Investment Advice From a Sixth Grader

They want to do more with their money than simply save up for the next new skateboard deck. And so I tried teaching them about investment risk.

I told them about interest-bearing savings accounts and certificates of deposit. I explained the basics of stocks and bonds and mutual funds. I introduced concepts like return on investment, venture capital, sweat equity. I showed them a graph of Google’s stock price as it rose and dipped and rose again.

Serious looks, nodding heads. These boys want to get rich. (As my son’s friend says, money doesn’t buy happiness, but it enables a good lifestyle!)

To test their comprehension of the material, I asked them how a person their age might invest a hypothetical $1,000.

“Something conservative like a savings account,” they said.
“But wouldn’t you want something with higher growth potential?” I asked.
They shook their heads. “No, you want the money to be there, no matter what.”

That wasn’t what I wanted to hear. Most financial planners would advise riskier high growth investments when you’re young. With time on your side, you can weather the ups and downs of a changing market while keeping the faith that things will ultimately go up and to the right.

I tried a different tack, and asked how a 95-year-old man should invest his life savings.

“Something super high risk like stock in a startup,” they said.
“But wouldn’t the old man want to be sure his money was there, no matter what?” I asked. “After all,” I explained, “he’s so old, he can’t work anymore. His savings is his only source of income.”
They shook their heads. “He’s gonna die soon, so what does he care? He might as well try to strike it rich and leave a ton of money to his grandkids. If things don’t work out, his family can take care of him.”

Tell that to seniors living off a fixed income portfolio.

Why are these 12-year-olds giving investment advice that’s the opposite of mine? Does the new generation have different expectations about money? Or is this a Silicon Valley thing (where we live), where it’s ingrained in high-tech culture to get rich quick by hitting a financial home run?

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