According to Beth Kobliner, an expert on personal finance, kids can understand money from an early age as 3. As a humanoid copying machine, kids observe how adults use the cash to get materials and soon understand it is not the parent who has the power to unlock their desire but the money that holds the key. Our young selves enjoyed the crisp newly minted notes as we counted the total Eidi at the end of the day.
Image: Photo of a child checking out Eidi during Eid prayer
We all know that money is not enough for happiness, but money provides freedom and choice. Children feel this "freedom" as they use Eidi to buy sugary treats without anyone’s permission. But as soon as Eid ends, these young buds face the confusion over what to do with their extra money. But through agricultural evolution, we learned that surplus needs to be protected by a trusted tribe leader. Following that tradition, children pass Eidi to the most trusted member in the family aka "Mother." The rest becomes history and unknown to Muslim households.
What if in a parallel universe our Eidi was invested in assets?
For simplicity, let’s assume we receive 1000 taka each Eid from age 4 to 18. What would have happened if we invested 14,000 BDT for 12 years (2009 to 2021 )
1. 🥇Gold Bar : BDT 40,000 (3X in 12 YRS)
A safe haven for all Bangladeshi Households which holds value, tradition, and pride. But it shows that Gold’s growth has been quite low in the past 12 years, but it is a great asset to hedge against inflation or volatility. Gold investment is so popular that even Shakib Al Hassan opened his own gold shop.
2. 🏦 Bank Fixed Deposit: BDT 45,000 ( 10% APR for 12 YRS)
FD is a common investment option for all Bangladeshi households. It is safe and considered a passive income for most households. We love it and also feel guilty about having it. It is the “HaramBae” of all investments.
3. 📰 Grameenphone Shares: BDT 80,000 (8% Dividend, 3X Price, 12 YRS)
Dhaka Stock compositive does not seem lucrative due to volatility. But let’s assume that inspired by the television advertisement, we decide to invest our Eidi in a blue stock like Grameephone in 2009. In addition to stock appreciation, the dividend would have provided cash flow for our rickshaw fares which have been quite high in recent days.
4.🏠 Real Estate(Land) : BDT 200,000 to 300,000
Truth is that is impossible to buy a chair with 14,000 takas. But if invested in pooled real estate land anywhere within Dhaka Municipality (Not even Gulshan or Dhanmondi) in 2009, our investment would give us a return that would force Buffet to retire investing. Prudent investors have always targeted real estate as our capital market is not well developed, thus making it impossible for Millenials to own land. (Take a moment of silence to appreciate the roof over your head)
Off topic Commentary:
It is unfortunate that Bangladeshi retail investors do not get access to US stock market. DSE is risky for long-term retail investors as it is subject to manipulation. Thus investors have to stick to GOLD or “Harambae FD” as Dhaka stock markets does not provide quality ETFs.
Can you tell me in the comment which asset in the World would have given us the best return on our Eidi if invested in 2009?
Importance of teaching financial habits at a young stage:
Children’s financial habits are set by the age of 7. Even attending 18 years of formal education we cannot grasp the concept of inflation, assets, or liability. Morgan Housel, the author of Psychology of Money explained why just learning about money is not enough. Even the most knowledgeable CFA holder fails to create wealth and lead a happy life. Because building wealth requires habits, processes, and values that our parents can teach us at an early age. Our inability to understand and build and good habits at a young age make us take bad financial decisions at later stages of our life.
Eid is one of the best experiential proof of delayed gratification. It is a reward after 30 days of fasting and patience. Let's use this Eid to teach our youngsters about managing their own Eid money in the best possible way.
Note: This article comes from my personal experience with bad financial habits in me and around me. Recently I came to a realization that a lot of us use things not because we need it, but because we have it. Also, we buy things to impress people who does not add any value to our life. 😆
Let me know about your thoughts over email or comment about teaching money to kids as I iron my old Punjabi for this Eid.
If you find it useful, share it with folks who have young kids in the family.
Eid Mubarak. See you in June !!
Reference:
Grameenphone and Beximco Stock:
https://www.barrons.com/market-data/stocks/gp?countrycode=bd
https://www.marketwatch.com/investing/stock/beximco?countrycode=bd
Shakib’s Gold Investment:
https://www.newagebd.net/article/169301/shakib-al-hasans-company-brings-finest-quality-gold-for-consumers
Gold Price
https://www.bullion-rates.com/gold/BDT-history.htm
Habits:
https://www.pbs.org/newshour/economy/making-sense/money-habits-are-set-by-age-7-teach-your-kids-the-value-of-a-dollar-now