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WE ALL LIVE IN the same economy, but we experience it differently. How we react to today’s economic developments is heavily influenced by our upbringing and world events at that time. This is a key insight from the first chapter of Morgan Housel’s wonderful book The Psychology of Money.
I can think of three things that have shaped my outlook—and lead me to a very different outlook from my children. First, my father grew up on a farm during the Great Depression. He never spoke about how hard it was. But one of my father’s favorite evening snacks was a bowl of popcorn with milk on it. While I thought that was peculiar—nobody else I knew had that for a snack—I learned from my mother that one winter that was all my father’s family had for supper every evening. They had a cow for milk and excess popcorn they hadn’t sold.
One result of this story: During my working years, I saved a healthy portion of my income to make sure that my children always had enough food, and we would never have to eat popcorn with milk for dinner.
Second, I went to high school in the 1970s. That had a dual impact. Although my father kept his job, the news was filled with accounts of 50-year-old men getting laid off because, during that time, it seemed all the jobs were moving to Japan. I grew up knowing that no job is forever, and you may not have a chance to decide when you retire. This further reinforced my tendency toward thrift.
The other big economic development in the 1970s was inflation. I’ve written about how I invest in Series I savings bonds, and it’s because I remember what double-digit inflation can do to the cost of living.
The third big influence on my thinking: I had a good friend in high school whose parents had been held at Auschwitz. Every time I would shake her father’s hand, I would see the serial number tattooed on his forearm.
I’m extremely fortunate to live in America and have no plans to leave. But I do have a few gold coins in our safe-deposit box. If I had to flee, gold is likely to be a better bribe to border guards than greenbacks or bitcoins.
My sons, on the other hand, know their parents grew up with no lack of food or shelter, have never experienced double-digit inflation and have seen people make multiple career changes in their 50s. Why would they view financial matters the same way I do? We see it differently because we’ve had different experiences. The tragic consequence we need to avoid: letting our experiences completely dictate our view of the economy.
While I lived through the highest inflationary period the U.S. has ever suffered, it was really only about 15 years out of our two-century history. Many people faced profound poverty during the Great Depression—but it was called “great” because it was far worse than any other depression we’ve faced and is in no way the norm. While immigrants still come to America because of oppressive governments, not all countries are oppressive.
My portfolio will not be identical to those who didn’t live through high inflation, didn’t have parents who lost everything during the Depression and didn’t personally know a survivor of an oppressive government. By studying history—and realizing that my life experiences are unique to a time and place—I can avoid putting all my money in gold or Series I bonds. For those who study history, perhaps 85% or 90% of their investment portfolios will reflect the same core holdings. What about the other 10% or 15%? That’s driven by our own personal history.
Kenyon Sayler is a mechanical engineer at an international industrial firm. He and his wife Lisa are extraordinarily proud of their two adult sons. He enjoys walking his dog, traveling, reading and gardening. His previous articles were Any Interest and Home Free.
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Excellent piece. We all carry the past with us, and can’t help but view the future through the same lens to some degree.
My dad recently passed away, but he was born in 1933, and he remembered cornmeal and oatmeal were common dinners in his house during the mid to late depression years.
“have seen people make multiple career changes in their 50s.”
Not everyone had to make a career change but, some wanted to make a career change in their 50’s.
My father has a PhD but, went back to school in his 50’s to get a CPA. He didn’t like what was taking place in academia with colleges and universities merging and cutting staff and decided to take control of his future.
He was an inspiration to me to adjust my career by going back to school for a second masters degree, this time in cyber security. My career is thriving and I can thank my father for setting a wonderful example in career agility.
Very good article. I particularly enjoyed hearing of your fathers milk and popcorn dish. My father was also a farm boy who was a young teenager at the start of the depression. Growing up I remember that a favorite dish of his (particularly late at night if he got the munchies) was milk and bread in a bowl. Interesting piece of history.
It is clear that our personal histories can have a significant effect on the way we think about money and investing. However, I would add that being aware that our attitudes may not be in our best financial interests can allow us to nudge ourselves out of our comfort zones. I have always been conservative financially, but books on investing by Jonathan Clements and others convinced me to increase my equity allocations which had a significant positive impact on my portfolio.
Great article! I hadn’t thought about a few of those facts but you are spot on.