My son once told me he someday wants to earn big bucks working for Microsoft. “So you want to be a software developer like me?” I asked. “No, I want to be a cashier; that’s where the money is!” he quipped.
That’s when he was nine. Kids this age have a very simplistic view of money. They’re old enough to know money doesn’t grow on trees but too young to understand how they’re earned or made.
Now that he’s 12 and has a solid grasp of math, our conversations have evolved into more advanced topics. Admittedly, he spends a significant part of his spare time playing on his Xbox, which of course, is sold by Microsoft.
So one day, while waiting in the car for his school bus, he asked, “Dad, do you really own Microsoft?”
“Yes, I own Microsoft,” I proudly assert.
“I probably own minuscule like point zero, zero, zero, zero, one percent of the company.”
“Microsoft has billions of outstanding shares. I own like 500,” I added.
I made a quick glance in my rearview mirror and he looked puzzled. But I can tell he still had my attention. His bus has been coming in late the past few days due to driver shortage. And this allowed me to have longer conversations with him.
Of course, the best way to explain concepts to kids is through analogies. This is how I teach my kids about money and investing.
The delicious pizza analogy
“Think of a company like Microsoft as a giant pizza pie. When Bill Gates and Paul Allen started the company, there were like eight shares. As the company became more profitable and successful, the pie became bigger and bigger, and more and more people wants a piece. They had to cut more slices or shares.”
“These shares are sold in the stock exchange just like slices of pizzas are sold in our local pizzeria. As more and more people buy Microsoft products like your Xbox, the slices become more delicious and valuable.”
“I bought my first shares at around $25 apiece. Now they’re worth over $300. I also get paid every few months called a dividend, which I use to buy more shares in the company. The more shares you own, the larger the pay. Not all companies pay a dividend though.”
“So if you want to be wealthy someday, you need to buy things that go up in value and not the ones that go down like a new car. If you buy a Tesla, 300K miles later it’s worthless. If you bought $1,000 worth of Tesla stock in 2010, that investment would be worth around $100,000 today.”
I can tell from his eyes he’s getting excited. I want to expound further but he interrupts me to ask, “Can you teach me how to invest in Tesla?”
Invest in thyself first, successful companies second.
“Hold your horses, you’re only 12. You hardly have any money to invest. The best investment at this stage is yourself.”
“You earn money through work. If you have a marketable skill, companies like Microsoft and Tesla can pay you big bucks for exercising that skill for them. Then you’ll have money to invest in them and a bunch of other successful companies.”
“Think of marketable skill as delicious toppings on a pizza. The more skills you have, the more companies would be fighting over to take a bite from your pizza.”
“One such skill is coding. Instead of simply playing games, you’re better off learning how to write them! To get rich, you want to become a producer, not a consumer.”
At this point, I’m so hyped up I couldn’t stop talking about anything that would inspire him to learn how to code.
“When I was your age I wasn’t simply playing games, I was learning how to make them. Back then, there was no Internet, and computer books were hard to get and very expensive. Yet I’ve managed to build a simple shoot ’em up, space invaders type of game.”
“Elon Musk wrote his first game, Blastar, at your age. He’s now the richest man in the world!”
“In fact, seven of the top ten richest billionaires today are coders!” I exclaimed.
He then surprised me with a bit of a sarcastic question, “Dad, why aren’t you a billionaire?”
That’s when I saw his bus coming from a distance. I kissed him on the cheek and said, “That’s really a good question, son.”
He stepped out, closed the door, and headed his way to the bus.
I thought to myself, maybe someday, just maybe.