This is part 3 of 3 in our “My Worst Money Mistake” series. This is the biggest financial lesson I learned in college and a piece of investing advice that I’ll carry with me for the rest of my life.
As I stared at the computer, I couldn’t believe what was happening. All I could manage to do was whisper to myself “No, no, no, no.” Gone. All of it. All $1,000.
A Lesson in Betting on a “Sure Thing”
It was my senior year of college. I had some extra money in savings, and my dad suggested I try to invest some of my cash. I’d never owned stock in my life, but I figured it was as good as time as any to dabble in the market. It was 2008, and stocks were trading at historic “Pick a company that’s really cheap at the moment,” explained my dad, “but that you know will be around for awhile and make a rebound. Like a bank.”
“Like a bank…” the words still ring in my ear. It sounded like a fool-proof plan.
Then September 25, 2008 hit.
Have you ever tried to walk into a WaMu branch since 2008? Yeah.. we all know what happened to good ol’ WaMu.
Reeling From A Loss
Technically, I didn’t lost $1,000 in a single day on the stock market. But when the news came in, it felt like I’d lost it all in that one moment, staring at the computer, watching the news ticker. “Office of Thrift Supervision takes over Washington Mutual Bank.” WaMu was no longer a bank, and my “investment portfolio” had dissolved completely, leaving me with only fond memories of my first foray into investing.
All of the eggs in my figurative stock market basket had been smashed into the ground. I no longer owned any stocks. Zero. Nada.
If there was ever was a worse feeling than losing $1,000 money, it was feeling like an idiot.
Going into my stock market adventure, I didn’t know a thing about investing. I had no idea what the market had been doing. I didn’t even bother to research WaMu’s history. I also blatantly ignored the news that WaMu’s debt had been downgraded by two credit agencies.
I relied on a hunch and some unsolicited advice. And I paid for it.
The Silver Lining in the 2008 Crash
But you know what? I couldn’t be happier having lost that $1,000. I experimented with the market and learned the most valuable lesson about money that I carry with me today:
You are responsible for your money and what happens to it. Period.
You can read all the financial advice you want, watch CNBC’s Jimm Cramer flail his arms around and yelling “BUY! BUY!” and buy the sexiest, most popular stock. None of those people have to deal with the financial consequences of your decisions. You do. And the one person who will care most when your investments have tanked is YOU.
I didn’t do my research. I didn’t understand the risk of investing in a single stock in a volitile market. I didn’t understand my own risk tolerance (it certainly wasn’t investing $1,000 in a company might dissolve in a matter of weeks!!)
So what does this have to do with teaching your kids about money? Here’s what I took away from my experience: Let your kids make mistakes with their money. Let them make financial mistakes early and often. But let them figure it out on their own.
By all means, please teach them about the risks and rewards of investing. But let them practice. Better that they lose $50 (or even $1,000) now than when they’re living on their own trying to scrape together enough money to cover the rent.
And for the kids and teens out there: In the off chance that you’re reading this, if there’s one mistake I’ll never repeat again, it’s this: don’t follow your parents’ investment advice 🙂
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