I have been thinking about how to teach Kelly and Christian about managing their money and investing for the future. We talk about money and its place in our life, but we have not yet put together a formal program. When I first considered homeschool, I read Raymond and Dorothy Moore’s book The Successful Homeschool Family Handbook. They highly recommend homeschooling families start a family business to help teach fiscal and general responsibility. I agree completely and plan to start a small family business within the next couple of years. In the mean time, I want to teach Kelly and Christian to manage and invest their money in a systematic way.
When Kelly receives money, she puts it into a little purse that she owns. When Christian receives money, he puts it into his piggy bank. They get money as gifts, do odd jobs, and have generally been proactive about finding ways to increase their nest eggs. A couple of months ago, Christian wanted to buy a remote control airplane, so we dumped all his money out on the bed and talked about what might be a good way to divide it up in a responsible way. Kelly participated and this is how we decided to divide up the money:
Maybe those values need a little tweaking and maybe not. We will work that out as we go, but there was a bigger issue that came to me as we were working on this. After we got the money all divided up, I told them about Albert Einstein’s famous thoughts on the power of compound interest. Christian was excited about that because he has always had a keen interest in science and famous scientists and loves anything that has to do with numbers.
Kelly was excited, too, for a couple of reasons. She read an awesome book titled Start Small, Finish Big: 15 Key Lessons to Start–and Run–Your Own Successful Business by one of the founders of Subway that talks about starting a business that has inspired her to want to learn about business and finances. In addition to that, we had talked about how important it is to save 10% of our earnings from the earliest age possible for retirement. At about the same time I described how exciting it is to watch a nest egg grow over the years into something quite substantial. She had brought that up during class one time when she was in government school and her third grade teacher laughed. She was really a good teacher and she explained that she thought it was a wonderful idea to save for retirement. She was just surprised that Kelly was interested in such things at such an early age. Kelly viewed that as something that set her a little bit apart from the other kids in a good way. Ever since then she has had a desire to learn more and really get into an investment program.
So, how do we get the big concepts across to the kids in a way that will both serve them well for the long haul and teach them somthing. Luckily, I ran into the description of a book the other day that just might fill the bill. Even if it is not exactly what I want, its description gave me the seed of an idea for how to put together a homeschool investing program for Kelly and Christian. The name of the book is The Little Book That Beats the Market by Joel Greenblatt. The whole concept behind the book is to get back to the basics. Those basic are described very well in a great little article on the book in the Wall Street Journal by Jesse Eisinger. Mr. Eisinger beautifully captures the essence of the book when he writes, “Invest in good companies when they are cheap.”
I am sure I will need to add or subtract to this as I go along, but here are the goals and assumptions for this homeschool education project:
I will try to describe how we go about this here with a running total of how our investments are doing. Stay tuned…