If there was ever a time to be fiscally responsible, it’s now. The problem is that not all of us received an in-depth financial education when we were growing up. However, the real world couldn’t care less about that fact.
It’s become abundantly clear that strictly relying on your W2 paycheck is no longer going to cut it in a world where the rug can get snatched from beneath you in the blink of an eye. We need to form more of a symbiotic relationship with our money. Instead of just working for it, it’s time to make that money go to work for us!
On the latest episode of the Jaded 80s Baby podcast, I sat down with Chuck Jaffe to discuss all things finance-related. We covered everything from teaching your kids about money to using the stock market to build your savings regardless of your budget.
Chuck is a nationally syndicated financial journalist and the host of the Money Life podcast. He has over 30 years of experience as a journalist and an investor, and he is a highly-respected voice in the world of finance. You can visit the page for part one or part two of this interview to listen using timestamps, or you can listen to the full interview using the audio player below.
As always, I’m going to go over a few key points from the interview in this post, but you should listen to it in its entirety when you have time.
Investing Is Not Gambling
For most of my life, I fell into that group of people who likened the stock market to a casino. I generally operated by the simple belief of not risking money on anything that I couldn’t directly influence. Like many, I’ve always been very conservative with my money.
Chuck talked about the importance of financial education and how learning about the market can help remove the fear and emotion associated with investing. But where do you even start? If you look online, you’ll see plenty of courses from “experts” who claim that they can teach you to beat the market, but Chuck stated that those courses may not always be your best bet. You can find almost any educational resource you need for free, and you should only pay for a course if it comes with some level of exceptional support or access to resources that would otherwise be unavailable to you.
Big-time brokerages like Vanguard and Charles Schwab offer plenty of free educational resources, so you should be able to find a lot of what you need there. I watched YouTube videos from experienced investors to help me learn basic things like jargon, what is an index fund, how the stock market works, etc. The education is out there if you’re willing to put in the work.
You Can Save and Invest on a Limited Budget
Not all of us have some high-paying job that gives us access to loads of excess cash, a 401k, or some other financial vehicle. The good news is that even if you don’t have any of the previously mentioned resources, you can still save money and start investing.
One method for saving that Chuck mentioned was taking your change from a purchase and adding a dollar to it before putting it away in a jar. Over time, that adds up, and it works. Over the last ten months, I employed a similar method for saving money. It allows you to set it and forget it. That money will grow, and it’s like you’ve been paying yourself the whole time.
He also mentioned using an app like Acorns. The Acorns app that essentially does the same thing that I just outlined, but it takes that money and immediately starts putting it towards investments of your choice. The amounts are small, so it’s a good onramp for new investors who might be a bit hesitant.
Charles Schwab is another good option for new investors. They allow you to take any amount over $5 and start buying fractional shares of stock (small pieces). Best of all, it’s commission-free. For example, let’s say that company A’s stock sells for $100 per share, but I only have $10. I can buy 10 percent of one share ($10 worth) and keep adding money to that amount over time until I eventually own a full share of company A’s stock. I can also spread that same $10 across multiple companies if I wanted to.
Be Wary of DIY Investment Apps
Having a do-it-yourself attitude is an admirable thing, but you might want to forget about that when it comes to investing. If you’re an inexperienced investor, you need to be careful when it comes to apps like Robin Hood that empower you to make potentially boneheaded financial decisions. Sometimes we need to be saved from ourselves, and many of these DIY investment apps fail to do that.
We talked about the recent story of a young man who thought that he went into an insurmountable amount of debt by trading using the Robin Hood app. He made a series of moves, and by the time he looked at his account balance, he couldn’t believe how much money he owed. The problem is that he made a mistake, and he didn’t actually owe the amount that he thought he did. The man was an inexperienced trader who was allowed to freely operate above his skill level, and he may not have completely understood exactly how the app worked.
Simply put, DIY investment apps give you too many options and make you check too many boxes. If you don’t know what you’re doing, it’s a recipe for disaster.
Teach Your Kids About Money at an Early Age
My favorite takeaway from the interview was an activity that Chuck calls trade or treat. Every Halloween, he comes out with a set of rules that allow the kids in his neighborhood to trade candy for envelopes filled with various monetary values.
There are different levels of risk assigned to each type of envelope, and the kids pay with 1 – 3 small pieces of candy. They can take a chance to hit it big, or they can play it safe and guarantee themselves a return on their investment.
It’s an exercise dedicated to teaching risk management, and it helps kids learn how to value money. I can’t do this activity any justice by explaining it here, so I suggest you listen to the end of part 2 to hear Chuck explain it in detail. He starts explaining the activity at the 36:44 mark. It will surely go a long way in teaching your kids the value of a dollar.