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A Burger Explains Inflation

Everyone’s freaked out about inflation, but what is it exactly? (Asking for a friend)

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Tell your friend there’s no need for embarrassment. People stress about inflation, but ask them to explain how it actually works, and that gets a little hazy.

Okay, cool. The friend—c’est moi! What do I need to know?

In a nutshell 🌰 Inflation is the rate at which the costs of goods and services increase over time. It gets a bad rap, but a modest level of inflation (around 2%) is a good thing.

As the economy grows, businesses and consumers have more money to spend. That means higher demand, which leads to higher prices. Over time, wages should rise along with inflation (since the price of labour should increase with everything else).

Unfortunately, this recent inflationary spike — to almost 7% — has been too sudden for many salaries to keep pace. So, people are feeling it whenever and wherever they spend.

How do we fix it?

Governments can heat up or cool down the economy by raising or lowering interest rates, making money more or less expensive to borrow. There are other issues that impact inflation, too, such as global supply chain flows and geopolitics.

Zzzzzzz…..

Okay, okay… Do you like burgers?

Wait—what?—burgers!

Welcome back. The Big Mac Index was invented by The Economist as a more digestible way to explain the purchasing power of a dollar around the globe. In 1986, a McDonald’s signature sandwich cost $1.06. In 2022, you need $5.65 to buy the same burger.

Whazzat?

Inflation makes your dollar lose value over time. As the price of ingredients, real estate, employee wages, and transportation go up, the power of your dollar goes down. It’s one reason people work to grow their money in the markets, instead of holding it all in a savings account. Because on its own, a dollar today’s worth a little less tomorrow.

Can I get a side of fries with that?

Whoa, Rockefeller! Potatoes average an inflation rate of 4.58% per year…

#cost of living #economics #Financial Literacy #Inflation #spending

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SpongeBob’s Road to Real Estate

A Pants-Wearing Sponge Cleans Up in the Housing Market. Here’s the Takeaway.

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Against all odds, everyone’s favourite sea sponge is doing quite well for himself: he owns his own home! Say what you will about SpongeBob’s fashion, food, and career choices, this kid’s captured a milestone that’s a dream for many. And he’s not just captured that milestone, he’s slayed it.

SpongeBob’s hollowed-out pineapple home is allegedly worth $18 000 000 — almost 3X what Drake paid for his Toronto manse. Consider the view: “This post-modern tropical gem features 360-degree ocean views and three stories of nautical luxury,” boasts a video on SpongeBob’s official YouTube account.

Okay, so how did he do it, and what lessons can we soak up from this real estate rockstar?

Millennial Bob: A fiscally savvy thirtysomething

Thanks to a glimpse fans once got of his driver’s license, we know SpongeBob was born on July 14, 1986 — so, he’s a millennial at age 35. Those who grew up watching SpongeBob SquarePants may find it hard to believe that he’s been more disciplined with his finances than the majority of us, but hey, crazy things happen under the sea. Let’s consider that Bob may be a financial wizard, and deconstruct his money moves.

He’s a famously devoted fry cook — some say the world’s greatest — at the Krusty Krab, Bikini Bottom’s favourite fast-food joint. Work ethic? Check! Income? … inconsistent. In one episode, according to Spongepedia, Bob claims to make under ten cents a year. In another ep, we learn that he pays his boss, Mr. Krabs, $100 an hour for the privilege of working. We’ve seen him pocket an envelope of cash on payday, so he does get the occasional haul, but really Bob’s the original gig worker.

The Takeaway

He’s been side hustling since he was 12— jouster, chef, lifeguard, lawyer, the list goes on. Bob started early, put time to work in his favour, and probably learned a thing or two about compound interest along the way.

Is he investing? Probably. He’s sure invested a lot of time over at Mrs. Puff’s Boating School, where he’s failed to get his boating license 1 258 058 times. Silver lining? He’s saving money on gas and boat payments, and likely making that money work for him in the markets.

And finally, Bob knows a deal when he sees one. Submerged “land” is considerably cheaper to buy than its above sea equivalent. In Canada, a man recently listed two lots, “presently underwater,” for the bargain price of $99,000.

Is this the investment property to sink your savings into? We prefer drier. But hey, location, location… floatation!

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The Economics of Full-Time Wizardry

From Muggle to Wiz, Wealthie runs the numbers.

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From the budding wizards at Hogwarts to the more seasoned wizzes of Lord of the Rings, wizardry is where it’s at. For anyone curious about a career in wizarding, Wealthie looks at the costs of getting off the ground. (haha see what we did there?)

Looking the Part: $35+

A robe was just a scratchy cloak until Madam Malkin came along. She cornered the market on fashion and function. We hunted for the ones that Harry and his pals made famous, but they’re only sold at Universal Studios. So, if you’re a label lover who wants the real deal, you’ll have to budget for it.

Tickets to Universal: $315 PLUS flight and hotel! That’s a lot of IRL money. So, while you’re saving up we’ve found good alternatives at well.ca, Walmart, and Amazon, ranging from about $35-$60, with hood, embroidery, and lining.

Pro tip: sew in a few pockets to make room for spells and potions.

Carry a Big Stick: $4.50 and Up

The pièce de résistance! If you’re serious about wizardry – which we know you are – you’ll need a wand. Wands are an opportunity to express yourself. Are you a no frills kind of wiz? A 14-inch gold-tipped standard, or a basic lucite will run you about $4.50 to $5.50.

Are you a wizard who loves movies and history? Maybe you’d like to bid on Glynda the Good Witch’s wand, which sold for $400 000 back in 2019!

Hocus Pocus: Misc.

Every great wizard has some potions up their sleeve. Since we could use some money to launch our career, we’re costing out potion ingredients for a spell to help you win at Bingo!

2 tbsp Pepper

2 tbsp Mustard (yellow works best)

10 freshly picked Honeysuckles OR 20 grams of Organic Cloves

1 sealable glass bottle to hold all ingredients.

Most of these items, you’ll find at home for free, so cast your spell and let’s get you some dough for a bestie!

A Wizard’s BFF: Priceless

Every wizard needs a companion — one that strikes fear into the souls of their enemies, and is also extremely cute. Like an owl! Did you know that owls are able to turn their heads a full 270 degrees? Oh, and owls have adapted to nearly every ecosystem on the planet? Hoo knew?!

The Eurasian Eagle Owl generally costs between $2,800 and $3,800. Suddenly, a rat like Scabbers looks like a steal. You could train a raven, or adopt a cat. You can even adopt a Great Horned or Saw-Whet Owl for $25 to $100 monthly. Don’t forget to factor in costs for food, training, and exercise.

Owning a pet is a pretty serious business, even with magical super powers. So you may want to start by testing out your powers of convincing on the Muggles in your home.

The wizardry game is a long game. And a fun one. You’re now armed with the tools you need to become a wizard. So, come up with a Wizard name, and don’t forget to trademark it!

Thoughts on pursuing your dreams:

Don’t let the Muggles get you down.

– Ron Weasley

#economics #Financial Literacy #harry potter #kids #spending

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The Business of Bans

From books to beef to screen time, a peep at the profit margins of prohibition.

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Book bans are sending old classics back to the bestseller list.
Banning meat’s proved pretty lucrative for one beloved California chef.
If your kid is asking for more screen time, order Chinese and tell them they’ve got it pretty good.

The silver lining of censorship (kidding…but also, ka-ching)

Obviously banning books is a terrible, horrible, no good, very bad thing (a phrase we learned *from a book*, btw). But is it also good for business? That seems to be the takeaway following the Tennessee School Board’s decision to remove Maus—a graphic novel about the Holocaust—from the eighth grade curriculum. That happened in mid January. In the weeks since, the 1992 Pulitzer winner has cracked Amazon’s top 20, hitting number one in the graphic novels category.

Similar sales spikes have followed recent crackdowns on The Handmaid’s Tale (Margaret Atwood) and The Bluest Eye (Toni Morrison). And it’s not always the far right behind the banning: Last year the discontinuation of six Dr. Seuss titles (featuring racist imagery) sent other Seussian titles soaring up the best seller charts.

It’s something we could be seeing more of. According to recent data from the American Library Association, the fall of 2021 saw the most instances of “book challenges” since the group started record keeping more than 50 years ago. Meanwhile, Maus author, Art Spiegelman, has rebuffed offers from Hollywood to option his book for the big screen. He says the story (where Jews are mice and nazis are cats) is best served by the comic format. And honestly, who needs movie money when you’ve got LeVar Burton AND the moral high ground on your side?

Next up: Why did the lab rendered chicken cross the road?…

Lab grown meat is big business and it’s getting a boost from one of the world’s most influential chefs. In 2018, Dominique Crenn banned meat from the menu at her Michelin star restaurant in San Francisco. Her goal was to effect “real environmental change”, and clearly taste didn’t suffer—Atelier Crenn scored a third star after moving to a meat-free menu.

Four years (and one pandemic) later, chicken is making its triumphant return, following Crenn’s partnership with Upside Foods, the California-based startup at the forefront of cell-based poultry production.

Is this the future of meat? Crenn says yes, and plans to introduce new “chicken” dishes to her menu following regulatory approval. Upside Foods has raised more than 200 million in funding, including an investment from Whole Foods CEO, John Mackey. Just last month, the company acquired Cultured Decadence, another cellular agriculture startup focused on shell-free, cell-based lobster, which sounds a little…well…fishy, but it’s an excellent tongue twister that we won’t knock till we’ve tried it.

When your kid complains about screen time limits…

…spend a long weekend in China. Tencent Games, one of the world’s largest gaming companies, spent China’s month long Winter Break limiting access to their platform for kids. 14 hours over 30 days.

The policy is in line with a national movement to combat climbing rates of addiction and near sightedness. Last summer the Chinese government banned game play for minors on weekdays and restricted use to three hours on most weekends, encouraging gaming companies to break “from the solitary focus of pursuing profit.”

These rules took effect last August, prompting stock sell offs and a slump in domestic market growth (a 14.3% decline in just one year). Still, profits are climbing, thanks to robust global sales. And meanwhile, the policy’s working. Tencent reported that minors now account for 0.7% of time played on their platform, down from 6.4% in 2020.

The outcome? More time to read banned books!

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The Definition.

The Eighth Wonder of the World.

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Compound interest is like “interest on the interest” as the money made on a principal investment in turn earns more money.

—

Simple interest refers to the money earned on a principal investment. Compound interest, by comparison, is the “interest on the interest”. This means that the money made on a principal investment gets included in the calculation for future interest payments. For patient investors, this is often considered among the safest and most reliable ways to earn money.

Compound interest acts like a snowball rolling down a mountain. It’s been jokingly called the Eighth Wonder of the World, and it sure seems magical when it’s working in your favour. It’s less magical when it’s working on your debt, and it’s why people will tell you to pay down your most expensive debts first, not the biggest.

What’s the best thing you can do with compound interest? Start Early.

“Interest on the interest” leads to a snowball effect
Among the safest and most reliable ways to earn money
Compound interest is more powerful with time, so start early

#Financial Literacy #growth #interest #investment #stock market

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Age 8

The one where they start investing.

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Is your 8-year-old wondering why they have to learn about “old person stuff” like money? Have they retired on modding and influencer proceeds? Fine. Time to hook them with stocks, growth, and risk. Start with stocks. A stock represents a piece of a company that they can own. Starbucks (SBUX), Spinmaster (TOY), Disney (DIS), are all companies that your kid can own a piece of now.

We prefer diversification, but maybe you and your 8-year-old have your eye on a stock you’d like to buy? Great. But first, a #protip. Two, actually:

Boundaries. Research.

Do your research. Know what you’re buying. Look at the last year, five years, 10. Read up on the company. Look at how (and if) it’s growing. What do you think of the leadership?

Now, get real about risk tolerance — yours and your eight-year old’s. In a phrase, invest what you’re comfortable losing. Because once you’ve bought that stock, chances are you’ll want to check its price. Daily, weekly, then hourly. And traditionally, this is a surefire way to lose all your money. Investing works best with long horizons. Plus the willpower of a Jedi Knight.

Start Here.

As you start your investing journey, there are a few stats worth remembering.

An Arizona State University study found of the 26 000 stocks traded on US exchanges in the last 100 years, 1000 account for ALL profits. 86 stocks account for half of all gains. The average stock has traded for seven years and LOST money, and the most common return for a stock over its lifetime is… -100%.

Let’s take a beat.

OMG. WTF. Breathe. ETFs.

That read like a lot of bad news, we get it. But here’s the thing…

In the history of the markets, over a 20-year period, stock markets have always gone up. They’re one of the most consistent long-term drivers of wealth. But history shows that diversification is key, so you boost the odds of holding at least one (or part of one) of those magical, fairy dusty, 1000 winning stocks.

Exchange-Traded Funds — ETFs — are one way to get instant market exposure and diversification. They give you a slice of each stock in the market they represent. It’s like an all-you-can-eat buffet with limited portion sizes. If you’d like to learn more about ETFs, check out our Glossary. Or, better yet, invest in a Wealthie account!

All you really need to know about investing, though, can be summed up in the two words we know you’re crushing:

Start Early.

#age 8 #ETFs #Financial Literacy by Age #risk tolerance #stocks

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Age 11

It’s complicated.

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Eleven! You have a great kid who’s young enough to still take your advice on *almost* everything, and old enough to know how to roll their eyes. At this age, you may feel heightened pressure to complete your kid’s transformation into the perfect human. It may feel like a good time to suggest your child start donating part of their allowance, to transform them into considerate, generous people.

Before they start giving money away, take a moment to consider the full picture.

Start Here.

A lot of us have been taught that allowance should be divided in three ways: a percentage to save, a percentage to spend, and a percentage to share.

Encouraging generosity in your 11-year-old is important. If you’ve got a child who wants to give part of their allowance to a friend at school who doesn’t have money for lunch, then you’ve definitely done something right. It’s good to give, but it’s best to give when you have something to give.

If your child gives their lunch money to someone and no longer has money for their own lunch, then we have a problem.

While financial generosity is important, being generous with time may still be more valuable to development at this stage. We’ve always said that your child’s most powerful financial asset is time. Help them share their time, while whatever money they have continues to grow in the background.

Keep Going.

Volunteering helps your child build new skills, confidence, and a sense of pride in being part of a community. It can also teach them valuable lessons about empathy, business, teamwork, and life.

(Bonus: Volunteering by teens has also been linked to more volunteering in adulthood and a greater sense of well-being, better work opportunities, and more education than for teens who didn’t volunteer.)

Get This.

Have your 11-year-old do some research to build a list of organizations they might like to support. Canadahelps.org, charitynavigator.org, and volunteermatch.org are resources full of trusted organizations and opportunities.

Maybe you’d like to find a once weekly or monthly opportunity to make volunteering part of your family’s routine.

From here, your job is to treat this kind of service as a regular, nbd thing. You may feel proud of your kid for the choices they’re making, but loading them up with praise will turn something that should be a natural part of life into something that feels extraordinary. Your kid is extraordinary. Let volunteering and service be the one ordinary thing about them.

#age 11 #allowance #Financial Literacy by Age #money #savings #sharing #spending #volunteering

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Age 12

The one where they get a job.

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Twelve years old is prime time to flex some early entrepreneurial muscle. This is an excellent period to lock in some healthy habits for business and for life.

Start Here.

If your kid is getting ready to hang a shingle as a babysitter, a gardener, or a mod creator, they’re going to have to set a price for their wares. Determining your “worth” (and having to argue for it) can be a real emotional rollercoaster. The sooner you help your kid get comfortable with their own sense of value, the better.

You and your emerging entrepreneur may want to start with some field research. What are the going rates for the jobs being considered? Do other people in the neighborhood get $10/hour to babysit? If so, asking for $30/hour is probably unwise. But so is accepting $3/hour. Research what others are charging, and suggest a rate at the top of that range. If a customer has a lower rate in mind, your kid can offer to meet in the middle.

Establish an hourly minimum wage that feels appropriate, and then talk premiums.

Perhaps there are instances that will call for a top up on the hourly rate, such as extra kids being added to an evening of babysitting, or a lawn mowing job turning into a planting and weed-picking extravaganza.

Keep Going.

Practice conversations about value and hourly rates with your kid. Help them strengthen their language, so a conversation about a wage isn’t a hesitant, uncomfortable negotiation, but an opportunity for your child to declare what they’ve determined their time is worth. What should they do if a parent says no to their requested rate? What should they say if the parents don’t give them the right amount at the end of the night? The more they role play difficult conversations, the more comfortable they’ll feel having them in real life.

Finding a wage that feels right teaches your kid to value their time. And, building self worth in these small, tangible ways can have a valuable impact on the rest of their life. As an adult, they’ll find that a comfort with negotiation opens up unexpected opportunities to ask for what they need, want, and deserve, regardless of which side of the table they’re seated at.

Get This.

Now is a great time to introduce the notion of Opportunity Cost. Opportunity Cost compares the price of doing one thing against the cost of missing out on doing another thing.

Saying yes to a sleepover with friends on a Saturday night may mean saying no to a babysitting job that would earn them money towards a savings goal. Your 12-year-old will probably choose the sleepover 9 times out of 10, but with the idea of Opportunity Cost firmly planted, you may find that over time, they start to consider their tradeoffs.

#age12 #business #Financial Literacy by Age #jobs #money #savings #spending #time #value

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Age 13

Your kid is a teenager. That. Was. Fast.

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You have a fabulous, complicated teen, whose growing autonomy makes you realize they will be living independently in just a few short years. (We realize that nothing feels short right now, including your 13-year-old, who at this point may be taller than you.)

While your kid grows like a weed, show them how to do the same for their money.

Start Here.

Introducing the Rule of 72. Simply put, it’s a formula that calculates how long it will take an investment to double. Doubling their money is a decent way to get your teen to sit up and take notice.

Here’s the Rule, which is actually one of the best math equations around:

72 ÷ Your Expected Interest Rate = The Number of Years for Your Money to Double.

Let’s put this into action. Try the Rule of 72 with 1% and you see pretty quickly why it pays to prioritize investing over saving for the long term.

At 1% interest, it takes 72 years for money to double (72 ÷ 1 = 72)
At 3% interest, it takes 24 years for money to double (72 ÷ 3 = 24)
At 9% interest, it takes 8 years for money to double (72 ÷ 9 = 8)

Keep Going.

As your kid’s financial literacy increases and they learn more about saving and investing, they’re likely to start thinking a little more about their spending. Maybe the $7 after-school Frappuccino takes a backseat to something less pricey, and the $3 they’ve just saved gets invested.

And, hey, we get it — even monks appreciate a decent caramel frap now and then. This isn’t about doing without. This is about your kid starting to understand the power they can have over their money, and what this starts to mean over time.

Get This.

There’s a lot of talk in financial literacy about paying yourself first. The simple rule of thumb is that 15% of all money that comes in should go into investments. As an adult, 15% can feel impossible. As a 13-year-old, 15% can feel like a habit. Start it now.

#age13 #Financial Literacy by Age #frappuccino #habits #investing #money #savings #spending

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Age 14

Time to get real about stocks.

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By 14, kids have hopefully learned the lesson that making money takes discipline and hard work. Hahahaha. Actually, they’ve learned that making money requires a TikTok channel and an influencer contract. NO MATTER where your 14-year-old is at in their journey, this lesson will ensure that even if your kid thinks making money is easy, they can still keep their “easy money” working hard.

Start Here.

Here’s the math:

$20 a week saved over 35 years, will net you $36,400.

$20 a week invested over 35 years can build a portfolio of about $290K.

Investing over time is considered one of the most reliable and consistent ways to build wealth. So, let’s get real about it.

Keep Going.

An Arizona State University study examined the 26,000 stocks traded on U.S. exchanges in the last 100 years.

Here are the results:

1,000 stocks account for all profits
86 stocks account for half of all gains
The average stock has traded for seven years and lost money.

Get This.

Excuuuse me?! Do not panic. Those numbers need some serious context!

Wealthie accounts focus on the long term, because in the history of the markets, over a 20-year period, stock markets have always gone up.

History also shows that diversification is key. To boost the odds of holding at least one (or part of one) of those 1,000 winning stocks in a portfolio, it’s helpful to have exposure to a lot of them.

Exchange-Traded Funds — ETFs — are one way to get broad market exposure and diversification. These are investments that trade on an exchange, like regular stocks. They’re funds made up of little slices of multiple stocks that move with the market.

If you’d like to learn more about ETFs, great news: your 14-year-old owns one! You can check on your ETF by logging into your investment account.

#age14 #ETFs #Financial Literacy by Age #investing #money #saving #social media #stocks #tiktok

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Age 15

Adulting 101.

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Your 15-year-old’s life is starting to get hectic. With the demands of high school ramping up, university or college looming in the not-so-distance, and a busier social life, your kid may be interested in making some money of their own. It’s a great time for a part-time or summer job, and an excellent time to build the skills for both.

Start Here.

First though, value. At 15 — with pressure to fit in AND grow up — understanding value can get complicated. This is the age when clothing and taste can start to dictate acceptance. Your kid may want money to buy whatever they’re seeing around them at school, and while they can do what they like with their money, it literally pays to get clear about a few things.

As your kid’s thinking about where to work and what to do with their time, find ways to encourage them to look at what they value in their life. Whatever the answers — family, pets, friends, trips, home, the environment, their Xbox — how many of the items on their list cost money?

It’s an obvious takeaway, but one that can use a refresher from time to time. Money doesn’t always equal value.

Translate that into the workforce, and choosing a job you love over one that pays more, for example, might connect value to your values. Similarly, the tradeoff of a lower salary for work you care about (and actually enjoy), or a healthier life balance, may not feel like a tradeoff at all.

Money is a tool, not an end point. Instill this in your 15-year-old, and you’ll give them one of the most valuable guides to life.

Get This.

Sitting down with your kid to talk about how to write a CV, fill out an application form, and ace a job interview are skills that will benefit them for decades. And once they’ve gotten the job (thanks to your excellent tutelage), prepare them for the deductions they’ll see on their pay cheques. They can come as a big surprise. Your kid may think working 10 hours at $10/hour may net them $100. Alas, as we wise, experienced ones know, it does not.

Research shows that students who work more than 15 hours a week are more likely to drop out of high school, so try to make that the max. Your kid may have to learn how to set boundaries with a boss who’s asking for more time. It’s good practice for a healthy work/life balance. Working is good. But so is not working. Learning how to healthily hit the balance is key to happier living.

Keep Going.

While it’s tempting to help them get out of bed to actually get to their jobs, experts agree that you pretty much have to leave your teen to it, or risk enabling bad habits. Agony, we know (but so is a world filled with 20-somethings who need their parents as an alarm clock). Let them make mistakes. Let them be late for work or double book themselves, so they can learn the consequences. As always, be a guide, offer advice, and help them when they need it. But let them also learn about adulting on their own.

#age15 #Financial Literacy by Age #interviews #investing #job #money #saving #stocks #summer jobs #value #work

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Age 16

The one where they get a car.

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Not every family owns a car, and not every kid is ready to get behind the wheel. But in most places in the U.S. and Canada, 16 is the magical age when the person who was once your baby is legally allowed to drive.

We are as frightened by this prospect as you are.

Start Here.

Let’s start with the budgeting piece. If your 16-year-old is cutting out Aston-Martin pics for their vision board it’s a great time to remind them that at no point should transportation ever take up more than about 15% of a monthly budget.

Get This.

If your kid is vying to borrow the family car, leverage the teaching moments for all they’re worth.

Charge them for car insurance. Your kid is a new driver and, let’s face it, you’ll think they’re a menace behind the wheel until they’re 50. Charge them insurance to help get them accustomed to costs associated with owning your ride, to insure your peace of mind, and to help ease the sting of your premiums going up now that you have a teen driver in the house.
How much do you spend for gas and routine maintenance? Will your teen pitch in for gas?
How much are your monthly car payments? Do you own or lease, and what are the advantages of each? If you have a car loan, how much will you end up paying in interest over the course of the loan? Maybe your teen can cover the interest.

Keep Going.

There are a lot of household costs that start to pile up at 16 — food for ravenous appetites, higher insurance costs, clothes and sporting equipment. If you think you’re doing your teen a favour by shouldering it all, Jerald G. Bachman says maybe not.

Bachman, a University of Michigan professor and an expert on behavior during the transition to adulthood cautions that kids who have cash to splash around on non-essentials while parents cover the basics can fall prey to “premature affluence”. It’s an inaccurate experience of the world that can really chip away at a young person’s financial literacy. Financial literacy actually deteriorates if it’s not put into practice, so get practicing. Have your teen find ways to contribute to household finances, their sports equipment, or their investment account.

We particularly like Option Three.

#age16 #budget #economics #Financial Literacy #Financial Literacy by Age #interest #investing #money #parents #spending #Teens