🌳 Growing Money + Maths + Explain it Like I'm in Year 7

The money stuff that you wish they taught in school

Feb 22, 2024

You know when you’re in class and someone asks a question and you go:

“Oh, I was going to ask that” or,
“Oh, I didn’t have that question before, but now I want to know the answer to it”

That’s what this is supposed to be like (but with money stuff, not English or Biology).

The format of this newsletter is simple:

3 questions from teenagers and young adults like you and my answers.
💬🤔 Got your own question about money that you want to ask? If you send it through this week there’s a good chance you’ll get an answer next week! You can submit it here (and it can be totally anonymous if you prefer 🙂).
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Your Questions & Answers

🌳 Growing Money
Maths
Explain it Like I'm in Year 7

🌳 Growing Money

Q. “I’ve been reading about investing money and growing it but it’s all a bit confusing and there seems like there’s a lot to learn. Do you invest your money? What in?“
-Lola, 19

Answer

Hey Lola - it’s super impressive you’re already thinking about investing. You’re right, there’s a lot of choices out there and lots to learn. But that’s ok. You have time to do that and you’re starting early which are both huge wins.

Yes, I invest part of my families savings for the future.

Right now, we personally invest in public shares (some people call them stocks). That means we buy small ownership stakes (shares) in companies that are listed on the share market in Australia and overseas.
We also have invested in property by buying our family home. We have a mortgage (a large loan) for that property, and are (very slowly) paying it off over time.

What you invest in is a really personal choice and influenced by a lot of different personal factors. There’s no ‘right’ or ‘wrong’ option. Other things you can invest your money in include things like investment properties and term deposits or even things like art, collectibles and farmland!

Another Kind of Investing

There’s another way to think about investing too. It’s about investing in your own knowledge. You’ve already started doing that. Keep going! You don’t have to be in a rush to put your money into something. Learn about your options and figure out what feels right to you.

And be really REALLY cautious when you see something on TikTok or a Reel that says it’s a way to make money quickly that:

‘no one will tell you’ or,
that’s ‘a secret money hack that no one knows that will make you thousands’.

That is 100% just a scam from a sad little creator trying to get a few extra views from people who don’t know any better.

And if you have more questions along the way as you do this just write in again, because heaps of people will benefit from learning with you!

Maths

Q. “I’m bad at maths. That just means I’m always going to be bad at money stuff too right.“
-Daniel, 14, Qld

Answer

Hey Daniel. Short answer? No. It doesn’t.

I’m not great at maths either. It was the subject that I struggled with most at school. But I got through it and was ok at it by the end.

You know what I wish I’d done differently though? I wish I hadn’t told myself that I was ‘bad at it’ when I was starting high school. Because that just made me dislike it. That was the wrong approach.

One of the best teachers I had put this really simple formula on his classroom wall:

Results = Effort x Ability

For me, my ‘ability’ in other subjects was higher, so I could put in an average amount of effort and get good results.
But my ‘ability’ in maths was lower. That meant that if I put in the same amount of effort, my results would be lower. Makes sense right?
I needed to put in more effort. But I only realised that a bit later on.
The other thing that helped was attacking this subject like it was something that I had to beat and win at. Maybe thinking about it like that might help you too.

Math and Money

Good news: you don’t need to be able to solve complex equations to be good at money stuff. You just need to be great at some basics. And those basics are not that tough to learn:

Percentages - knowing how they work, and how to calculate them is absolutely crucial. This is how interest is calculated and charged. So once you know this you will be able to understand loans, debt, and most importantly, investing.
Addition, subtraction, multiplication, division. The basics that you’ve been learning since you started school. You need this to do things like budgeting and figuring out savings goals.

The great thing about 2024 is that if you want to learn in a different way to the way you’re taught at school, you can.

There are some incredible resources out there. For maths, Khan Academy (on YouTube and their own website) has been really popular with the kids I tutor. Give it a try and focus on the concepts above. You’ll be fine, just get in there and give it a go.

Explain it Like I'm in Year 7

Q. “Hey Ry, I don’t really get inflation (but I want to). Can you explain it to me like I’m in year 7?“
-J, 19, Vic

Answer

Hey J - what a great way to ask that question! Let’s go through it by breaking it up into smaller parts.

Basic Definition (Plus 2 Examples)

Inflation is the increase in the cost of the goods and services over time.
For goods you’ll see it in the higher prices of things you buy (like groceries and cars).
For services you purchase, you’ll see it in higher bills for things like haircuts, education and getting a tradie to help fix something.

How is it Measured?

It’s measured in percentage terms. For most of the last 30 years, inflation in Australia has been between 2% and 3% per year.

So that means that if you bought a trolley of groceries in July 2010 for $100, that exact trolley of groceries would have cost between $102 - $103 one year later in July 2011.

But over the last couple of years, inflation went up. A lot. Instead of sitting between its most common 2% - 3% range it went all the way up to 7.8% at one point.

What Does That Actually Mean?

Right, practical example time. Take our trolley from before.

In December 2021, that trolley of goods was worth $100.
Then inflation went to 7.8% for the year.
That meant that the SAME trolley of goods cost $107.80 a year later in December 2022.

The thing about inflation is that it doesn’t just affect what’s in your trolley at the supermarket. It affects everything. You might have noticed this in rising costs for things like your phone bills, streaming subscription costs and takeaway food.

Is Inflation Bad?

Mostly, yes. High inflation is really bad. That’s because it basically makes people poorer. Look back at our shopping trolley. If the exact same amount of groceries costs $7.80 more than a year before, that means there’s less money for other things like bills and holidays.

And remember, it’s not just that one trolley of groceries that’s more expensive when inflation is high. It’s everything. So that means a lot less spare cash for other things.

And those ‘other things’ include things like eating out and holidays.
Jobs in those sectors keep a lot of people employed.
So inflation makes us poorer. Then that affects demand for other things (like meals out or holidays).
In turn, that might mean less shifts or fewer jobs for people who work in those areas.

You said ‘mostly’?

Yep. That’s because a little bit of inflation is a good thing. Because deflation (prices going down) only happens when times are really tough and lots of people are losing their jobs and lots of businesses are going bankrupt (closing).

And when that happens people spend even less because they’re fearful of losing their jobs too, or because they figure they can buy things more cheaply a bit later. Same problem. Less demand = less jobs. Not good.

The sweet spot is inflation of 2% - 3%. That’s the target for the institutions that manage the economy. It’s a little bit of a ‘Goldilocks’ thing. Not too high, not too low, just right.

This is Complicated!

It definitely is. Inflation is caused by a lot of things. And it influences a lot of things.

But just remember, you don’t have to know every detail of it. You asked what it was. So let’s finish by going back to those simple, clear statements about it:

Inflation is the increase in the cost of the goods and services.
It’s measured in percentage terms.
Too much of it makes people poorer.
In Australia it’s been between 2% - 3% per year, for most of the last 30 years.
A few years ago it went all the way up to 7.8%.

Hope that’s helpful. You might need to read this and come back to it a few times for it to ‘stick’ in your head but be patient and if you want more detail or want to clarify anything just let me know!

Thanks for Reading

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