Three Money Lessons My Grandfather Taught Me

grandfather.jpgI was only seven when my grandfather passed away, but during the last year and a half of his life, he made a special effort to take me under his wing and express to me, as only he could, some of the lessons life had taught him. Some of them were hauntingly accurate; others, more quixotic. But I remember most of the lessons incredibly fondly. I would sit beside him on the old green couch in his home, listening to his tales as he told them.

Although I am nowhere near the storyteller that he is, I wanted to share a few of his tales with you, ones that had a lesson related to personal finance. Most of them simply show that the things that were true then are true now.

Diversify your money. My grandfather was a bootlegger in the 1920s. He had an old Tin Lizzy that he used to drive around rural Illinois, carrying his wares under a tarp on the back. Unsurprisingly, given that Prohibition was ongoing, these were cash-only transactions, and he would often drive along in that old rusty machine across the backwoods of Illinois, in the time before there was even many paved roads.

He kept all of his money in a local bank, the building of which was still standing when I was a child (though it has since been torn down). The bank gave everyone 1% interest compounded annually, which was a huge deal at the time for people in the area, as most of them were much more used to keeping cash at home in various hidden places. The owner of the bank was then taking everyone’s investments and investing them directly into stocks. This was a great arrangement for everyone through the 1920s as the stock market went wild, but in October 1929, the stock market crashed.

Most of the businesses that the bank owner was invested in were bankrupt by the end of 1930, but the bank owner kept trying to play the market and make the money back. Well, in late 1931, word got around that the bank had almost no money at all, and lots of people went to the bank to try to collect. The bank just shut their doors, locked them up, and the bank owner left town with what remained of everyone’s money. My grandfather happened to be out on a run then, and when he came back to find himself in financial ruin, it changed his life forever.

He failed because he put all of his money in a single investment that wasn’t all that secure to begin with. If you have money to save and invest, put it in several different places, because you never know what might happen.

If a financial transaction makes you uncomfortable, get out while you can. My grandfather sold a good deal of liquor in the outskirts of Chicago in the 1920s, which meant, unsurprisingly, that he was likely selling liquor to associates of the Capone family, who ruled Chicago at the time. My grandfather often spoke of Capone himself in almost folk hero terms, but Capone’s associates made him quite uncomfortable.

The general arrangement was that my grandfather would drive up to a certain warehouse, unpack his wares, pick up an envelope left laying there, and drive away with the envelope and its contents. The location would change from time to time, of course, and the new instructions were left in the envelope.

Once, the instructions left there were very suspicious, as they described a warehouse next door to a police station. My grandfather sweated about whether to deliver the liquor or not, eventually choosing not to, even though there was some potential risk to his personal safety through this choice. He was afraid of a trap, and the risks of the arrangement became too much for him. If things get uncomfortable, get out as best you can – don’t keep staying in, no matter how good the arrangement treated you in the past.

Insure yourself against the inevitable. Later on in life (well after Prohibition’s end), my grandfather started an independent fishing business. He worked for years building a reputation for his fish market, which he maintained by catching, dressing, and preparing the fish, while his wife minded the market itself. Eventually, when he had children, they became involved as well, helping out with the fishing process to increase the size of his market.

Of course, given that he was a self-employed fisherman, health insurance was the last thing on his mind, so when he was struck down with meningitis in the spring of 1959, he left his family (his wife, a teenage daughter, a younger teenage son, and an even younger son) without any sort of income at all. He had no health insurance, so he basically laid on a bed in the living room of their home, hovering near death for several months, while the daughter and the oldest son basically quit school and took over the fishing business to keep food on the table.

I think this was the single biggest regret of his entire life. He told me tearfully how it hurt him that he couldn’t even stand, but he would watch his children and wife work themselves almost to the bone all around him. When he finally recovered, it wasn’t long before both his daughter and his oldest son were already living their own lives, wandering down paths much different than what their life had originally held for them.

If you ever do anything, make sure that your family is taken care of, no matter what,” he told me over and over again with a tear in his eye. Finally, I’m following his advice.

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