Thinking about money education in our home, based on the childhoods of Yoshiaki Murakami and Warren Buffett

Are you winning or losing today?

When I am trading, my children often ask me this.

In a previous article, ‘The Inconvenient Truth of Installment Investment,’ I wrote that what I want to leave for my children is both the ‘ability to earn’ and ‘knowledge of investment.’ So, how should I convey that to them? Is what we are doing in our home the right approach?

To think about this, I looked into what kind of money experiences two famous investors had as children: Yoshiaki Murakami and Warren Buffett.

Yoshiaki Murakami | Entrusted with 1 million yen in the third grade of elementary school

Mr. Murakami first bought stocks when he was in the third grade of elementary school.

The trigger was 1 million yen handed to him by his father. Initially, his father intended to give this to him as ‘pocket money until he graduated from university.’ Mr. Murakami negotiated it himself and had it changed to ‘pocket money until he entered university,’ which meant about 10 years’ worth.

The first thing he bought with that money was Sapporo Beer stock. The reason was simply that his father was always drinking Sapporo Beer.

His father reportedly taught him about buying and selling stocks as follows.

Buy when it starts to rise. Sell when it starts to fall. Do not think you can buy at the lowest price. Do not think you can sell at the highest price.

This lesson hit home during a failure he experienced in high school. Even though the stock of Dowa Mining had risen tenfold, he missed the time to sell and ended up significantly reducing his profits.

Mr. Murakami reportedly had his own children invest in the same way. He says that some children did well and others failed. Furthermore, he says he actually ‘has expectations for those who lost a lot of money.’ The reason is that thinking about why they lost money leads to learning about the world.

It should be noted that Mr. Murakami received a final guilty verdict in 2011 for an insider trading case involving Nippon Broadcasting System stock. I think opinions on him as an investor vary from person to person. This article only covers the point of what kind of money experiences he had as a child.

Warren Buffett | Bought stocks at age 11 with money saved since age 6

Buffett first bought stocks in 1942, when he was 11 years old.

As he wrote in a letter to shareholders, he used all of the $114.75 he had been saving since he was 6 years old to buy 3 shares of preferred stock in a company called Cities Service.

According to the biography ‘The Snowball,’ the subsequent price movement was as follows: the stock, bought at $38 per share, fell to $27. After it returned to $40, Buffett sold it. He made a small profit. However, that stock later rose to $202.

From this experience, it is said that Buffett learned not to be fixated on the price at which he bought, and not to rush to sell for a small, immediate profit.

There is one other major difference from Mr. Murakami. Buffett’s money was not given to him by his parents. From a young age, he earned it himself by delivering newspapers and placing pinball machines in barbershops.

His father was a stockbroker. Just like Mr. Murakami, investment was something familiar within his home.

Three things they had in common

When you compare their childhoods, three common points emerge.

1. They had parents who invested close by

Mr. Murakami’s father held stocks himself and explained his thinking on buying and selling in words. Buffett’s father was a stockbroker. For both of them, investment was in the home before they ever learned about it in a textbook.

2. They bought stocks with real money as children

Third grade and age 11. In both cases, they bought actual stocks with their own money, not just playing pretend.

3. They both experienced a failure in ‘timing the sale’ early on

I think this is the most interesting part. Mr. Murakami sold too late and reduced his profits. Buffett sold too early and missed out on a large subsequent price increase. The directions were opposite, but both experienced the difficulty of timing a sale with their own money while they were children.

The amount lost must have been small compared to failures in adulthood. I believe there was meaning in being able to fail with a small amount while they were still young.

The difference is ‘money received’ versus ‘money earned’

On the other hand, there is a decisive difference between the two.

Mr. Murakami thought about how to grow a lump sum of money given to him by his parents. This is an experience that cultivates ‘investment knowledge’.

Buffett saved money he earned himself and put it into investments. He experienced both ‘earning power’ and ‘investment knowledge’ as a child.

The two things I want to leave for my children, which I wrote about in the previous article. Their childhoods seem to be the perfect entry points for each of those.

Doing the same thing doesn’t mean you’ll get the same result

There is something to be careful about here.

These two are people who became highly successful in investing as adults. People who bought stocks as children but didn’t succeed later don’t make the news in the first place. Collecting only the childhood stories of successful people and saying ‘this is the secret to success’ is putting the cart before the horse.

Giving a third grader 1 million yen or having an 11-year-old buy stocks doesn’t mean they will have the same life.

Therefore, what I want to take from their stories is not the method itself.

• Keeping investment in a place where children can see it

• Letting children handle real money

• Letting them experience small failures while they are still young

It is more about this kind of mindset.

I myself did not receive any special education

Looking back, I have no memory of receiving any special money education from my parents.

I discovered the excitement of stock investment during my university years. After reading Takafumi Horie’s “Winning is Earning,” I learned how business works and became interested in stock investment.

However, it is not that investment was absent from our home. The company my father worked for went public, and the shares he held through the employee stock ownership plan grew significantly. My parents had also been accumulating gold for a long time and were building assets through investments as well.

Such stories reached my ears as a child, at least to some extent. Therefore, it was a natural progression for me to start investing, and it was one of the reasons I entered the financial industry.

I wasn’t taught, but I heard about it. The first common point between the two of them also applied to me.

What we do in our home

So, what do we do in our home? I will list them according to the common points between the two.

Keep investments in a visible place

When my children ask, “Are you winning today?”, I show them the trading screen and explain the situation, whether I am winning or losing.

Since I do swing trading, which captures price movements over several days to several weeks, there are naturally days when I am in the negative depending on the market. Looking at it day by day, there are days I win and days I lose. However, looking at it month by month, I am winning most of the time. I try to convey both of these things.

I do not hide the days I lose because I want them to know that investing is not something you win at every single day.

Let them handle real money

I give my children Revolut debit cards for kids. The trigger was that it became possible to create cards linked to a parent’s account for children aged 6 and older. In this cashless era, handing out cash was also a hassle.

I put all their allowance into this card. Since it is a debit card, they can only spend what is in it. I don’t worry about them overspending, so I don’t restrict how they use it.

I do tell them, “Think about how you use it, and save up before you spend.” Both of them are currently saving money to buy toys they want, like radio-controlled cars.

Let them experience earning money

When they help me with things like massages, or for example, when they draw a good picture, I sometimes actually pay money to buy that picture.

At first, the children might say something like ‘5 ringgit.’ However, there are no other buyers in the house. As we negotiate, the price keeps going down.

I don’t think they are aware of it themselves, but a price is only determined when there is a buyer, not by the seller. I believe this is also a form of money experience.

I haven’t let them invest yet

On the other hand, I haven’t let my children invest yet.

The money I give them for things like school tuition is being accumulated in a sub-account of my brokerage account, invested in an ETF that tracks the NASDAQ 100. However, this is money that I am managing, and the children are not buying and selling it themselves.

I would like to teach them how to trade once they are around college age. However, I want them to focus on their studies and play for now, so I have no intention of teaching them trading methods yet, nor do I want them to become traders in the future.

What I want them to learn is how to manage the money they earn steadily through their main profession. The means for that could be long-term index investing or trading. I want them to have both earning and managing as the two wheels of asset formation.

Enough to do anything, but not enough to do nothing

Buffett once said this about the money he leaves to his children.

Enough money to feel like they can do anything. But not so much that they feel they don’t have to do anything.

What I want to leave for my children is a state where, when they become adults, they can choose for themselves where to live and how to live, whether in Japan or abroad. Money is necessary for that. However, just giving them money won’t put them in a position to choose.

The ability to earn for themselves and the knowledge to manage the money they earn. I believe that only with these two things will the money I pass on truly come to life.

I haven’t researched the childhoods of Mr. Murakami and Buffett to confirm that our family’s way is correct. However, I intend to continue these three things: not hiding investment, letting them handle real money, and letting them experience small failures.