Investment of a lifetime for newborn

I HAVE thought a lot about what my newborn son's future holds: he's going to have to plan to make his money stretch 100 years.

Newborn baby's feet

LAST Friday my heavily pregnant wife sent me the following text: "It's time."

Re-runs of '60s sitcoms had convinced me that it was a father's job to nervously chain-smoke cigarettes out the front of the hospital until a matronly midwife announced the arrival of a bouncing baby, at which point we would switch to smoking celebratory cigars. (Those '60s subliminal cigarette ads really did take you from cradle to grave.)

But alas, I don't smoke. My addiction is my iPhone.

So while I crouched next to my wife, patting her on the head while simultaneously checking my share portfolio, she snatched my iPhone out of my hand, grabbed me by my throat and thundered "FOCUS!".

So I did. And 20 minutes later Lewis (Louie) Pape came into our lives.

After driving him home from the hospital a few days later, I caught Louie looking at the both of us.

I reckon if he could talk, he'd have said: "Let's be honest guys. You two clowns have no idea what you're doing with me, do you?"

Of course, he'd be right.

All first-time parents understand that, for all the parenting classes, books, and advice from family and friends, bringing a baby home for the first time is a terrifying experience.

While I don't totally understand why my son screams at me at 2am, I have thought a lot about what his future holds: he's going to live a lot longer, work in a much more competitive (and lower paid) workforce, and he's going to have to plan to make his money stretch 100 years. 

This baby will live to be 120

LIFE expectancy (for Australian men at least) has more than doubled from about 38 in the 19th century to 79.

This may have something to do with each generation taking better care of itself than the last (as evidenced in my baby photos, where my old man nurses me with a Winnie Blue hanging from his mouth, and my mother sports a "healthy" tan).

But the evidence is clear - in the future, we're going to live a lot longer.

You can see the start of this happening now.

If you want to keep an old person talking, just ask them how many pills they pop each day, and for what. That'll buy you a good 20 minutes.

In the past decade or so, Big Pharma has come up with a slew of new pills to extend your life (which are generally subsidised by taxpayers - for now, at least).

Last month National Geographic magazine ran a front cover of a newborn with the headline "This baby will live to be 120".

It argued that today's babies are being born into a golden age of medicine, where big data is driving new technological and genetic breakthroughs that will allow Louie and his mates to reach a century.

Which is exciting stuff - but it will also fundamentally change how we work and live.

According to economist Phil Ruthven, the amount of paid work in a man's lifetime hasn't varied much over the past few centuries: it's always been about 75,000 hours.

The only thing that's changed is that we spread those hours over 50 years, rather than 25 like our ancestors in the early 1800s, whose lives were literally all about work.

Back in those days, people clearly struggled to strike a healthy work/life balance (there's not a lot of living left over when you have kids at 15 and pull up stumps at 38).

Yet, even though we're living much longer today than ever before, we're still retiring at 65.

Louie will quite possibly work longer than any generation in history (Ruthven reckons his generation will retire at about 80), and it's likely that he'll spend his working life in a much more connected, and a much more competitive career. 

Here comes everyone

THE same factors that are driving bounding leaps in medicine are also causing arguably the biggest employment shift since the start of the industrial revolution.

Case in point: earlier this week a woman from Telstra - who told me she was working in a call centre in Bendigo - called me to upgrade and up-sell my telephone plan.

We got chatting. She said she liked her job, and earned "decent money, about $50,000".

It does cost Telstra much more than that when you factor in four weeks' paid holidays, sick leave, parental leave, public holidays, long-service leave, superannuation, payroll tax, and expensive office rent.

And I didn't even give her the sale.

That's because, two weeks prior, a Telstra employee from the Philippines - doing the same job - had called me and sealed the deal.

We got chatting too. He told me he liked his job, and that he got paid the equivalent of about $2000 a year (about $40 a week).

Politicians argue they can protect us from this. But they can't. All the talk of the high Aussie dollar is a smokescreen for a bigger issue: Australia is a high-cost country to do business in.

As the car industry has proven, you can't legislate against bad economics, no matter how many billions of dollars of taxpayers' money is thrown at Ford or Holden.

So maybe Louie will choose to run his old man's sheep farm - a business that is likely to pay more than a Philippines call centre (but not by much).

In that case, I better start teaching him about investing. And given he's got to make his money stretch for a century (or more), at least he's got some serious compounding on his side. 

Where should your kids invest for the next 100 years?

SINCE 1900, Australia has had the best performing share market in the world, according to a 2010 study by Credit Suisse.

AMP found that $1 invested in Aussie shares in 1900 would have grown to $294,047 today - an 11.9 per cent return.

Being an owner (or part-owner) of well-run businesses is the way to become incredibly wealthy over time (in the same period, if you'd put your money in the "safety" of cash, you'd have only $201). 

Wealth by birthright

AS I'm only beginning to learn, it's a natural reflex of a parent to want to wrap their kids in cotton wool and cushion them from the harsh fears (real and imagined) of the future.

But it's also important to keep things in perspective.

By being born in Australia, Louie is already one of the wealthiest people on the planet.

And with two loving parents, and a strong extended family, well, he's got the world at his little bare feet.

Tread your own path! 

Contact Scott Pape at barefootinvestor.com or [e-mail]