It was one of those particularly crisp November mornings that remind you of the approaching Saskatchewan winter as we drove the highway to school. The youngest son was clutching a bank statement that showed a credit of $0.03.
“What is this?” He asked as he waved the statement in my general direction.
“Well, that is the interest you earned last month on the $700.00 you have in your bank account. The bank pays you to keep your money there,” I replied.
“That isn’t much,” he said.
“No it isn’t, but there is something else you could do with your money – you could invest it with me. That means you could use your money to make more money,” I said.
There was a bit of a pause in the conversation while the young Warren Buffet thought and before he said, “How much can I make?”
I smiled, “If you bought shares of a bank (so you would actually own part of a bank), you would receive a dividend of about 4.5%, which is about 9 times more than what the bank is paying you now. If you kept investing, by the time you were finished university, you could probably afford to buy a small home.”
Jason liked that idea, but to make my investment proposition even more attractive, I decided to add an extra incentive:
“For every dollar you give me to invest, I’ll give you an extra fifty cents. So, if you were to give me your $700. I would add an extra $350.”
Jason accepted my offer, and after school that day, he gave me $700 to invest. With the additional $350, he bought 14 shares of Bank of Nova Scotia. As his candy business grew, he continued to buy more shares, and re-invest all the dividends. When he earns money, or receives some as a gift, he is careful to invest at least one-half. He has also diversified over the years by purchasing units of a global mutual fund, and we have plans to buy more dividend-paying common shares. I’ve managed to keep matching him fifty cents on every dollar, which is expensive but worth it – I suspect it will end up saving me money over the long-term. He now has enough money to pay for two years of university or buy a small car, and he still isn’t out of high school.
And, he uses some of his money to do nice things for people, like buy lunch for his buddies.