Comment by thw_9a83c

Comment by thw_9a83c 5 days ago

Nice! I also created a "virtual bank account" for my kids when they were 7-8yo. They can choose to take the weekly cash or put it in their savings account. My bank gives them a 5% interest rate per month, which isn't bad. Explaining the idea of compound interest this way is easy.

However, I think that's the easier part of being an investor. The more complicated part is risk management. With a savings account, there is basically zero risk. But that's not how you invest these days.

mattmanser 5 days ago

5% per month? Where is this crazy money generator? Assume you meant per year here!

It's not zero risk:

- Your currency may collapse, see Germany 1930s, Argentina, Zimbabwe, Venezula, etc.

- Only a certain figure is protected in savings, though governments will act aggressively to protect that (see 2008 + the Icelandic/UK/Dutch palava)

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thw_9a83c 4 days ago

Yes, it's 5% per month. You wouldn't be able to explain the concept of a yearly compound interest rate to such young children. One year is an eternity in their life. I also don't give them too much pocket money to encourage them to save. They would spend it on junk food if they had too much cash.
A agree, that the currency is not a 100% safe investment. Inflation especially makes it bad for long-term savings. Indeed, money in any savings account is insured only up to a certain amount. However, that's not something you can explain to kids with a "virtual account." I suppose the idea that Daddy's bank will go bankrupt is probably not an ideal way to teach kids financial literacy.

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