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Recently, in a taxi going to Auckland Airport a friend shared that he is concerned about the world his children are growing up in. Yes, I thought, the war in Gaza is appalling and the Russian invasion of Ukraine shows no sign of ending. Sean “Diddy” Combs was on trial for sex-trafficking and friends of his like Boosie Badazz defended him by tweeting, “U shouldn’t be sent to jail for being a freak.” What a world we live in. I get it. How can you not be concerned about the world your children are growing up in?
But my friend isn’t thinking about global issues or the deeply weird manosphere of black American hip hop artists. He is thinking of the bougie-ness of the world around him in his sought-after South Island hamlet. And he is thinking how different his children’s lives are to his own childhood, and how the cold days on a faraway farm and lonely nights at boarding school instilled in him a burning desire to be someone. And, sure as hell he’s done it, and he’s still driven to grow and succeed and make his life count. But he asks himself (and me as we head into the Waterview Tunnel), is all the love and material comfort he provides his children robbing them of the very things that fuelled his success and which they need if they are to have the drive and grit it takes?
The driver turns down the radio for some reason. The question lolls on the seat between us, as if resigned to an answer that is blandly well-meaning but daring another.
I am immediately reminded of another conversation I had 20 years before, also in a taxi, being driven from the airport to a hotel somewhere I can’t remember in Italy. My wife Brigit and I were sharing the ride with an American couple. To pass the time of day I asked them what they intended to do in Italy. The woman answered happily, “We’re gonna do everything. We’re skiing – spending the kid’s inheritance.” It was the first time I had heard the phrase.
So that’s a possibility. Tell the kids early you are not leaving them any money, either because you will spend whatever you have before you die or you’ll give it away. You could throw in, “And you are on your own after you leave school. Get yourself through university and into a job.”
It sounds harsh to the modern ear but it’s not long ago that it was the standard approach (if not the standard way of delivering the message). It was standard because parents didn’t have the means to provide ongoing support to their children, and their children were better educated and heading to higher-paying jobs anyway.
At bottom my friend’s concern boils down to whether his children will be ambitious for success in life, and how much effort and sacrifice they are prepared to put in to achieve that success. What we all need to be happy and fulfilled (which is what success is) is ambition and achievement. But not any sort of achievement. Great material success without meaningful relationships and achievements that benefit others as well as ourselves will not deliver a fulfilled and happy life.
More specifically regarding wealth, the three most important values underlying a healthy relationship with money are self-sufficiency, a sensible frugality and an understanding of the power of compounding.
In this, as in many other areas of financial management, billionaire investor Warren Buffett is a good teacher. His daughter Susan, who was living in a small home in Washington, D.C., asked her father for a US$41,000 loan to renovate her small kitchen and provide garden access after the birth of her first child. Buffett answered, “Why not go to the bank?” So she did.
My grandfather on my mother’s side was a doctor and a successful investor on the side. There is Scottish heritage all through my family, so perhaps it is no surprise that my grandad was careful with his money. He told a little story about Henry Ford I and his grandson Henry Ford II to a wide-eyed 8-year-old.
“On the street outside the Ford Motor Company’s offices in Dearborn Michigan was a newspaper seller. Henry Ford I and his grandson Henry Ford II both bought their daily newspaper from the same seller every day. Henry Ford I scrupulously tipped the salesman a nickel every day when he bought his paper. One day the newspaper seller said to him, ‘Mr Ford sir, don’t you know your grandson tips me a dime a day?’ to which the older man replied, ‘He’s got a rich grandfather.’
Who else but Einstein gets to comment on the power of compound interest? “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”
Former All Black captain David Kirk, now chair of Rugby New Zealand, joins Listener.co.nz to take a conversational look at money, finances and living well. The cofounder and chairman of Bailador Technology Investments, Kirk sits on a number of other boards including investee companies of Bailador and charitable organisations.
