Financial Goals are not One Size Fits All

Earlier this week, I wrote a piece that referenced how a discussion on a text chain morphed from a question about a potential market bubble into a discussion about differing risk tolerances and goals among a group of old friends.  Today, I ended up in a similar discussion with a vastly different group with enormously different considerations, yet the suggestions were surprisingly similar.

To briefly recap the earlier discussion, the college friends in my group chat are either nearing retirement or fortunate to have taken an early plunge. Considering that we met as undergraduates at UPenn and most were in the Wharton School, they tend to have better than average financial knowledge and most have been fortunate to experience success in their careers (though the most financially successful was a political science major in the College of Arts and Sciences).  Even so, we could see that the group members have very divergent risk tolerances and perspectives.  A few wanted to take almost no risk with their nest eggs, while others could not imagine being underinvested in stocks.  Given their personal preferences and motives, none were wrong.  What makes sense for one might not work for another.

This morning, I was on the subway uptown from an appointment in lower Manhattan when a large group of teenagers flooded my train car.  A few of the young men who happened to get seats or stand near me were willing to initiate a polite conversation with an older guy in a suit, and I learned that they were high schoolers on a field trip to the Guggenheim Museum.  Along the way, they asked me what I did for work, and when I told them, one asked what sort of investments they should consider.

Bearing in mind that these were students from a public high school in Brooklyn who had just told me about their prior field trips to local public colleges, I realized that they were in a vastly different situation from my buddies.  Yet I ended up giving them almost the same advice I gave to my very risk averse wealthy friend – be conservative.

In this case, I reminded them that they are in a tricky situation for an investor.  They have impending financial needs and little room for error in the short term.  These young men hoped to attend college in the coming years (which entails big expenses no matter one’s wealth) and acknowledged that they have limited disposable income and near-term job prospects (as would any high schooler).  My suggestion was to focus on building savings and not risking them too much to best afford their educational goals.  They intuitively understood that they needed to keep money available for spending on both necessities and some luxuries – matcha latte and a new quarter-zip came up in conversation – and how to try to keep them separate.

I wasn’t a total spoilsport, though.  I said there’s nothing wrong if they choose to take some risk with some of their spending money as long as they understand that it might not be available for the niceties that they desired.  Like any other risky venture, it could work for or against them, but they had the advantage of youth – they have decades ahead of them to focus on careers that will allow them to earn money and build wealth.   Along those lines, they also asked about what to expect from college and jobs.  We only had a limited time – the subways moved promptly – but I left the conversation optimistic about this group of eager learners in New York City.