Besides the fact that there's a massive generational wealth transferunderway, another reason why I'm not too worried about the financial future of our kids is because they are much more financially savvy than we once were. Here's a post about financial advice out by a younger read.
Thanks to the internet, there is an endless amount of free information to consume. The information uptake compared to when I was a kid in the 1980s (pre-internet) must be 1,000X greater. Further, the ability to invest smaller sums of money is much easier and access to once unaccessible deals is much more available.
You used to have to spend $500 to buy Microsoft Excel software to help track your finances. Holy crap! Now you can just sign up for Empower and manage your net worth and analyze your investments for free. Those who've taken advantage of such democratization have tremendously outperformed those who couldn't be bothered.
Given the stock market is at an all-time high, here's an interesting question I received from a 13 year old cryptocurrency trader who wants to know what financial mistakes to avoid. Perhaps you can give this middle schooler some advice after I'm done as well.
Financial Advice Sought By Younger Reader
Question: I’m 13, live in an upper middle-class family, have good grades in school, and want to start planning out my future now. I want to learn the major mistakes other people have made before I can even grasp the chance to do the same.
I run an eBay account where I make ~$400 gross a month buying and reselling high tier shoes and clothing. The money usually ends up in my desk drawer, but I have been dabbling in the investment of cryptocurrency and I have turned around a $2,200 profit so far.
I know that money comes with work and gambling for it is the worst thing you could do. I want to be able to live a happy and wealthy life and I know I have all the utilities but I don’t know what to do. I am willing to work and take risks to sustain financial growth but I don’t know where to start.
If anyone is willing to give me three pieces of advice for my future I will take them with full consideration. Thanks! Daniel
My financial advice and answer:
Hi Daniel,
Congratulations! You are well ahead of your peers when it comes to planning for your financial future. Most folks in the US don't care until it's too late. When I was 13 years old all I did was chase girls, skateboard for hours after school, drink beer and occasionally sneak my parent's car out for a spin! It was a helluva fun time living in Kuala Lumpur, Malaysia back in the late 1980s.
Your parents will cringe at my first piece of advice, but do know that your grades don't really matter until high school. In other words, have fun in middle school. You get to start all over freshman year in high school. Freshman year is when you really need to start hitting the books because your GPA gets averaged over the next four years. Better grades mean an easier time getting into college and setting yourself up for an easier life.
The people today who complain about life not being fair more often than not didn't take school extremely seriously. Education is what will set you free. Get the best grades and test scores possible to give yourself as many options as possible.
Related: Public Or Private University? Depends On Your Guilt And Risk Tolerance
Second piece of financial advice
My second piece of advice is to lose money early and learn from your mistakes. It's much better losing $1,000 than losing $100,000. Investing in cryptocurrencies sounds like a great way to make and lose everything. If you end up losing your $2,200 profit by not at least taking some profits, you'll always be reminded about this loss before making more significant investments.
The people who are in for a rude awakening are those who feel they just can't lose because they only started investing after 2009. Never ever confuse brains with a bull market. Study the previous bubble implosions to better prepare yourself for the next one.
You don't have to be a great investor. You just have to be a good-enough investor to make lots of money long term.
In addition, always develop an investment thesis before you invest and check it regularly over time. Having an investment thesis helps keep you invested for longer, which is one of the most important aspects of successful investing.
Related: The Proper Asset Allocation Of Stocks And Bonds By Age
Final piece of financial advice for younger investors
My final piece of financial advice is to always focus on building your personal brand. The easiest way to do so is to establish a presence online that organically grows over time. What do you want people to think when they search for you online?
Don't post compromising pictures of yourself that might come back to haunt you. Don't write hateful commentary, only love or nothing at all. Focus on helping someone first before asking for help. Be resilient. Learn how to speak in a calm, clear, and professional manner. And never fail due to a lack of effort. If you can consistently tilt towards the positive, you will surround yourself with other positive people in return.
The abundance mindset will make you much wealthier than someone who holds onto a welfare mentality. There are janitors and elevator repairmen who make over $250,000. There are bloggers who make over $1,000,000. You don't have to go the traditional route to make good money.
Oh yeah, and listen to your parents. The easiest way to never say, “I wish I knew then what I know now,” is to listen to the people who've been there. Find a mentor. Constantly ask yourself whether your next purchase will improve or hurt your lifestyle and net worth. I've done my best to share my experience and expertise on everything I've been through, good and bad, on Financial Samurai. Don't let all the free advice go to waste!
Good luck! And thanks for reading. Your question has encouraged me to take some money off the table.
Sam
Related posts:
How To Invest In High Risk Assets Without Losing Your Shirt
The First Million Might Be The Easiest (the post where Daniel asked the question)
Invest In Private Growth Companies
Finally, instead of investing in cryptocurrency, consider diversifying into private growth companies through an open venture capital fund. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment.
Check out theInnovation Fund, which invests in the following five sectors:
- Artificial Intelligence & MachineLearning
- Modern DataInfrastructure
- Development Operations(DevOps)
- Financial Technology(FinTech)
- Real Estate & Property Technology(PropTech)
Roughly 35% of the Innovation Fund is invested inartificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!
The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum.
You can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.
