Michelle Lopez: 4 big investing lessons you can teach kids of any age

Michelle Lopez, Head of Australian Equities at Aberdeen Standard Investments, got her fierce work ethic and sensible attitude to investing from her parents. Her father opened a delicatessen on Sydney's Oxford Street after an injury precluded him from construction work for a time.

"My parents migrated from Spain, and they came with nothing. They literally came with a backpack on their back," says Lopez with pride.

From the age of five, Lopez would help out around the store on school holidays earning pocket money. Later, when her father returned to construction she would earn a bit more pocket money painting fences and helping out.

I've been speaking with different investors and fund managers about how they tackle the challenge of teaching their kids about investing. For some kids, there's an innate curiosity about what mum or dad does for a living. No doubt, while working from home through lockdown the only way to get anything done is to explain a little bit here and there.

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For other kids, there may not be that tug of curiosity about finance, but there are many other ways to impart the valuable lessons about investing and that's what I talked about with Michelle Lopez. 

Recent research conducted for HILDA (Household, Income and Labour Dynamic Survey) saw a correlation between financial literacy and financial wellbeing. The more time you invest in financial education, the better your financial potential will be, and the less likelihood of financial stress.

Over the past two years, more people have started trading and investing than ever before. 

The 2020 ASX Investor Study showed that 23% of investors only began investing in the past two years. That's huge. Nearly one in four investors has less than two years of investing experience behind them. 

The rapid uptake in investing and the technological change that has brought about more access to financial markets and it should in turn be putting an even higher standard on the financial literacy we expect. 

Michelle Lopez is passionate about investing. Her first eye-opening moment was during a high school ASX competition. (You would not believe how many successful Aussie investors and fund managers have discovered their spark from this very same competition. It's a powerful tool, it seems.)

It was about putting together a portfolio for three months, from memory," said Lopez.
"I'm pretty competitive, right? So that was my first moment of: 'Oh, let's explore this a bit more' and then I was hooked."

For Lopez, it's a bit too early to begin on the ASX competition with two kids under 10. But she has established a beautiful way to impart those early lessons and it all starts in the garden.

How does your garden grow?

"So the way that we've approached it is very much around storytelling, which is kind of the big one for kids," said Lopez.

And Lopez has found myriad ways to bring investing into the veggie patch. First, there's the patience needed for long-term investing and tending to your investments. Then you have to keep an eye out for risks and mitigate them. She's also worked in diversification strategies. And most importantly, keeping that curiosity alive.

“Around this young age, it's more about planting the seed and raising awareness of investment or business concepts, rather than physically investing in markets. I truly believe that if you have the right mindset, the right framework, and ensuring that they remain curious about how things work, the investing part will come more naturally later on”

"Hopefully, that's going to set them up and then regardless of what career path they take - whether it's finance, social work, science - they've already got the right thinking and framework that they can turn to."

Here are four big lessons on investing and how to learn them in the garden: 

# 1 Long-term investing

Gardening is a great way to learn patience. It's perhaps the key skill I'm missing in my own lacklustre home garden.  

"We've actually used our veggie garden as the framework for investing. We found it intrigued the kids and that they wanted to do more with it," said Lopez.

"We've tried to incorporate giving back to community as much as we can. And even just connecting with people is such a great skill."

There's a beautiful simplicity to it. Much like investing, you plant the seeds, you water them, you watch it grow and then you get to reap the benefits at the end. 

"It's that longer-term perspective that you can't just go out and grab something and eat it and be done with it. You have to plant it, you've got to take care of it," said Lopez. 

#2 Mitigating risk

Lopez's backyard has a snail problem. Never one to let an opportunity for a lesson go to waste, the snails, too, form part of investment strategy.

"We researched and we found out that coffee beans - and we go through quite a bit of coffee - are a natural repellent. We don't want to use any pesticides. So now we get the coffee beans, and we put it in the garden so that's gotten rid of the snails," said Lopez. 

Managing risk is part of everyday life. We're always balancing risks and rewards. Teaching about risk management in the garden shows a valuable lesson on how keeping an eye out for risks can help you reduce your exposure to risk and in doing so... well, there's a more bountiful harvest at the end of it. 

#3 Diversification 

Diversification is in every investor's toolkit and the garden benefits from this just as much as your portfolio. 

"We had kale, we had spinach, then we did tomatoes. And then we thought well this is explaining diversification to them. So we just pulled across general concepts around the garden, and how it could apply to something like investing," said Lopez. 

Different plants have different risks, different time horizons and different rewards at the end. It's an analogy that will work in the reverse, for those who are already at an investing age and want to reflect on the dynamics of the market. 

#4 Entrepreneurialism

For Lopez, entrepreneurialism is just about taking ideas and running with them. She's not a big fan of the over-used term "entrepreneur" but recognises the importance of making something meaningful out of creative ideas. 

This can start as something as small as school holiday projects, or something akin to the age-old lemonade stand out in the front of the house. It makes for cherished childhood memories. 

My last school holiday project was a scrunchie stand in the front yard. Another time, it was an exercise in giving back and building community by packaging up the rapidly growing rocket leaves for neighbours to share in. 

"We've tried to incorporate that kind of as much as we can. And even just connecting with people is such a great skill," said Lopez. 

The importance of financial literacy of investing is just as important as knowing how to add and subtract. It's a life skill, like knowing how to have a budget or how to apply for a job. But in order to get the message across, you have to make it age-appropriate. It's the investing equivalent of hiding veggies in the dinner. If you chop them up small enough, and wrap them in something fun - the kids will love it.

So, get out your spades and watering cans and tend to your growing garden. 

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