It was when my dad, usually receptive to my teenage bantering, stayed deadly silent that I knew something was wrong. We were all just hanging out in the kitchen, but something was off that fall evening. “He’s nervous about our money,” explained my mom. Turns out, he had good reason to be.
I was 12 when my family moved to Canada from the U.K. in the late ’80s. We’d always been ordinary middle-income folks but after being thrust into the Canadian real estate boom and the promise of the North American dream, my parents eagerly invested their modest capital. Some of that money went into rental properties bought with friends, but their remaining cash savings went into the hands of a real estate investor who promised them a whopping 30% return.
Do I even need to tell you how it all ended? The property market crashed, and the “guaranteed” 30% return evaporated in what turned out to be a scam. The long and short of it was that almost all of my parents’ money was gone.
The “guaranteed” 30% return evaporated in what turned out to be a scam. The long and short of it was that almost all of my parents’ money was gone
In retrospect, I experienced what most millenials did in the crash of 2008. As one writer put it in an opinion piece for The New York Times, “the financial crisis remains the defining trauma of my generation.” When the unthinkable happens — everyday middle-class folks losing their homes, lives being ruined — the damage lingers. A 2016 study suggests this isn’t figurative either; rather, the various stresses of the financial crisis “were linked to an increased rate of mood disorders, anxiety, depression, dysthymia, and suicide.” Even financial advisers display signs of post-traumatic stress from that time.
My experience in the 90s bears this out. When your family loses all of its money through a mixture of naiveté and greed, it changes how you think. Money becomes both precious and a constant source of anxiety. As I grew older and started earning an income, the mere idea of investing scared me. I was so shaken by my parents’ financial escapades that I held on to my money for dear life. Whatever small amount I was able to put aside during the extended time I spent in grad school almost exclusively went into GICs. At least there, the “guaranteed” aspect — right there in the name — was real.
As I moved further into adulthood, I had a tendency to stick to those stable investments, or simply put money aside into savings accounts. These were, I thought, the safest places for my money. The idea of actually risking it in the market seemed reckless to me. Sure, it was understandable given what I’d seen happen to my parents. But that conservatism also meant that I’d missed out on a couple of decades of market gains, not having been confident enough to invest in a mix of stocks and bonds. Not helping matters is that over the past decade in particular, interest rates have been at or near historic lows, which means “safe” investing carried — and still does carry— an extra penalty of low returns.
I was well into my thirties when I learned how to invest sensibly and think about things like risk tolerance, investing timelines, or those sometimes-confusing acronyms like ETFs, TFSAs and RRSPs. What I gradually realized over time is that there is a difference between risking it all on some high-risk adventure, and carefully chosen, diversified investments. The former is foolhardy; the latter is based on our best information, and allows you to choose the mix of investment types that’s right for you. My parents’ mistakes and misfortune taught me that investing wisely requires a careful balance of risk, goals, and common sense.
When the unthinkable happens — everyday middle-class folks losing their homes, lives being ruined — the damage lingers
True, dabbling in the market still leaves me jittery. But I have faith that time (and some healthy returns) will heal those nerves. Stung for decades by his errors, my dad had a tendency to never spend. But lately, after years of relative comfort, he’s taken to wondering how he might indulge a bit: maybe a gas fireplace for the home, or maybe a new car. Though there were some lean times, thanks to diligent saving, hard work, and a mix of privilege and luck, my parents were able to retire comfortably.
That’s the thing about mistakes: having made them, you’re left wiser, and better able to enjoy what you have now. While it’s true I wasted years letting those early negative experiences rule my investing instincts, they eventually taught me that playing it too safe isn’t the right option either. If I want to retire as comfortably as my parents have, I need to sensibly and carefully put my money to work.