Barmitzvah portion that lasts for years
ON MY barmitzvah, I received the customary dictionary, a fountain pen and my first real injection of cash. If memory serves me right, I was given cheques to the value of £120, which in 1977 was worth a lot more than it sounds (the equivalent of being able to afford a top-of-the-range iPad today).
I remember my parents opened a Post Office savings account for me and the money was duly deposited. They handed me a savings book, in which I would be able to log all my deposits and withdrawals. This could and should have been the beginning of my financial education. However, my money sat in the account neglected for five years.
Then, as an impoverished student, I rediscovered the now-dusty savings book and, having weighed up my financial options, I took the bold decision to spend it all on beer. Within a few weeks the £120 was gone and I was left with nothing but a sore head with which to remember it.
Fast-forward 40 years and I now have a 15-year-old daughter and a 12-year-old son. Ideally I would like them to make different choices from those of their dad — choices that allow their money to grow while leaving their livers intact. The good news is my son, Alex, has a better grasp of finance than I did at a similar age — ie he is able to do basic arithmetic. Not only this but, as a maths geek, he can also calculate compound interest, knows the value of savings and is happy to allow his money to grow. Indeed, so impressive is his financial acumen that he gets his dad to pay for just about everything while allowing his own funds to accrue.
His sister, Lucy, is different. I sat her down to talk about money but her own interest rate waned rapidly when she realised I was lecturing her about finance. Her philosophy is to make her money work for her and, in Lucy’s view, the money works best when used for buying chips during ice-skating trips and ordering cuddly toys from Japanese websites. On the upside, she has become adept at persuading her parents to invest perhaps more than they would like in the Far Eastern cuddly toy market. So perhaps she has more of an understanding of finance than I give her credit for.
I would like to develop this interest in spending money into a capacity to make it grow. A while back I asked Martin Lewis, of the Money Saving Expert website, for advice on this. His idea was to encourage children to do some research and make their own decisions — up to a point. So, if they want to purchase a Playstation with their bar/batmitzvah windfall, they should be encouraged to find the best deal but not to blow all their savings on instant gratification.
They could also be taught about making that money grow by investing a portion of it, teaching them about both risk and possible reward by using small amounts of their own funds. He also thought the teenage years might be a good time to learn their first lessons about tax, by opening a junior ISA.
Obviously, at this stage our children will be handling only small amounts, so even if their investments prove unsound, they will not lose much. And they will learn how to handle money and gain a valuable insight into both its value and its potential.
Using a compound-interest calculator I have worked out my £120 barmitzvah money would now be worth more like £1,000, had I left it in the bank for 40 years. if I had invested the sum, I would now be able to buy a lot more lager than I could then. A lesson I hope my children will learn in due course.