A Letter to My Son: Financial Advice for Life

The following is a letter from Russ to his son.

Dear Son,

You’re seven, a great age for many reasons. You’re old enough that I no longer have to watch Thomas the Train. You’re still young enough that when we read together, you let me pick at least a few books that I like (one day I’ll need to apologize for making you sit through several hundred renditions of Yertle the Turtle), and you still get excited when I bring you back a stuffed kangaroo from Australia. In short, you’re at an age when I can still solve most of your problems.

I know that won’t last. Eventually you’re going to need to go out and find your place in the world. So this Father’s Day, I thought I should take the opportunity to offer some advice, or at least advice relating to your financial well- being.

My number one recommendation is to find a job you truly love doing because you’re going to be doing it for a very long time. This was always good advice, but it’s likely to be even more pertinent for your generation. Recently my generation and the previous one have gotten into somewhat of an odd habit: we live much longer but want to retire much younger. This probably has to change. If you can find something you think you can do for, say, fifty years or so that would be a good thing.

Also, when you finally do decide to retire, the government may not be of much help. That will be all right, assuming you follow my second admonition: save. This is both the easiest and hardest one to follow. It’s easy because unlike picking a career or picking a stock, both of which involve a lot of uncertainty, saving requires no special foresight. It does, however, require discipline, and the earlier you start the better.

The third bit of advice concerns what to do with those savings. This is a big topic but, for now, concentrate on just two things: value and diversification. Always remember the price you pay matters, even when investing. This is something many in my generation forgot during the tech bubble when we told ourselves that Internet companies with no revenue should be worth several billion dollars. Second, no matter how good an investment looks, don’t own too much of it. There are very few free lunches in finance, or in life. If you want more return, you need to take more risk. Diversification is the one loophole to this rule.

That’s pretty much it. Find a job you love, save early and often, be a value investor and don’t put all your eggs in one basket. Nothing that original, but I’d like to believe that following this advice will save you from at least a few of life’s little hiccups. And know that if you stumble, I’ll always be there, stuffed kangaroo in hand.

Love,

Dad