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Next Gen Personal Finance


Apr 6, 2018

What follows is a summary of an Investing panel discussion held at the NGPF Summit in mid-March 2018 in San Francisco. The all-star panel included Bill Bernstein, financial theorist, neurologist, and financial adviser/author, and Jonathan Clements, WSJ columnist, author, educator and blogger at the HumbleDollar.com.

For those of you who use the Stock Market Game, you might want to rethink that.  Neither panel had anything positive to say about it, but Bernstein explained why.  It rewards risk taking, and excessive trading, and sets up those who win the game to lose in the real world. According to Bernstein, “it is a recipe for investment disaster.”  He goes on to claim “it is the modern financial version of candy cigarettes.” (That was the mildest of his analogies!)

Bernstein has written investment books and advised wealthy people during his career.  In an effort to give back in some way, he has written a short book called If You Can—Helping Millennials Get Rich Slowly, which he has made available at no cost.  In this book, Bernstein gives a straightforward roadmap to follow for savings, and understanding investing, including rebalancing portfolios.  

If you find this to be too much, he suggests you use a low-cost target-date fund and set it and forget it.  It might “cost” you a bit more in management fees, but that may be a rational tradeoff. The most difficult part is actually saving, which Jonathan addressed.

Jonathan Clements talked about how to instill a long-term focus in our students.  

“We do things that feel good in the moment but hurt us in the long run.”  It takes people decades to learn that buying things does not buy us happiness.  He suggests three things to help a teenager think about the long term (regarding investing).  

  1. Demonstrate how exciting it can be to save early and consistently by showing how much you can accumulate
  2. Get the kids to visualize their future goals (beyond cars and houses)
  3. Play on loss aversion: we get twice as much pain from losses as pleasure from gains.

Jonathan suggested we explain that every dollar a young person spends today costs them $5 of retirement income….that should get students interested in both savings and investing!!!

Jonathan’s book, “How to Think About Money” aims to help people with all of the simple but important decisions they make about spending and investing.  It starts with “money doesn’t buy happiness” and ends with “we can control risk and costs, we cannot control returns.” Another was how he got his children to feel like they were spending their own money.  I wish I had thought of the “soda game” when my kids were small!