What my grandparents taught me about saving and investing
When I turned 16 my grandfather gave me $1,000 and took me to his financial planner (and fishing buddy) to learn about investment options and the very basics of financial markets.
He did something similar for all of his grandchildren. As the oldest grandchild, I was the first to be taught the value of money, the importance of saving and the power of investing.
My grandparents grew up in a quintessential southern country town in Kentucky, shortly after the Great Depression. Their parents experienced poverty and struggle, and their earliest memories were shaped by the resilience of their community to survive.
Once the economy started to recover, they quickly decided to save, save, save - because who knew when another crash like that could happen?
My grandparents focused on saving but not missing out on what mattered to them most. Cutting back on expenses by cooking at home more and limiting the times they bought "to go" meals meant more money for activities.
To be able to travel across the country on a modest salary with four kids they had to do it cheaply. Instead of going to a resort every few years, they bought a blue tent and camped all over, and they travelled frequently.
By reducing their expenses, my grandparents were able to put money away while raising a family.
It was once they had a big enough pot for a rainy day that they chose to invest.
My grandfather made his first investment in real estate.
Over the course of 30 years he purchased and rented out different properties in their little town, many which he still owns today. The rent from each property generates more than half his monthly retirement income.
My grandfather also always made sure to take advantage of any pre-tax retirement contributions and corporate matching opportunities. He invested in mutual funds and was able to retire comfortably at 59.
They were always aware of the risks of investing and understood just because something worked once historically, it did not necessarily translate to the same future performance.
They were patient when their investments experienced ups and downs through bull and bear market cycles, but remained focused on diversification. They took an interest in funds focused on companies that paid dividends (the money paid by a company to its shareholders out of profits).
This allowed them to grow their retirement funds to provide a steady stream of income to last through a long retirement.
My grandfather worked in the school system and always looked for an opportunity to teach. He was one of the first people to talk to me about compound interest and why saving early could mean more long term.
I also learned the importance of creating a reliable post-retirement source of income. My grandparents' willingness to speak to my brother and I about investing increased my confidence and readiness to invest. Some women are not privy to this and keep away from the stock market.
This experiment of gifting $1,000 to each grandkid, with guidance about what to do with it, was a great learning opportunity for us all at a young age. The goal was to create an awareness of the financial markets and shape healthy attitudes towards investing. There's rarely a visit that my grandfather does not bring this up and ask me how that $1,000 is doing.
I had bought individual stocks based on very limited knowledge - focused mostly on price. Even though my investments at that point did not make me rich, I learned about what securities were, the differences between equities and bonds, and how fees from frequent trading can eat away at overall performance. Eventually I moved the money into a retirement account.
I'm not exactly sure how much money that $1,000 has made me over the course of 18 years, but I know my ROI generated a wealth of knowledge and experience.
If I had the gift today I would probably do things differently. I would consider putting it into a fund, which would allow my $1,000 to be part of a larger pool of money managed by a group of investment specialists (portfolio managers).
This option could have ensured my investment had a broader exposure, rather than being concentrated on a handful of stocks.
Regardless of the outcome of the $1,000, the exercise itself instilled in us an interest in financial markets and paying attention to the saving and investing opportunities around us.