I remember my dad encouraging me to save my dollars and not spend them on choc-99 double ice-creams ($2.13). These were soft whip ice-creams with 2 cadbury's flake chocolates stuck in the side and they seemed like the closest thing to heaven on earth to me. What my dad said seemed logical though and I saved. When I was 16 I had a holiday job that earned me many ice-cream-worths but I kept it - didn't buy a bicycle or anything. "Save your money."<p>These were Zimbabwe dollars, however, and in the late 1990s it all inflated away to nothing. So much for conscientious saving.
We're seeing more and more economic focused posts making it to the front page lately. We're all thinking about it due to high inflation and few options to protect our cash savings. That said, the quality of HN comments regarding economics tend to be, in my experience, quite low. I'd suggest anyone interested go seek out more qualified analysis beyond a weekend HN thread full of people like me regurgitating half understood economics theories we've absorbed over the last two years.
1228 pesos in 1976 was worth about $4.50 in 1976 USD [1].<p>... and if he'd bought into the S&P 500 (Vanguard launched the First Index Investment Trust now the Vanguard 500 Index Fund in 1976 [2]), it would be worth about about $190 in today's USD. Which you could sell to buy about 2.99g of gold today (3 trillion times as much as reported).<p>While obvious you'd have to be extremely prescient to put your money in a completely different type of fund that had launched only just that year and at the time they would not have touched such small dollar investments.<p>... but today we now know that Bogle's idea was actually pretty good and you really can make such small dollar investments (eg. Fidelity's no-fee, large cap fund has no minimum to invest (FNILX), or you could buy a fractional share of a variety of large cap ETFs: SPY (SPDR), IVV (iShares), or VOO (Vanguard) from a variety of brokerages). Of course, a minor wouldn't be able to own shared directly... so, get your kids a UTMA account [4].<p>[1] <a href="https://en.wikipedia.org/wiki/Historical_exchange_rates_of_Argentine_currency" rel="nofollow">https://en.wikipedia.org/wiki/Historical_exchange_rates_of_A...</a>
[2] <a href="https://en.wikipedia.org/wiki/The_Vanguard_Group#Growth_of_company" rel="nofollow">https://en.wikipedia.org/wiki/The_Vanguard_Group#Growth_of_c...</a>
[3] <a href="https://fundresearch.fidelity.com/mutual-funds/summary/315911628" rel="nofollow">https://fundresearch.fidelity.com/mutual-funds/summary/31591...</a>
[4] <a href="https://www.investopedia.com/terms/u/utma.asp" rel="nofollow">https://www.investopedia.com/terms/u/utma.asp</a>
Argentina has experienced multiple rounds of hyperinflation due to failed monetary policy. Saying this story is a "lesson about the power of inflation" is like saying "the sun is hot". Yes, it certainly is, but it is so far beyond normal definitions of "hot" that people will have a hard time understanding it. This is more a story about the failures of Argentina's governments over the last 50 years than a story about inflation.
Brazil had its own share of problems with hyperinflation during the 80's and early 90's. I remember the behavior it conditioned people.<p>Once people got their paychecks, they would rush to the supermarket to buy as much as they could, by the end of the month they wouldn't be able to buy that much with the same amount of money.<p>People ran ahead supermarket staff which updated prices so they could buy the same product at a previous price.<p>Gas stations had long queues during the night when there were news about about gas prices rising.<p>My father developed and interesting habit: whatever he bought, he would write in the box how much it cost in gasoline liters. That way we could have a good idea of how much each thing really cost. It was somewhat funny many years later finding old boxes written "Custou dez litros de gasolina".
I'm from the US but I lived in Argentina for about 5 years (2013-2018). It was a great lesson, and I'm seeing things in the US now that I used to see in Argentina. At the bank recently, they had a sign about the national shortage of coins. That was common in Argentina. Sizes of products getting smaller in order to keep the price the same - "inflacion escondido" (hidden inflation).
For comparison, from <a href="https://es.wikipedia.org/wiki/Anexo:Salario_m%C3%ADnimo_en_Argentina" rel="nofollow">https://es.wikipedia.org/wiki/Anexo:Salario_m%C3%ADnimo_en_A...</a> the monthly minimum salary in September 1976 was AR$11200 ~= US$45.34.<p>So the AR$1228 of the author were like US$4.97 in 1976, that are like US$25.11 today <a href="https://www.in2013dollars.com/us/inflation/1976?amount=4.97" rel="nofollow">https://www.in2013dollars.com/us/inflation/1976?amount=4.97</a> .<p>Also, the price of gold was like $120/oz <a href="https://sdbullion.com/gold-prices-1976" rel="nofollow">https://sdbullion.com/gold-prices-1976</a> so it was like 1.2 grams
The point missed in most save/invest vs. spend arguments is this:<p>If you've been raised to be a saver, you are well trained at living cheaper/less frivolously. Note that this presupposes that you make enough money to live reasonably and save; I'm not talking about the extreme poverty cases where immediately spending the rare windfall actually makes sense.<p>By cheaper, I mean one car instead of two, simpler vacations, less eating out, less fancy house, "using up" quality consumer goods instead of constantly replacing them with the latest fashionable stuff (e.g. second complete kitchen makeover in 15 years).<p>Suppose person A makes X and spends X and saves nothing. Person B makes the same, but spends 0.5X and saves 0.5X. Now suppose an economic disaster where all those savings are wiped out and A and B additionally end up taking a 50% pay cut. Who will continue to live in comfort, albeit with misgivings about not being able to save up again?
Thinking about money and its hypothetical worth in X years is a waste of mind resources, at least for me. Instead, I'm going to just save 20-25% and spend the rest on being happy. If things go south, so what? I've got an expiry date and one day these things won't be a problem.
Zeihan in tears. I really enjoy his description of geopolitics, but the man definitely overestimates Argentina repeatedly for no bloody reason.<p>When I was a child, I saved a little of my allowance to start with, but then rapidly realized that every year I was blowing away (in earnings) my savings from the previous year. Soon my porn and bootleg music high-school business was beating all the savings of the previous year. Then my ad fraud "business" plus my fake reviews "business" was beating that.<p>I dropped all of that stuff, went to uni for other things and then eventually started engineering later in life than most people and the pattern repeated in earnings. Through sheer luck I happened to make choices that aimed at growth rather than savings.<p>Pure savings are over-rated. You should hold nearly everything in inflation-protected assets. And loads of these are crazy liquid. Plus, I have friends with whom I have a de-facto liquidity pool. It's sort of a liquidity insurance mechanism: we'll just help each other over temporary liquidity humps.<p>One of my friends had to leave the US temporarily because of a green card processing delay due to COVID and he knew that I'd cover his mortgage if he needed me to. Helps you sail closer to the wind knowing that only broad-based economic failure can hurt.
As a grateful person with sufficient income, we are contributing IRS gift limit of 15-16k per parent to kids account. Eventually when the time is right we will get her practice investing also with the hope that she will see how much her account has grown by the virtue of compounding. Before then we are planning to get her do chores for neighbors and learn to earn money and get her save.
Cash should be seen as medium of exchange rather than store of value. If you saved for a bike, the bike was probably worth much more to you than a picogram of gold. Even if you ended up forgetting about your penny jar and finding it in the attic as an adult, the act of saving itself gave your valuable lessons about planning and delayed gratification.<p>On the other hand, if you made even a conservative investment like a thin silver chain or a popular book with author autograph, I bet you will get more than your money's worth for that today. If you bought a share of Apple stock - woah, but I guess we couldn't have all known back then.<p>As adults, yeah we should know better than to keep our wealth essentially in the pockets of politicians. Invest in something that will be useful to your or someone else even many years later, or profit-generating businesses. But there is nothing wrong with children play-learning a simplified version of life rather than immediately having to know the difference between mutual funds and ETFs.
Are there any kids book that explain these money concepts to elementary school kids? I feel one the big failings of the school system is that these are not taught early on and instead a lot of time is spent teaching things that kids will never use in their lives.
OP describes investment strategy that is destined to fail (i.e. keep money in savings account). This is in fact great way to teach the children by inducing failure so they understand why they need to learn <i>investing</i> instead of <i>saving</i>. My mom always converted cash to gold instinctively because she did not trust government printed paper. In US, people tend to keep money in S&P 500 with rather poor return but still well protected against inflation. The problem is still that money earned over time increases at least linearly for most people. This means that whatever amount you saved up as kid isn’t going to amount much even if it was inflation protected. For instance, all the money I saved up as kid for 10 years and put in S&P 500 for inflation protection will still come bit short to match my one month income.
When Ceausescu's regime fell in late 1989 a piece of bread was costing 3.75 lei. About 10 years later, late '90s-early 2000s, a piece of bread was costing 3,000 lei. Hight inflation is a bitch.
Ah, the magic of interest: <a href="http://www.threepanelsoul.com/comic/at-the-bank" rel="nofollow">http://www.threepanelsoul.com/comic/at-the-bank</a>
Same happened with my savings as a child in Bulgaria - my grandparents were putting into that savings account significant amount of money evety month, and when I tried to withdraw them later, all that savings were worth nothing! This should be a lesson to all of us - at least it was for me!
Fun fact: You will likely lose more money in divorce (about 50% probability in Western world) than all the money you had saved throughout all of the married <i>combined</i> by choosing cheaper vacations, forgoing hobbies, finding discounts, buying inexpensive cloths and cars.
So there is something to be said for keeping your savings in a stable currency or asset but that doesn't necessary protect you from negative government action. Some examples:<p>1. Many Russians held funds in currencies other than rubles. Faced with sanctions, Putin instituted forced conversion to rubles. So far the ruble hasn't been decimated but this could still go south;<p>2. Venezuela essentially prevents conversion of currencies. I mean it's complicated. There's a government rate and a black market rate and the country is under completely unjustifiable sanctions; and<p>3. Argentina is also currently restricting access to foreign currencies;<p>4. Years ago, Argentinians held funds in foreign currencies. Local banks held foreign currencies against those deposits. When things went south the banks basically packed up all their money, put it on a plane, flew it out and then declared bankruptcy or just threw up their hands; and<p>5. Some will even point to FDR's sovereign devaluation of the US dollar as another bad example. In the 1930s, the government forced purchase gold for $20/oz (the peg at the time) and then revalued the US dollar at $35/oz.<p>This last one is a constant point of consternation for gold bugs turned Crypto Andys.<p>And no crypto isn't the answer here.<p>My point here is that you cannot overstate the importance of multigenerational wealth creation in the developed world. The dark truth here is that the US has often had a hand in the above events that have essentiaally stolen accumulated wealth from ordinary citizens.
This has nothing to do with gold. He is comparing the exchange rate of the Argentine peso and the USD.<p>That exchange rate is appalling over time because Argentina relies heavily on USD denominated imports and issues debt denominated in USD to obtain them.
The work one did decades ago would not be worth of the same today due to increased total factor productivity.<p>When people think the money they earned in past should be worth same today assume that value of money should grow.
Saving and buying collector edition video games might be a good purchase for a kid that might pay off later.
A corvette might be a good investment too, if they stop making gasoline cars in the near future.