12 ms·

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

by 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?

by 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?