The three people making all your investing decisions

My parents have been visiting this past week. The girls are thrilled with their gifts of fairy wands and pink tutus. As for me, well, I’m feeling a little less than light on my feet. 

That’s the lot of adult children and their parents. The expectations and wishes of your parents often contradict your own choices and views.

When you’re making investing decisions for yourself, there are three voices in your head. Your mother, your father and you. Your parents educate and inform your attitudes towards saving, spending and risk. I’m assuming an idealised two parent heterosexual family for illustrative purposes only. As you go through life your experiences and the economy you work in then shape your individual views.

If you’re making decisions with your spouse then there are six people trying to come up with an answer to an investment decision: you, your parents (that’s 3), your spouse and your spouse’s parents (adds up to six). How is the divorce rate not higher than 50%?

The areas of conflict can be broadly categorised as differences in what is perceived as valuable and what is considered risky.

I’ll share two short stories as examples.

Value

I think $500 is a reasonable amount to spend on a handbag. In the London financial markets where I work, most of my female colleagues consider me a cheapskate. Hermes, Celine, Chanel and Louis Vuitton sell bags starting at over $2000 and that’s the norm for women who work in The City.

My mother thinks about $100 is the right price for a handbag. Something practical and solid, not fashionable like the ones I buy.

My father firstly can’t understand why we women must schlep around so much stuff. If we must carry around so much, can’t we just use a 5-cent plastic bag that the groceries come in?

Three people, three differing perspectives on the value of things.

Risk

A Swedish colleague married a nice English girl. They’re both established in jobs and ready for a life together, but they can’t agree on buying a house in London.

The Swedes despite their cosy communal spirit and a population of a few million, managed to give themselves a financial housing crisis that saw house prices plummet 40% - 50% in 1992. My friend remembers his parents working for years to pay a mortgage that was underwater. His English wife has only seen house prices rising and to her buying a flat is an investment decision that is as “safe as houses”.

Different life experiences, different perspectives on how risky an investment is.

Here’s a picture of the most expensive handbag in the world. Over $300,000 and made from Himalayan crocodile!

ermes Birkin (via  Christie’s )

ermes Birkin (via Christie’s)

I hope my readers will agree with me that the bag isn’t value for money and there was way too much risk in it for the poor crocodile.

Thanks,
Mallika