How To Give the Gift of Financial Independence

Grandparents enjoy the chance to pass their hard-won wisdom along to their grandchildren. They can also struggle to find a gift that is meaningful and long-lasting in a throw-away, fast-moving world. Bob and Barb, who are grandparents, conjured up an idea for a gift that would keep on giving: to inspire their grandchildren to take advantage of their youth and the power of compounding. They gave their grandchildren a copy of Early Bird: The Power of Investing Young with a contract and $200 per year for investing. The agreement stipulated that after reading Early Bird, they were free to pick their own stocks as long as they communicated which stock they chose.  We were excited to hear from them in 2017 when they gave their unique gift. We followed up with them this year to find out how it went.

Bob and Barb had some very intriguing and encouraging observations from the experience. First, the grandkids that chose to participate had some prior exposure to the idea that investing was not only important but extremely beneficial to their personal finances. They credited one parent in particular for having conversations one on one with her daughter and nephew who took full advantage of the agreement.

While they were disappointed that not every grandchild chose to take full advantage of their offer, they, like any good investor, took time to learn from the experience. If they did it again, they said, they would read some chapters together with their grandchildren and use that as an opportunity to be more involved in the investing process. Next, they would want to be more involved in the accountability process and hands-on throughout as opposed to leaving that only to the (very busy) parents. Finally, after being in the program for a few years they want to have the kids and themselves to read the book again for a refresher. Not a bad idea. We did that ourselves and just put out a second edition with new chapters and updated information. 

They were happy with the amount of money they were able to provide but wanted to share that any amount of money would work. They felt that the amount of money was less relevant than sparking interest and getting in the market at an early age. This is a good point. Even small amounts can add up! We just added a whole chapter about how to retire from the earnings of a summer job. Bob and Barb knew the power of compounding, the main purpose of the incentive program pushed the grandkids to overcome the inertia of not investing. Since their program has been going for a number of years, two of the grandchildren have added much of their own money now and have come to see the value, encouraged by the returns they earned. The kids also saw how much more valuable investing is compared to a savings account.

This program also has changed the participants’ relationship with money. Experiencing what I like to think of as the “Buffett Paradox” where you think of how much more things are worth because you think about the opportunity cost. Warren Buffett famously referenced a $300,000 haircut which refers to what his haircut would ultimately be worth if he had invested the same amount over decades. This may seem like a crazy way to think about money, but it does make you more thoughtful with your purchases and helps you consider saving and investing instead of just thinking of money as something you spend. 

While Barb and Bob were teaching kids how to invest, they also created a unique connection with their grandkids, a gift in itself. Don’t get me wrong, I would never turn down a gift set of Legos at Christmas even in high school, but the real-life building blocks that Barb and Bob gave the next generations is a true foundation that will never be outgrown. 

Bonus: It doesn’t matter that much how much money you offer as long as those who it is offered to start investing because what you are really paying for is for them to understand the power of investing. Investing young is the ultimate chance for anyone to put small amounts of money to work for very long time periods, and long-term perspective is a gift that grandparents are uniquely positioned to share. 


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Comments

  1. Best Investment OpportunitiesApril 28, 2022 at 2:13 PM

    Thanks for the wonderful blog it will really help us to get some good information about the investment.
    Best Investment Opportunities

    ReplyDelete

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