Doubling Time

Part of the story I tell myself about money comes from the micro-world I grew up in. The bubble within a bubble where my parents were the decision makers. One of the ways I was taught saving was that my parents used to match what I saved. How do you instill the concept of compound interest, and delaying getting something now, so that it can build for later? Saving and Investing are worth thinking of as different things. You save *for* something. Investing puts money to work (reinvesting rather than consumption). You can then spend some of what the investment earns, and reinvest some. But it is hard enough learning delayed gratification by saving, so... baby steps. Compound interest also takes time to kick in. 5% real return would double your money in roughly “rule of 70” 14 years (70 divided by return equals roughly the doubling time). No kid is still a kid if they have to wait that long. The big thing I wanted was a music system. I saved half by starting a sweet business, and my Mom matched what I saved. Where she got the magic “compound interest”, I don’t know. But she managed. She was a bit of a hero.

Funny Faces sold individually were my biggest winner

Schroedinger's Cash

Snapping Hand-to-Mouth income dependence requires stepping away from the edge. This is difficult, because the views are best when we push out as far as we can. Savings and Investment come in very different flavours. Two of them are “there, but not there”. That requires taming your inner toddler. A Buffer is an Emergency Fund of 3-6 months’ worth of expenses. Cash that is in your account, but not for normal spending. It is there for smoothing. When unexpected expenses arise, or income disappears unexpectedly. Any spending requires balancing repair work. An Engine is a source of passive income. Powering a stream of income that lessens the burden on your hands. But you can’t spend the Engine. The Engine is working. Spending your Engine is firing it. You can spend some of what the Engine produces. If you spend less than it produces, it will grow. The third type of Savings & Investment is easier. Saving *for* something. You can visualise the reward. Stepping away from the edge requires developing the ability to value what you can’t see.

There, but not there

The Intelligent Investor

My introduction to investing was fairly late. I was always a good saver, but saving and investing are different (though related) things. The youngest of three brothers, I was determined to be the last to have chocolate left at Easter. I also took as much advantage as possible of the family incentive scheme. If we saved up for something, it was matched. I was still saving “for” something, rather than putting money to work. I chose to study Actuarial Science because I didn’t like money controlling me, and that seemed like a safe way to secure a good income with the skills/privileges I had. Through that, and further investment studies I ended up at an Asset Management firm. The book I was then given to read was “The Intelligent Investor” by Benjamin Graham, and a shorter one, “The Little Book of Value Investing” by Christopher Browne. Saving is primarily about discipline and delayed gratification. Investing is about making sure the money is working. That through the noise of numbers and opinions, something of value is being done.