Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

Frugality, Modesty and Humbleness

Saturday, May 22nd, 2004
By for Profit Confidential

Parents today take the time to bring their kids to all kinds of extracurricular activities (mostly lessons and team sports), such as swimming, piano, baseball, tennis, football, hockey, and dance to mention a few.

But what about the time we take to teach our kids about the aspects of life which young adults today can get into the most problems with? Are parents taking their young kids to lessons for serious life-shaping experiences? Likely not.

I was at the horse races the other night and asked a colleague about how he and his wife educate their kids. “Bruce,” I asked, “when did you sit down and talk to your three kids about the birds and the bees?” He answered, “We never did. There’s so much talk about it on TV and at school, we figured they would learn on their own.”

To each, their own, I say. I’m not a psychologist or psychiatrist, so I can’t tell parents how to raise their children. In my house, however, we believe that the more education our children have today, the better off they will be tomorrow. For example, since I do know a little about money, let me tell you about what we teach our kids in the Lombardi household.

At the age of eight, my daughter probably understood more about the different levels of government taxation than most 20- year-olds. When we she was seven, I started taking her to work with me on the weekends. On Saturday afternoons, at 4:00 PM, we would sit in our office boardroom each week and discuss a different financial topic. Everything from marketing to the stock market, to government, precious metals, and currencies.

Does this early teaching work? You bet it does. My daughter recently told my wife she only wants calculators in the house that have taxation functions. And when a close friend recently gave me a one ounce gold bullion coin as a gift, my daughter was able to quickly rhyme off 10 different items that coin could buy. She’s always up-to-date with the value of an ounce of gold, and a few good gold stocks too.

A bit over the edge? Maybe. But I wish someone had taken the time to explain the value of money and compounding to me when I was a youngster.

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In our house, we try to concentrate finances in three areas: frugality, humbleness, and modesty. These are “states” easier said than done. And that’s because, when you’ve worked hard all your life, and you want to spend a little money, you have to first think about the repercussions excessiveness will have as a model for your kids.

My wife took my son to the store the other night to buy baseball shoes, which he’s never had. But baseball shoes are expensive; soccer shoes are cheaper. My wife explained to my son that the baseball shoes were too much money and that he’d have to settle for soccer shoes. To that, my son answered “But mom, the other kids are going to look at my shoes and see I’m using soccer shoes for baseball. They’ll laugh at me!”

When I got home that evening, my son explained to me the situation and told me he got soccer shoes instead of baseball shoes because “the baseball shoes were too expensive.” This was music to my ears. Frugality.

Whenever my son comes back from a friend’s house, he often asks, “Why don’t we have a big house like all my friends?” To which I reply, “Our home is too big for us as it is!” Many people I pass in life are of the thinking that if you can afford a 10,000-square foot house, why not own it? My thinking is the opposite. How could you possibly use all the space in such a big home? How many beds can you sleep in at one time anyway? Modesty.

About a month ago, I walked out of the local post office in our town with my daughter and she saw the “sold” sign on the commercial building across the street. She asked, “I wonder what they are going to do with that building?” To which I responded, “I have no idea.” But the reality was that I was the one who had just bought the building. Humbleness.

At a certain point, frugality, modesty, and humbleness become fun. North American kids have so much more today than kids in third world countries, yet, most of the time, they completely take their blessings for granted.

There’s the old saying that you “reap what you sow.” The same can be said for the life lessons that we pass on to our children. Most of us are working hard to put bread on our table every day. Most children aren’t given the opportunity to understand how it got there in the first place. Some of us with teenagers seriously question where the next generation is going.

Don’t misunderstand me, I’m all for a physically healthy next generation enjoying sporting and extracurricular activities, but we need to provide them with the “other” facts of life too. Just as our children are taught how to hit a home run or play “Chopsticks” on the piano, we need to teach them how to balance a checkbook, the long-term costs of credit card debt, how interest rates affect their purchasing power, how our currency fares in the global economy… and so on.

The future generations need an appreciation for the power of money. I’m sure I speak for many that hope to acquire enough wealth to offer our children “all the things we never had” — things like being able to afford a solid education for them, or perhaps a little something to get them started in their adult lives. But my friends, teaching our kids about solid money management is the greatest legacy we can offer.

It is my opinion that if we educate our children and instill in them the values of our parents and their parents, including frugality, modesty, and humbleness, perhaps they won’t have the same problems with debt and overspending that we have today.

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Michael Lombardi - Economist, Financial AdvisorMichael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Some of the stock recommendations in Michael's various financial newsletters have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland. Follow Michael and the latest from Profit Confidential on Twitter or Add Michael Lombardi to your Google+ circles

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