Investment Principles for Teenage Children

By Mark JG Taylor

20 August 2020

Warning: Occasional rough language - Teenage guidance of parents is advised

Wonderful as they were, my parents regarded discussions about money and investments as taboo when I was growing up in the 1970's. As my children became teenagers, I began to ponder my late parents' failure to do this and I resolved not to make the same mistake: educating our children about money and investments is an essential parental duty.

When I started to talk to my children about money and investments, I wrote some investment principles for them. There is no 'standard operating procedure' for being a parent, and the principles I wrote are a personal perspective. For this reason, I would urge parents to consider articulating their own thoughts to their children.

This is what I wrote.

Investments

1. Be aggressive - you have a 50 year investment horizon and the market will eventually revert to its long term upward trend.
2. Be brave - once you have picked your investment direction, the ups and downs of the market are generally a distraction. Do not panic.
3. Be thoughtful - think carefully about the big market trends and stick with them unless there are good reasons to change your position.
4. Be patient - if you want excitement, take up skydiving. Investment should be a long, boring game.
5. Be decisive - if you have made a poor decision, acknowledge it, act promptly to rectify it, and learn from it.
6. If you are not sure what to do when there are big shocks in the market, do nothing.
7. If a forecast return is 'too good to be true', then it probably is. Use your common sense and beware of sure bets and over-hyped promises.
8. Trading is generally a bad idea, unless you are God (unlikely) or you have inside information (illegal) or you are using someone else's money (banking). Rather pick long term trends and high quality investments at sensible prices.
9. Emergency cash in bank accounts is essential once you start working (3 times monthly expenses is a good guide) but, while studying you can rely on Mum and Dad so, unless you are worried about the market dropping, cash is best invested more aggressively for the long term.
10. As a general rule, debt is bad unless you are investing in an asset that you have plausible confidence will deliver a better return than the interest you are paying on the debt. Cars are crap investments.

Most importantly, financial net worth has nothing to do with being a wonderful human being, so never value yourself, or anyone else, based on financial net worth.

The corollary of this is that arseholes are statistically evenly distributed across all levels of wealth; so too, wonderful human beings.

Lifestyle

1. Live within your means. You have had an abnormally privileged upbringing which can be a curse because it can lead you to expect more than you can always afford.
2. Mum and I may not leave much over when we kick the bucket, but we will prepare you for the world by educating you, loving you, hopefully teaching you a little wisdom, and not spoiling you (if we spoil you, you will have nothing to look forward to).
3. Invest in yourself. Lifelong learning will enhance the invisible part of your financial worth - your ability to make money. It will also make you interesting to talk to at a dinner party.
4. Prioritise what is important: keep life simple, delay gratification, seek experiences and wisdom before acquiring things, laugh and love a lot, stay healthy, and have a long-term plan.

Mark Taylor is the CEO of Neu Capital Africa, a leading on-line capital matching platform which links vetted African businesses to global and domestic investors seeking to make individual investments of $5m to $50m+. In keeping with the notion that much of parenting is a social experiment, Mark's greatest parenting achievement is that he has not yet scarred his children for life.