Investing Styles May Be Learned In Childhood
Investors approach investing in many different ways in order to help clients find the right type of retirement method to use.Some want safe and sure, so they choose the standard savings account and might venture into Certificates of Deposit (CDs); they won't get into anything that seems riskier than that.Others are gung ho and will just throw their money at the first investment opportunity that comes along no matter how crazy the idea seems.("I'm developing a new leprechaun trap.As soon as it is up and running, we'll be rolling in the gold from the end of the rainbow.")Everyone else falls somewhere in between.
So the first place that people invest at us in their home, and I am not talking about their actual real estate holding of their home, I am talking about the piggy bank that everyone had as a child.Parents taught children very quickly that money should go in a piggy bank and it should stay there for an indefinite period of time.(That period of time was sometimes defined by the parents need for a loan for necessities like food, or it was determined by the child's ingenuity in getting that bank open by hook or by crook.)This lesson was the entirely wrong lesson to teach because the child's net worth went down every time inflation went up, and there was no corresponding increase through interest in the child's bank account.Some people still keep a significant amount of money on hand even though it does nothing but fade away as inflation devalues the currency.
If the child is lucky, the parent opens up a savings account for the child.The bank used to make a big fuss about it, and the child felt good about depositing his or her money in a place with such nice people where he or she got a lollipop at the minimum.The idea of compounding interest is probably beyond the scope of most children before the age of 11 or 12, but a good parent who had time would check periodically with the child and the bank account and explain how his or her money has grown even without any deposits.This teaches the child about savings, and that is great, but it misses the opportunity to take a risk with that money.
Some children receive U.S. Savings Bonds that are usually stashed somewhere and never seen again.Maybe they are seen again when they mature, but nothing can be learned from the lack of interaction with this type of investment.So unless the parent or the grandparent made a special point about savings bonds and why they were important, most children grow up to be adults that don't think a lot about supporting the country through the patriotic issues.
Those that were the most fortunate had a parent who was an avid investor and who included the child in the decisions on the family investment plans.The child may have even received a share of stock or two from his or her favorite company.Getting that share framed and put where the child can see it, cab do a lot for later understanding of investing.Watching parents take a risk can help children learn to assess and take appropriate risks - it is true in life and true in investing.
Whatever style of investor a person is, some styles are easily traceable to family attitudes about money and what those attitudes resulted in.Some children see what when wrong in the home with regards to money and decide not to repeat those mistakes, while others grow up and follow in their parent's footsteps for better or worse.