64 ms·

As a childhood lesson you don't need crazy inflation for this to hold true though. Anything that takes more than a few of months to save up to just doesn't make

As a childhood lesson you don't need crazy inflation for this to hold true though. Anything that takes more than a few of months to save up to just doesn't make sense as a kid. Your disposable income goes up by factors of ten every few years. You have 2$ to spend at 5, 20$ at 10, 200$ at 15. Then it slows down but you might still get to 2000$ at 25. Saving as a kid really never seemed worth it to me.

Taek 5y ago
It's about the lesson more than anything else. I really want my kids to learn how to save and be well practiced at it, even though the utility function doesn't make a ton of sense.
- Jiro 5y ago
  Learning to manage money includes making correct decisions about whether a course of action is worth it. Forcing a child to save when he'd be better off not saving teaches the right lesson about what saving is, and the wrong lesson about when you should save.
  - jjeaff 5y ago
    Not saving comes natural to most people. Learning to save is the hard part. Most children don't ever make enough money that saving would make financial sense. The reality is, teaching kids to save their money is more a lesson in delayed gratification than it is a financial lesson.
    - makeitdouble 5y ago
      This is true for many children, but there’s a also a lot of kids who are too afraid to spend and enjoy their money. It is I think as important to teach children how to spend their money, on what, and get them used to understand how much they got for their money. As a kid I saved for a long time to buy an Atari Jaguar, and it was a eye opener looking back at the “sacrifices” I made for that result.
- epgui 5y ago
  I don’t understand why so many people “save money” but then just keep cash under a mattress or in a savings or checking account. If you want to win at life, you “save money” by purchasing non-cash assets like stocks.
  - plandis 5y ago
    > If you want to win at life, you “save money” by purchasing non-cash assets like stocks Just be born wealthy enough to have free money to invest as a child!
    - epgui 5y ago
      I hope I did not come across as that out of touch. The reality is, most people barely can meet their basic needs. If you hate that as much as I do, then vote for politicians that care about wealth inequality.
  - saagarjha 5y ago
    Because investing is non-trivial and nobody tells you how to do it.
    - epgui 5y ago
      I recommend “A Random Walk Down Wall Street” for a safe/conservative, no-bs and simple introduction.
      - ChadNauseam 5y ago
        I haven't read the book, but is the premise that asset price movements form a random walk? (They don't, and hearing it said that they do is probably my nerdiest pet peeve.)
        epgui 5y ago
        The book really impresses upon the reader the difficulties of beating the market, and indeed talks a lot about random walks, but mostly it's about the efficient market hypothesis. I should say that I also don't think this is the best description of how prices actually move, and over the years since I've read the book, I have come to no longer believe in the EMH. That being said, I do still think pointing people in this direction in general is the best thing I can do: even though these ideas will only take you so far, they remain academically productive, interesting, and useful... And most people would do better to approach the markets with more humility and less confidence. Those who are nerd enough to go beyond the EMH will undoubtedly do so on their own and at their own peril. :) The book is very much in the tradition of Benjamin Graham's The Intelligent Investor, Warren Buffett's value investing style, etc.
- shadowgovt 5y ago
  But it's a lesson in the same category as "You'd better learn how to do equations on paper and long form because you won't always have a calculator with you." If the underpinning is obvious bunk, it does nothing to reinforce the desired behavior and can in fact be counterproductive. The reason to do long form math on paper is to get a feeling for the mechanics of math so that you can extrapolate it to more complicated math. The reason to save is that there are minimum barriers to cost for investiture in capital, and capital pays dividends and grows in a way consumables don't (unless it doesn't! Nobody wins in a civil war).
  - Nasrudith 5y ago
    Really saving makes sense then in a contextual way of keeping some in case there is something you want. It gets across ideas of opportunity cost.
- nobrains 5y ago
  We put our children's savings (money for good school results, birthday money, eid money, etc.) into 3 separate envelops, equally: SPEND, SAVE, CHARITY. SPEND: They are encouraged to spend 1/3rd of the money. Whatever they want to buy. They have become online discount shopping experts, whether getting rubiks cubes, roller blades or harry potter merchandise. SAVE: 1/3rd goes into savings, which we will let them tap once they need it. Not sure when: once they are 17/18 perhaps? In all cases, it will be a big payout compared to the amounts they are used to "spend". CHARITY: And 1/3rd goes to charity envelop. So whenever an opportunity comes up, they can use that towards any charity event. Good thing is that they usually spend it all in one go. Great!
  - judge2020 5y ago
    I guess this is the type of modelling CNBC used for millenial spending in their infamous tweet[0]; I don't know many people that actually donate >10% of their income to charity. 0: https://twitter.com/CNBC/status/1076173906455810050?s=20&t=ZkNQymUoMej6Xpw3znrFDQ https://twitter.com/CNBC/status/1076173906455810050?s=20&t=Z...
    - photochemsyn 5y ago
      What you want to do is set up a charity in a Third World country and give them a steady stream of money that goes to the governmental leaders for their own personal projects, like a school or something. Do this for a few years and then you're positioned to get control of the country's natural resources at well-below market prices due to, ah, corrupt local leaders willing to sell out their country's interests in exchange for more 'charity'. See: Bill & Melinda Gates Foundation, etc.
      - oblio 5y ago
        I get the first part of your plan, but do you have some sources for the second part? How is that foundation exploiting the first step, in practice?
  - xivzgrev 5y ago
    My mom had a similar system. She had also split savings into long term and short term. So LT - 40% ST - 30% Spend - 20% Charity - 10% I don’t recall what the term was for short term, maybe a few months. Something about it worked. Today I follow a similar system, tho percentages are different (spend obviously higher) and no charity.
- krastanov 5y ago
  I feel most of my saving habits came from RPG games, not from my parents (although they did try to teach me that too).
  - Spivakov 5y ago
    Your comment reminds me of this interesting article: https://crpgaddict.blogspot.com/2010/06/game-economies.html?m=1 https://crpgaddict.blogspot.com/2010/06/game-economies.html?... In many rpgs as you progress through the game the need for expenditure diminishes to zero. Different case if it is mmo or designed around grinding though.
    - ItsMonkk 5y ago
      Feel like you would like this[0] article that goes extremely into MMO economies. [0]: https://www.desogames.com/virtual-labor-and-lessons-from-economics-in-videogames/ https://www.desogames.com/virtual-labor-and-lessons-from-eco...
  - bee_rider 5y ago
    Spending all your money on health potions and in preparation to fight (the|your) boss, accidentally over-leveling, and not needing them at all?
- foobarian 5y ago
  Perhaps we're getting a lot of that lesson from games like Royale High in Roblox. I was amazed at what a detailed budget/spending plan the kid wrote up in her journal for all the things she was hoping to buy for the in-game currency. And how many days it would take her to save up for it. Oh well, at least the inflation or opportunity loss from not investing is not as much of a factor there.
- drbojingle 5y ago
  If the utility isn't there why teach it? Feels like it won't connect. Better to teach them to have self disciplined and minimalistic isn't it?
- PheonixPharts 5y ago
  > even though the utility function doesn't make a ton of sense. What if it never makes sense? One thing I didn't realize until embarrassingly too late in life is that savings should only function as a buffer for emergencies. Anything else is just burning your money since there haven't been savings accounts that consistently beat inflation even in the US. I was fed these same myths as a kid, and earnestly believed that part of success in life was to have a huge savings account one day. I remember well all those "power of compound interest" talks in grade school, about how working hard and saving was the path to wealth. But that's all a complete myth. The real irony is that anyone who has built themselves serious amounts of wealth typically does so by making high risk/high reward choices. Teaching kids to play it safe and building saves, different desires to the future etc. doesn't make any sense in the world we live in. It's ultimately bad advice. No one I know who ended up very successful did so by living conservatively and within they're means. They're people who aggressively pursued improving their conditions, often times because they were forced too precisely because they didn't have a savings. The lesson of "save money, life within your means and make conservative choices" sounds nice, but in the world we live in today this is a recipe for short terms austerity and long term decline.
  - dreamcompiler 5y ago
    I knew a guy who had saved his way to millionaire status when he retired. His salary was in the high 5 figures. He never bought anything, lived like a hermit, and just socked it all away in a savings account (back when savings accounts earned decent interest). Kind of an extreme way to live but it used to be possible.
  - grog454 5y ago
    > No one I know who ended up very successful did so by living conservatively and within they're means. They're people who aggressively pursued improving their conditions, often times because they were forced too precisely because they didn't have a savings. This also seems like bad advice. You can aggressively pursue higher earnings and simultaneously spend conservatively (on anything that does not contribute directly to higher earnings). You seem to be setting up a false dichotomy. That said, I agree that at least in free market economies, high risk / high reward + tremendous luck is a requirement for extreme wealth generation.
- jasonhansel 5y ago
  IMHO the saving you do as an adult is a very different kind of activity from the saving you learn to do as a child. Saving as a child is more about delaying gratification by not acting on one's desires; saving well as an adult is more about taking action by making prudent financial decisions. I'm not sure if learning the former really helps you much with learning the latter, though it is a useful lesson in its own right.
  - nitrogen 5y ago
    Even among people who seem financially stable, I've been surprised how many of my peers spend money as soon as they see it and have never had more than $X000 at the same time ever. The lesson of delayed gratification is actually a pretty big factor in being able to save up money as an adult.
- luckydata 5y ago
  yeah, it's a bad lesson. We should teach kids to be smart with money, not doing something just because.
- niij 5y ago
  Alternately teaching them to spend it as fast as possible is a good lesson for high inflation.
- maximus-decimus 5y ago
  Did they really learn the right lesson if they come out of it with the conclusion saving is useless?
mlyle 5y ago
One of the biggest factors for success in life is the ability to cope with delayed gratification and to show restraint. Yes, opportunity cost is huge for kids, and they might rationally spend all money immediately. But that's still not what we encourage... So we'll put our finger on the scale and adjust situations to make saving beneficial.
bombingwinger 5y ago
It’d make more sense if your parents directed your savings to the stock market or in some other asset. Saving by itself is worthless if you can’t put the money to work.
- WanderPanda 5y ago
  As a first order approximation they should maybe offer you a bond with 5-10% yield per week, month or year (depending on your age)
- wmanley 5y ago
  The lesson isn’t how to invest, it’s how to not spend.
aqsalose 5y ago
Isn't the "go up by a factor of ten" pattern you describe more of your parents spending behaviors (until you are old enough to get odd jobs by yourself) than anything else? The concept of "save money and put your loose change coins into a piggy bank" could be much older than how much disposable income kids[1] today have. My hypothesis: Maybe the intended lesson was more coherent with the reality a century ago. Here is the first graph I found with a search engine of USD purchasing power: https://www.statista.com/statistics/1032048/value-us-dollar-since-1640/ https://www.statista.com/statistics/1032048/value-us-dollar-... . After the Napoleonic wars until WW2 or so the purchasing power of 1 U.S. dollar spend most of its time increasing followed by sudden drastic drops in value during ... the Civil War and WW1. [1] Or a random HN user got as a kid.
deleted 5y ago
[deleted]
moonchrome 5y ago
>Saving as a kid really never seemed worth it to me. Also saving during 20s for this reason - if you're just starting out in a career and expecting your income to rise rapidly the money you save on interest is going to be irrelevant.
- Nasrudith 5y ago
  Depending upon a rapid rise of income is a very good way to wind up buried in debt at the slightest complication makes it not come when expected. There are a few times when it can work like say medical school's debt stack. Saving in my twenties gave me good returns despite issues starting my career but that involved some exceptional circumstances from getting in on Tesla relatively early.
- NoLinkToMe 5y ago
  It's pretty universal as a kid, as someone in their 20s? Much less so. Sure, if you're getting a degree in CS and will land a 150k a year job soon, saving anything significant from your $14 an hour parttime job as a student makes little sense. But I was making $50k in my late twenties and was not going to jump in income significantly, I saved quite a bit and was able to buy a house and later stocks which have appreciated a few hundred thousand since then. Now starting my 30s with around $80k salary. Saving is a lot easier now, but the housing market got a lot harder, too. Inflation-adjusted I don't even make that much more. But with the few hundred thousand equity, at a 7% annual return my retirement at age 65 could be reasonably locked in at >$3 million, even without saving an extra penny. Saving in my 20s made a big difference. Outside of a few fields like tech, most people don't see crazy income growth to not have to bother with saving/investing in their 20s.
  - moonchrome 5y ago
    That's great - but did this saving involve sacrificing on experiences you've had ? Setting yourself up for retirement at age 20 sounds like a miserly life. It's generalizing of course, but I've noticed this in friends I grew up with. They had avoid debt mentality, saved a bunch of money compared to their income, etc. The money they saved up didn't really enable anything significant, and they had to miss out on a bunch of stuff to make the budget. Now we're in our mid 30s they have a bit of money stashed up, still single, still trying to figure out what they want in life. I've paid off the debt I've racked up in 20s, make considerably more than them (in no small part thanks to the more risk taking behavior) and the experiences I've had helped me move forward in life. You only get to go through youth once, even if you have millions in 40s-50s it won't make you young again. You'll be making money your entire life.
Spooky23 5y ago
Childhood savings is about encouraging discipline and responsible thinking about money. My kid saved about $200 in savings in elementary school. He parlayed that into a diversified stock portfolio, now around $4k several years later.
Swizec 5y ago
Wow I wish I had $200 to spend at 15 The rest of your comment makes sense. I didn’t really start saving until my late 20’s. It just made waaaay more sense to invest any disposable income in myself. So far so good. Thanks to those early investments in myself I’ve been able to save more in the past ~5 years of my career than my cumulative earnings of the first 10 years.
Consultant32452 5y ago
Time preference is a big component in life success. There's not a lot of practical ways to discuss this with a small child, so "save up for the bigger/better toy" is what you get. If you have better ways to teach this lesson to your kids, I highly recommend doing it.
- ClumsyPilot 5y ago
  As an adult, 'wait a year' is quite reasonable, but kids live in dog years, when i was a kid 'wait a month' felt like i have to wait untill i grow old and get reincarnated
  - Consultant32452 5y ago
    Start with shorter time horizons. Do your kids earn an allowance? Pay them interest. Every dollar they still have at the end of the week, give them a dime. Be creative.
lr4444lr 5y ago
It's not about maximizing utility or ROI: it's about learning delayed gratification.
jjice 5y ago
Wish I had this logic when I was 16 and working my awful minimum wage jobs. Sure, that money ended up in an IRA eventually, but $1k gets made much faster as a software engineer than it does frying chicken wings for minimum wage, to the point where the trade off from having a bit of fun in high school or college would vastly outweigh the small gains I made. I remember thinking my friends and peers were wasteful for spending their earned money on a new graphics card or even buying a $2 drink when they stopped at the gas station instead of saving what was required for necessary expenses, setting aside a little bit for fun, and saving everything else. Turns out I was the fool. I am happy for that habit of saving, but I wish I had more perspective and reduced my savings rate to focus on having a buffer instead of saving for retirement at 16. I guess that's what growing up is for.
- nullc 5y ago
  Was your future as a software engineer guaranteed when you were a kid? :) Personally, I never would have had an opportunity to go for a high paying job if I hadn't saved up a lot of money at a time when I was earning little. So not only was a high paying future not a sure thing, it was probably only possible because I didn't act as though it were. It's easy to take for granted all the luck and skill that our past selves benefited from, making past caution seem foolish in hindsight. Seldom was it actually guaranteed.
OJFord 5y ago
Saving for a (an achievable) goal is though. I bought stuff that I had to save for as a teenager that I still have and use. (Speakers & AVR come to mind.) I agree about the sort of 'goalless' saving that I do now though.
t_mann 5y ago
I liked it (saving and later also investing), I think at one point I even bugged my bank for better rates on my tiny account once I'd figured out how to compute compound interest on my dad's calculator (and realized it was programmable). Not that I don't need a job anymore, but it did serve me well (the stock market rising continuously for 10 years might have helped too). I definitely wouldn't talk anyone out of it with that sort of reasoning, maybe the only benefit is sparking an interest in math and computers.

Taek 5y ago

It's about the lesson more than anything else. I really want my kids to learn how to save and be well practiced at it, even though the utility function doesn't make a ton of sense.

Jiro 5y ago
Learning to manage money includes making correct decisions about whether a course of action is worth it. Forcing a child to save when he'd be better off not saving teaches the right lesson about what saving is, and the wrong lesson about when you should save.
- jjeaff 5y ago
  Not saving comes natural to most people. Learning to save is the hard part. Most children don't ever make enough money that saving would make financial sense. The reality is, teaching kids to save their money is more a lesson in delayed gratification than it is a financial lesson.
  - makeitdouble 5y ago
    This is true for many children, but there’s a also a lot of kids who are too afraid to spend and enjoy their money. It is I think as important to teach children how to spend their money, on what, and get them used to understand how much they got for their money. As a kid I saved for a long time to buy an Atari Jaguar, and it was a eye opener looking back at the “sacrifices” I made for that result.
epgui 5y ago
I don’t understand why so many people “save money” but then just keep cash under a mattress or in a savings or checking account. If you want to win at life, you “save money” by purchasing non-cash assets like stocks.
- plandis 5y ago
  > If you want to win at life, you “save money” by purchasing non-cash assets like stocks Just be born wealthy enough to have free money to invest as a child!
  - epgui 5y ago
    I hope I did not come across as that out of touch. The reality is, most people barely can meet their basic needs. If you hate that as much as I do, then vote for politicians that care about wealth inequality.
- saagarjha 5y ago
  Because investing is non-trivial and nobody tells you how to do it.
  - epgui 5y ago
    I recommend “A Random Walk Down Wall Street” for a safe/conservative, no-bs and simple introduction.
    - ChadNauseam 5y ago
      I haven't read the book, but is the premise that asset price movements form a random walk? (They don't, and hearing it said that they do is probably my nerdiest pet peeve.)
      - epgui 5y ago
        The book really impresses upon the reader the difficulties of beating the market, and indeed talks a lot about random walks, but mostly it's about the efficient market hypothesis. I should say that I also don't think this is the best description of how prices actually move, and over the years since I've read the book, I have come to no longer believe in the EMH. That being said, I do still think pointing people in this direction in general is the best thing I can do: even though these ideas will only take you so far, they remain academically productive, interesting, and useful... And most people would do better to approach the markets with more humility and less confidence. Those who are nerd enough to go beyond the EMH will undoubtedly do so on their own and at their own peril. :) The book is very much in the tradition of Benjamin Graham's The Intelligent Investor, Warren Buffett's value investing style, etc.
shadowgovt 5y ago
But it's a lesson in the same category as "You'd better learn how to do equations on paper and long form because you won't always have a calculator with you." If the underpinning is obvious bunk, it does nothing to reinforce the desired behavior and can in fact be counterproductive. The reason to do long form math on paper is to get a feeling for the mechanics of math so that you can extrapolate it to more complicated math. The reason to save is that there are minimum barriers to cost for investiture in capital, and capital pays dividends and grows in a way consumables don't (unless it doesn't! Nobody wins in a civil war).
- Nasrudith 5y ago
  Really saving makes sense then in a contextual way of keeping some in case there is something you want. It gets across ideas of opportunity cost.
nobrains 5y ago
We put our children's savings (money for good school results, birthday money, eid money, etc.) into 3 separate envelops, equally: SPEND, SAVE, CHARITY. SPEND: They are encouraged to spend 1/3rd of the money. Whatever they want to buy. They have become online discount shopping experts, whether getting rubiks cubes, roller blades or harry potter merchandise. SAVE: 1/3rd goes into savings, which we will let them tap once they need it. Not sure when: once they are 17/18 perhaps? In all cases, it will be a big payout compared to the amounts they are used to "spend". CHARITY: And 1/3rd goes to charity envelop. So whenever an opportunity comes up, they can use that towards any charity event. Good thing is that they usually spend it all in one go. Great!
- judge2020 5y ago
  I guess this is the type of modelling CNBC used for millenial spending in their infamous tweet[0]; I don't know many people that actually donate >10% of their income to charity. 0: https://twitter.com/CNBC/status/1076173906455810050?s=20&t=ZkNQymUoMej6Xpw3znrFDQ https://twitter.com/CNBC/status/1076173906455810050?s=20&t=Z...
  - photochemsyn 5y ago
    What you want to do is set up a charity in a Third World country and give them a steady stream of money that goes to the governmental leaders for their own personal projects, like a school or something. Do this for a few years and then you're positioned to get control of the country's natural resources at well-below market prices due to, ah, corrupt local leaders willing to sell out their country's interests in exchange for more 'charity'. See: Bill & Melinda Gates Foundation, etc.
    - oblio 5y ago
      I get the first part of your plan, but do you have some sources for the second part? How is that foundation exploiting the first step, in practice?
- xivzgrev 5y ago
  My mom had a similar system. She had also split savings into long term and short term. So LT - 40% ST - 30% Spend - 20% Charity - 10% I don’t recall what the term was for short term, maybe a few months. Something about it worked. Today I follow a similar system, tho percentages are different (spend obviously higher) and no charity.
krastanov 5y ago
I feel most of my saving habits came from RPG games, not from my parents (although they did try to teach me that too).
- Spivakov 5y ago
  Your comment reminds me of this interesting article: https://crpgaddict.blogspot.com/2010/06/game-economies.html?m=1 https://crpgaddict.blogspot.com/2010/06/game-economies.html?... In many rpgs as you progress through the game the need for expenditure diminishes to zero. Different case if it is mmo or designed around grinding though.
  - ItsMonkk 5y ago
    Feel like you would like this[0] article that goes extremely into MMO economies. [0]: https://www.desogames.com/virtual-labor-and-lessons-from-economics-in-videogames/ https://www.desogames.com/virtual-labor-and-lessons-from-eco...
- bee_rider 5y ago
  Spending all your money on health potions and in preparation to fight (the|your) boss, accidentally over-leveling, and not needing them at all?
foobarian 5y ago
Perhaps we're getting a lot of that lesson from games like Royale High in Roblox. I was amazed at what a detailed budget/spending plan the kid wrote up in her journal for all the things she was hoping to buy for the in-game currency. And how many days it would take her to save up for it. Oh well, at least the inflation or opportunity loss from not investing is not as much of a factor there.
drbojingle 5y ago
If the utility isn't there why teach it? Feels like it won't connect. Better to teach them to have self disciplined and minimalistic isn't it?
PheonixPharts 5y ago
> even though the utility function doesn't make a ton of sense. What if it never makes sense? One thing I didn't realize until embarrassingly too late in life is that savings should only function as a buffer for emergencies. Anything else is just burning your money since there haven't been savings accounts that consistently beat inflation even in the US. I was fed these same myths as a kid, and earnestly believed that part of success in life was to have a huge savings account one day. I remember well all those "power of compound interest" talks in grade school, about how working hard and saving was the path to wealth. But that's all a complete myth. The real irony is that anyone who has built themselves serious amounts of wealth typically does so by making high risk/high reward choices. Teaching kids to play it safe and building saves, different desires to the future etc. doesn't make any sense in the world we live in. It's ultimately bad advice. No one I know who ended up very successful did so by living conservatively and within they're means. They're people who aggressively pursued improving their conditions, often times because they were forced too precisely because they didn't have a savings. The lesson of "save money, life within your means and make conservative choices" sounds nice, but in the world we live in today this is a recipe for short terms austerity and long term decline.
- dreamcompiler 5y ago
  I knew a guy who had saved his way to millionaire status when he retired. His salary was in the high 5 figures. He never bought anything, lived like a hermit, and just socked it all away in a savings account (back when savings accounts earned decent interest). Kind of an extreme way to live but it used to be possible.
- grog454 5y ago
  > No one I know who ended up very successful did so by living conservatively and within they're means. They're people who aggressively pursued improving their conditions, often times because they were forced too precisely because they didn't have a savings. This also seems like bad advice. You can aggressively pursue higher earnings and simultaneously spend conservatively (on anything that does not contribute directly to higher earnings). You seem to be setting up a false dichotomy. That said, I agree that at least in free market economies, high risk / high reward + tremendous luck is a requirement for extreme wealth generation.
jasonhansel 5y ago
IMHO the saving you do as an adult is a very different kind of activity from the saving you learn to do as a child. Saving as a child is more about delaying gratification by not acting on one's desires; saving well as an adult is more about taking action by making prudent financial decisions. I'm not sure if learning the former really helps you much with learning the latter, though it is a useful lesson in its own right.
- nitrogen 5y ago
  Even among people who seem financially stable, I've been surprised how many of my peers spend money as soon as they see it and have never had more than $X000 at the same time ever. The lesson of delayed gratification is actually a pretty big factor in being able to save up money as an adult.
luckydata 5y ago
yeah, it's a bad lesson. We should teach kids to be smart with money, not doing something just because.
niij 5y ago
Alternately teaching them to spend it as fast as possible is a good lesson for high inflation.
maximus-decimus 5y ago
Did they really learn the right lesson if they come out of it with the conclusion saving is useless?

mlyle 5y ago

One of the biggest factors for success in life is the ability to cope with delayed gratification and to show restraint. Yes, opportunity cost is huge for kids, and they might rationally spend all money immediately. But that's still not what we encourage... So we'll put our finger on the scale and adjust situations to make saving beneficial.

bombingwinger 5y ago

It’d make more sense if your parents directed your savings to the stock market or in some other asset. Saving by itself is worthless if you can’t put the money to work.

WanderPanda 5y ago
As a first order approximation they should maybe offer you a bond with 5-10% yield per week, month or year (depending on your age)
wmanley 5y ago
The lesson isn’t how to invest, it’s how to not spend.

aqsalose 5y ago

Isn't the "go up by a factor of ten" pattern you describe more of your parents spending behaviors (until you are old enough to get odd jobs by yourself) than anything else? The concept of "save money and put your loose change coins into a piggy bank" could be much older than how much disposable income kids[1] today have. My hypothesis: Maybe the intended lesson was more coherent with the reality a century ago. Here is the first graph I found with a search engine of USD purchasing power: https://www.statista.com/statistics/1032048/value-us-dollar-since-1640/ https://www.statista.com/statistics/1032048/value-us-dollar-... . After the Napoleonic wars until WW2 or so the purchasing power of 1 U.S. dollar spend most of its time increasing followed by sudden drastic drops in value during ... the Civil War and WW1. [1] Or a random HN user got as a kid.

deleted 5y ago

[deleted]

moonchrome 5y ago

>Saving as a kid really never seemed worth it to me. Also saving during 20s for this reason - if you're just starting out in a career and expecting your income to rise rapidly the money you save on interest is going to be irrelevant.

Nasrudith 5y ago
Depending upon a rapid rise of income is a very good way to wind up buried in debt at the slightest complication makes it not come when expected. There are a few times when it can work like say medical school's debt stack. Saving in my twenties gave me good returns despite issues starting my career but that involved some exceptional circumstances from getting in on Tesla relatively early.
NoLinkToMe 5y ago
It's pretty universal as a kid, as someone in their 20s? Much less so. Sure, if you're getting a degree in CS and will land a 150k a year job soon, saving anything significant from your $14 an hour parttime job as a student makes little sense. But I was making $50k in my late twenties and was not going to jump in income significantly, I saved quite a bit and was able to buy a house and later stocks which have appreciated a few hundred thousand since then. Now starting my 30s with around $80k salary. Saving is a lot easier now, but the housing market got a lot harder, too. Inflation-adjusted I don't even make that much more. But with the few hundred thousand equity, at a 7% annual return my retirement at age 65 could be reasonably locked in at >$3 million, even without saving an extra penny. Saving in my 20s made a big difference. Outside of a few fields like tech, most people don't see crazy income growth to not have to bother with saving/investing in their 20s.
- moonchrome 5y ago
  That's great - but did this saving involve sacrificing on experiences you've had ? Setting yourself up for retirement at age 20 sounds like a miserly life. It's generalizing of course, but I've noticed this in friends I grew up with. They had avoid debt mentality, saved a bunch of money compared to their income, etc. The money they saved up didn't really enable anything significant, and they had to miss out on a bunch of stuff to make the budget. Now we're in our mid 30s they have a bit of money stashed up, still single, still trying to figure out what they want in life. I've paid off the debt I've racked up in 20s, make considerably more than them (in no small part thanks to the more risk taking behavior) and the experiences I've had helped me move forward in life. You only get to go through youth once, even if you have millions in 40s-50s it won't make you young again. You'll be making money your entire life.

Spooky23 5y ago

Childhood savings is about encouraging discipline and responsible thinking about money. My kid saved about $200 in savings in elementary school. He parlayed that into a diversified stock portfolio, now around $4k several years later.

Swizec 5y ago

Wow I wish I had $200 to spend at 15 The rest of your comment makes sense. I didn’t really start saving until my late 20’s. It just made waaaay more sense to invest any disposable income in myself. So far so good. Thanks to those early investments in myself I’ve been able to save more in the past ~5 years of my career than my cumulative earnings of the first 10 years.

Consultant32452 5y ago

Time preference is a big component in life success. There's not a lot of practical ways to discuss this with a small child, so "save up for the bigger/better toy" is what you get. If you have better ways to teach this lesson to your kids, I highly recommend doing it.

ClumsyPilot 5y ago
As an adult, 'wait a year' is quite reasonable, but kids live in dog years, when i was a kid 'wait a month' felt like i have to wait untill i grow old and get reincarnated
- Consultant32452 5y ago
  Start with shorter time horizons. Do your kids earn an allowance? Pay them interest. Every dollar they still have at the end of the week, give them a dime. Be creative.

lr4444lr 5y ago

It's not about maximizing utility or ROI: it's about learning delayed gratification.

jjice 5y ago

Wish I had this logic when I was 16 and working my awful minimum wage jobs. Sure, that money ended up in an IRA eventually, but $1k gets made much faster as a software engineer than it does frying chicken wings for minimum wage, to the point where the trade off from having a bit of fun in high school or college would vastly outweigh the small gains I made. I remember thinking my friends and peers were wasteful for spending their earned money on a new graphics card or even buying a $2 drink when they stopped at the gas station instead of saving what was required for necessary expenses, setting aside a little bit for fun, and saving everything else. Turns out I was the fool. I am happy for that habit of saving, but I wish I had more perspective and reduced my savings rate to focus on having a buffer instead of saving for retirement at 16. I guess that's what growing up is for.

nullc 5y ago
Was your future as a software engineer guaranteed when you were a kid? :) Personally, I never would have had an opportunity to go for a high paying job if I hadn't saved up a lot of money at a time when I was earning little. So not only was a high paying future not a sure thing, it was probably only possible because I didn't act as though it were. It's easy to take for granted all the luck and skill that our past selves benefited from, making past caution seem foolish in hindsight. Seldom was it actually guaranteed.

OJFord 5y ago

Saving for a (an achievable) goal is though. I bought stuff that I had to save for as a teenager that I still have and use. (Speakers & AVR come to mind.) I agree about the sort of 'goalless' saving that I do now though.

t_mann 5y ago

I liked it (saving and later also investing), I think at one point I even bugged my bank for better rates on my tiny account once I'd figured out how to compute compound interest on my dad's calculator (and realized it was programmable). Not that I don't need a job anymore, but it did serve me well (the stock market rising continuously for 10 years might have helped too). I definitely wouldn't talk anyone out of it with that sort of reasoning, maybe the only benefit is sparking an interest in math and computers.