Today’s post builds on my November 22, 2021 post, The Importance of Our Money Mindset. In that post, I wrote that “many of our core beliefs about money are formed in early childhood by observing how our parents, friends, and classmates talk (or don’t talk) about money.” The post talked about my childhood, and the development of my money mindset. In today’s post, I will share some thoughts about how the actions I am taking are helping to shape my boys’ money mindset.
We spend several weeks each summer at the lake. Last summer, I told the boys that they could have $20 to spend on whatever they wanted during the trip. We made the rounds of the local gift shops. My older son, Big W, is not materialistic and does not place any value on “stuff.” He examined all of the available items for purchase, considered a few as possibilities, but ultimately decided that there was nothing that he “needed” and decided to save his $20.
Little J is much more of a consumer. I expected the $20 to be spent very quickly. However, he was perhaps influenced by the cautious approach of his big brother. He did decide to purchase a Beanie Boo – a weak spot for him – but it was Bruni the Salamander from Frozen 2, so how could you resist? Bruni cost $9.99, so Little J told me that I could pay the taxes and he would save $10. I’m pretty sure that’s not how retail sales tax works, but he’s 7, so I cut him some slack.
I was quite pleased with the results of my social experiment. I discussed with Big W, age 11, the idea of setting up an investment account and depositing his $20. Wealthsimple offers the option of buying fractional shares, which provides the opportunity to invest a small amount of capital in companies that would otherwise be out of reach for small retail investors. Big W was intrigued, and Little J decided to get in on the action, too.
It took a little bit of maneuvering to get the accounts set up, as minor children can’t have trading accounts. But once that was figured out, social experiment #2 began. I gave each boy a piece of paper and let them scroll through the list of shares that were available for fractional trading. We talked about investing in companies that you know something about (Little J chose Roblox and Big W chose Amazon). We discussed the impact of the Covid-19 pandemic on consumer spending, and I suggested that they invest in companies that make things that people have to buy anyway (yielding holdings in Kraft Heinz and Colgate-Palmolive). I suggested investing in companies that might play a role in the pandemic recovery (Johnson & Johnson and Abbott Laboratories). Finally, we talked about diversification – geographic (Wealthsimple has both Canadian and US shares available for fractional trading) and by industry. I let each boy make their own list, and then did some minor tweaking at the end. But overall, I was very impressed by how they applied their knowledge.
Wealthsimple had some account opening and referral bonuses, so I was able to earn Little J a 205% return on his $10 investment right off the top. Big W’s bonuses amounted to a 194% return. They were delighted with this and we hadn’t even gotten started!
We purchased the fractional shares at the end of September, and then made some additional purchases in October (Grandpa T is supportive of the venture and helped to fund the investment accounts). Throughout the process, we talked about what it meant to own shares. Little J told me that he was going to go to school (with a briefcase) and tell his friends that he owns companies. He’s in grade 2.
Things really got exciting when the dividends started rolling in! What is a dividend, you might ask? This is a topic that I covered in my Introductory Financial Accounting course at the University of Manitoba and I was discussing it at home with elementary school-age children. The dividends were small, but the idea of receiving them for “doing nothing” was an intriguing concept.
Overall, the $30 investment of start-up capital has yielded significant learning opportunities that cannot be quantified. Even if their stocks tank (which they won’t, given the portfolio selection advice that they received), the experience has been well worth the investment.
I did some analysis over the Christmas break of the investment performance of each boy’s portfolio. In next week’s post, I will share some of the winners and losers and some of Big W’s thoughts on his stock-picking strategy. Stay tuned!
Life Lessons 