Mike Fay
When to Talk to Your Kids About Investing Mike

A few years ago, my parents began the process of downsizing. It was a long process that took them a while. Since I lived 2 states away, the only requested contribution from them to me was simple: “get your crap out of here.” No problem.

Just how much crap did I have? Too much. This kid saved everything. Video games and consoles, Champion jerseys, action figures; you name it, I kept it. For over a decade, it all sat collecting dust next to a plastic Christmas tree in a crawl space. The biggest space thief though was my collection of sports cards.

Courtesy: DocHoloday.com

At the height of my collection, there were roughly 10 to 12 thousand cards, easily. To me, it seemed like a lot. To diehards it was probably relatively pedestrian. Still, there was a significant amount of time and money pumped into the hobby over the course of 6 or 7 years in the 1990’s.

I don’t know the real number of nominal dollars invested in the collection, but I can comfortably estimate that total to be in $3,500 range. This estimate is based on total cards owned, cards per pack, cost of packs purchased, and a realistic estimate of what was spent on single inserts and memorabilia cards. After transporting this $3,500 fire hazard to my home, the inventory assessment for the selloff began.

The Baseball Card Bubble of the 1980’s and 1990’s is well documented and I don’t think I need to explain it in this post. If you want an in-depth take, this page offers a phenomenal breakdown of what happened. Point is, even when driving the cardboard home, I knew 90% of it was absolutely un-sellable. Straight to Goodwill to be someone else’s sorting project.

The rest? It wasn’t much better. I had an MJ insert go for $350. A separate MJ insert go for $50. And about 200 other inserts, jerseys, and autos go in 2 bulk lots for about $100 combined. That’s it. 20 years later, a $500 return on a $3,500 investment. 14 cents on the dollar. Take out the $350 MJ outlier, and we’re talking 4 cents on the dollar. Gross.

To be clear, I didn’t spend 3+ grand on sports cards myself. This was years of birthday and Christmas gifts from family and friends.

If you’ve made it this far you might be asking at this point, “what does this have to do with talking to kids about investing?” The answer is everything. For all the enjoyment that I had from buying and collecting cards, I always looked at the hobby as an investment. I would immediately cross check every new acquisition in a price guide like Beckett. Pay $3 for a pack filled with 8 commons and one card priced at $5? Too easy.

“These are going to be worth something some day.”

– Every Modern-era Baseball Card Collector

This way of thinking is what the Sports Card Bubble was all about. Boomers who had card collections thrown away by parents as children watched in horror as $1 Million card collections turned up in attics in places like Defiance, OH. Vowing to never let that happen to THEIR kids, cards that were always produced at modest scale and saved by few became produced at massive scale and saved by everyone. Suddenly, something that was rare once upon a time, was no longer rare. A good investment principal is approaching an idea if you have an edge over the market. If everyone is saving baseball cards, it isn’t an edge.

That 14 cents on the dollar I mentioned above is even worse when the opportunity cost of 2 decades of bagholding is factored in. That $3,500 put into the S&P 500 instead is worth about $11,000 today.

So, when is the right time to have the investment conversation? To start, kids should have a decent handle on what money is first — if they don’t, it’s wasted breath. Teach your kids about money. Whatever that age is should be completely up to parents. There is no one size fits all. But, when you start hearing comments like “this will be worth something some day,” it’s time to have a realistic conversation about investing.

The funny thing is, thanks to 80’s & 90’s nostalgia becoming all the rage, I ended up selling all the toys, Champion jerseys, and video games too. I was floored by how much people were willing to pay. The timing turned out to be everything — hundreds of dollars for a used Super Nintendo that Target started selling new again a short while later. That’s the difference between being a buyer in a bubble versus being a seller in a bubble.

The moral of the story is talk to your kids about investing early. Obviously, there has to be a balance. Let kids be kids. But when you hear “this is going to be worth something some day,” it’s time to have that talk. Ask questions! Challenge them. It’s how kids learn. Does everyone have access to this fortune idea or do you have an edge of some sort? If there is no edge, then there should be a certain level of enjoyment from whatever it is your kids are “investing” in. If there isn’t, challenge them to rethink it.

Here’s the tricky part: this is all assuming that mom and dad have a handle on investing first. If you are a parent and you don’t know what you’re doing, you need to learn. If not for yourself, for your children.

Oh, and thanks for saving absolutely everything, Mom. The small fortune turned out to be junk and the junk turned into a small fortune. Who knew?

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