Investing

Albert Einstein once said, “Compound interest is the eighth wonder of the world.”

This week’s blog is an important one. It’s about my continued attempts at encouraging my 2 daughters towards investing.

Currently they are investing via Vangaurd with a low-cost index fund that has been set-up for the last 2 years. My challenge is getting them to continue to invest as they become adults. Currently, the odds are stacked against me …

Disclaimer: this is not advice, this is information only.

A little update on my little investors

The truth is they are my little spenders. With their ages 13 and 10 I do have to let them be kids and I don’t want to torture them with my personal development and personal finance obsessions. But I do want to eventually rub off on them because I know how important it is to understand money and personal finances.

When I was clueless about money, this only led to stress, anxiety and me being very frustrated. “Where does our money go?” was my mantra in our house for many years. In the end, I was sick of being less than happy, so I got into personal development at the end of 2018. I wasn’t happy because my poor personal finances were pushing me into working all over the country in horrible b+b’s and in poor locations abroad.

For more on my previously poor relationship with money, you can read my 1st book.

If they get any money, my kids spend it rapidly. They are both into going up town and getting clothes. 3 ladies who love buying clothes – wish me luck …

They are awesome kids (I know I’m being biased but it’s the truth) and are very grateful for anything they get. They just don’t understand me when I encourage them to save their money for something decent. Instead, they are all over Primark and buying anything just so they can spend their money. But again, they are young and that’s what I suppose kids do.

Although they are aware of DUFFMONEY, they just laugh it off and don’t really understand what I’m up to. Like winding me up about my monotone voice when I’m in the office doing a Podcast.

DUFFMONEY is about getting to a point where I am financially independent (FI). It is also about helping other people who are interested, achieve some early FI also. FI is about living life on my terms like spending much more time with the 3 Duffy ladies. Or waking up on a Monday morning and not have to go to my means to an end. What does FI mean to you? I’m very interested in this so let me know in the comments …

If I (or when I) get to FI before they are adults, maybe they will understand what DUFFMONEY is about. They will fully understand what FI can do for a family and how important investing is in achieving that FI.

My latest attempts at educating my little investors

My latest attempts are mixed. My 13-year-old doesn’t want to know anything I suggest. I’m just that horrible parent who makes her do homework and clean her room.

My eldest loved reading in junior school but getting her to read now is a chore. As soon as she went into senior school it was like a switch. She hates reading now. Maybe it’s just an age thing. Anyway, I tried to get her to read RICH DAD POOR DAD a few months ago. To be fair she read the 1st 2 chapters but got bored very quickly.

RICH DAD POOR DAD is a book that should be taught in all schools. It would be a game changer and would help kids understand money from a concept point of view and maybe turn them into little investors. Anyone into personal development will tell you the same and I’ve heard many investors over the last 2 years credit this book as a catalyst towards their success.

A few weeks ago, I told my eldest I would buy her a copy of RICH DAD. She gave me a bore off Dad look. And then I said I would give her £20 if she read this game changer of a book. Still, not interested in the slightest. Another failed attempt at teaching the kids about investing.

The youngest is a little bit different. She is a Daddy’s girl at the moment and has even got back into Jitz (Brasilian Jiu Jit Su). In previous years, she was difficult to teach as she wasn’t into reading at all. But the last few months she is reading every night. And even offered to read RICH DAD because she was after the £20. I said no as it’s something that would go over her head at her age (10).

The youngest has even started getting into The Apprentice with her old man so maybe I’ve got a little investor waiting in the wings.

My fear with my little investors

When they are 18 or 21, my big fear in terms of their ISA’s is that they blow it on partying at the weekend. I know I know. I can’t live their life for them. And I want them to go out and have fun. Weekends out and holidays with their friends. It’s going to happen, and I want them to have the best life.

I just don’t want them to blow their ISA money on partying at the weekend. For me, they will learn much more about money and life by earning the money and then going out and spending it. Not by getting easy ISA money and blowing it.

Maybe a car is a good investment but I’m hoping I can help them out with a car – without having to use the ISA’s. My point is that I want their money to build so they benefit from compound interest. If they fully understand the benefits of compound interest, it will mean FI for them in their late 30s or even earlier.

To demonstrate I’m going to use 2 case studies. Case study 1 is the weekend fund that will be blown on the drink. And case study 2 will be the FI at a very early age scenario.

Case study 1 (Weekend fund)

  • £100 invested into low-cost index fund (expected interest is 7%)
  • The 7% interest isn’t guaranteed and is based on historical figures
  • The investment period is 11 years (age 10 to 21)
  • The money is invested every month for 11 years (dollar cost averaging)
  • The final sum is £19,798.97
  • The interest earned is £6,598.97

This is a healthy amount and a good start to adult life. It pays for a new car. Maybe a holiday. And possibly some student fees. Definitely a holiday and some serious partying at the weekend.

Case study 2 (FI at very early stage)

  • £100 invested into low-cost index fund (expected interest is 7%)
  • The 7% interest isn’t guaranteed and is based on historical figures
  • The investment period is 28 years (age 10 to 38 … this is my current age in case you’re wondering why I have gone for this random age)
  • The money is invested every month for 28 years (dollar cost averaging)
  • The final sum is £103,868.82
  • The interest earned is £70,268.82

Look at case study 2 and focus in on the interest earned. That is serious money for just letting your money compound over time. In this scenario, it is very likely that my little investors would add to this dollar cost averaging as they start work. Let us imagine, the penny really drops, and they increase their savings as they start work.

They might increase it to £500 pcm but to simplify it, I’m going to work on an average of £250 pcm over the 28 years …

Case study 2 (FI at very early stage) v2.0

  • £250 invested into low-cost index fund (expected interest is 7%)
  • The 7% interest isn’t guaranteed and is based on historical figures
  • The investment period is 28 years (age 10 to 38 … this is my current age in case you’re wondering why I have gone for this random age)
  • The money is invested every month for 28 years (dollar cost averaging)
  • The final sum is £250,672.05
  • The interest earned is £175,672.05

Again, focus in on the interest earned.

What to do

If you are interested in FI, have a good look at your personal finances. Spend less than you earn and invest the rest. Read some books and try and understand money and start heading towards FI. Financial education is much more important and beneficial than chasing the pot at the end of the rainbow.

FI might be what you are looking for to get you away from your means to an end. This is the situation I find myself in as I am nearing the end of my 30s.

And if you have kids, maybe pass on your investing knowledge to them. Disclaimer: this is 100% not parenting advice. I’m just letting you in on what I’m trying to achieve by teaching my little investors (fingers crossed) about money and the benefits of long-term investing.

If you have found value in this week’s blog, let me know in the comments. Understanding money is a big deal and as I learn more and more about it, the intention is to pass that info on via duffmoney.

If you want to get into crypto you can buy at an exchange like coinbase – free crypto … if you join via this link you get £7.45 free in crypto and so will I … then you get to do the same so everyone you introduce to coinbase you get free crypto they get free crypto – a win win!!

Book of the week: Rich Dad Poor Dad, by Robert Kiyosaki. This book is a concept book that will teach you all about money. It will help you to understand the benefits of investing and business. Kiyosaki’s real Dad was an employee who struggled with money most of his life. On the other, hand his best friends Dad was in business and investing and had a very good relationship with money. The quadrant he talks about is the employee, self-employed, business and investing. Personally, I want to be on the business and investing side as I push towards FI.

For a hard copy visit the excellent Imagined Things Bookshop: Imagined Things.

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