mr Market" and in that time I have realised that:

1: One shouldn't listen and act on others advice unless your own research backs up your investment criteria.

2: Greed can be good but is also bad when not practiced without emotion.

3: markets go up and down for no particular reason.

4: do not follow the herd under any circumstances unless you are smart enough to be at the front of the herd and remove yourself from the herd before the bull gores you.

5: do the opposite to everyone else.

6: Don't read the "funny pages" (a great quote from Warren Buffett and a reference to analyst/ brokerage reports and economic forecasters.)

7: Don't listen to the latest tips from friends (cyber or real life)

8: When the taxi driver, dinner party guests and party invitees all start talking about stocks, commodities,real estate or carbon trading as the thing to invest in. Don't.

9: A low share price doesn't make a company cheap. Bad management does.

10: Do your own research until your nose bleeds.

11: A hunch can often be wrong and infrequently right.

12: "Mr Market" and his bad moods can be profited from, but only short term.

13: Don't listen to me, only I know what I am doing.


The five years from 2002 have been far more rewarding financially-even including the current "credit crises" and while I have probably made some small mistakes since, my investment strategy has been honed by the years previous to 2002 and I now approach my investments with a sensible long-term view of my portfolio.

The companies I have invested in, not stocks, are assets which fluctuate daily in price and I will not sell unless there is a very good reason to do so or unless that schizophrenic "Mr Market" offers me a price for my share of a company that I just cant resist.

History is littered with the corpses of those that kept their eyes and ears closed when they were regaled with others past mistakes, but often one can learn more from the stupidity of others than the experience they have within themselves.

I hope my reflective stupidity helps.

My mum, and yours, was right.


Disclosure: I own SKC shares


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c Share Investor 2008