Every 10th episode is designed for and hosted by children. In this episode, we talk about living in Japan, different types of currencies, and the exchange rate.
Every 10th episode is designed for and hosted by children. In this episode, we talk about living in Japan, different types of currencies, and the exchange rate.
Linda Rogers: [00:00:00] My name is Linda Rogers, and this is Investing Forward.
Linda Rogers: [00:00:21] This podcast covers ESG integration, green bonds and impact investing, topics I would consider to be fairly advanced. Clients, of course, come to me with all ranges of financial knowledge and because investing is not covered in the U.S. school system, for the most part, a young person's financial knowledge comes down to luck - were they lucky enough to have someone in their life to talk to about investing and to help them build healthy money habits. Talking about money is not natural for many people. I try and sprinkle financial education tips for children or books about money in my financial plans to encourage parents, grandparents, or any adult to talk to the children in their life about money. The goal is to make the process of learning about money and investing fun and interesting, which it most certainly is. To further support that goal, I'll be dedicating every 10th episode to be a children's episode. The episode will be hosted by and designed for children, but I hope it will be entertaining and educational for all ages. I convinced my two oldest daughters to join me on this inaugural children's episode and since we are living in Japan, we're going to chat about currencies and exchange rates. I hope you enjoy it.
Linda Rogers: [00:01:33] Welcome to the podcast. Go ahead and state your name.
Annika: [00:01:36] I'm Annika.
Madeline: [00:01:38] I'm Madeline.
Linda Rogers: [00:01:39] And how old are you?
Annika: [00:01:41] I'm 10.
Madeline: [00:01:41] I'm 8.
Linda Rogers: [00:01:43] And like true military children, you've moved around. Why don't you go ahead and share the places you've lived?
Madeline: [00:01:49] We were both born in San Diego -
Annika: [00:01:51] - and we moved to Memphis. After that we moved to Coronado. And then.
Madeline: [00:01:56] We are here now in Japan.
Annika: [00:01:59] Atsugi.
Linda Rogers: [00:02:00] Pretty lucky. Where is your favorite place that you've lived?
Annika: [00:02:04] Definitely Atsugi.
Madeline: [00:02:09] Atsugi or San Diego.
Linda Rogers: [00:02:12] Well, what's your favorite thing about Japan?
Annika: [00:02:14] Well, we live on base, so for kids, we get a lot more freedom than we would get in the States,
Linda Rogers: [00:02:21] Are you kidding me? So it's not the food, the amazing sushi?
Annika: [00:02:25] I don't like sushi.
Madeline: [00:02:28] Only california rolls.
Linda Rogers: [00:02:30] Which I don't think are technically sushi. But that's OK. We'll keep working on you guys. So let's talk about money. And I guess before we do that, do you know what I do for work?
Annika: [00:02:42] Mommy is a financial planner, so what she does is she helps people with their money, like, let's say they don't have a good plan for like, let's say -
Madeline: [00:02:54] college for the kids -
Annika: [00:02:56] or like for retirement, how long they need to work and how much they need to work and what jobs are good and good banks, I guess, and stuff.
Linda Rogers: [00:03:07] All right, that was pretty good. So, yes, I spend my entire day pretty much talking about money and investing, so I thought we would start with what is money? And we live in Japan. What kind of money do we have here?
Annika: [00:03:22] We have yen.
Linda Rogers: [00:03:24] That's right. The money here is called yen. So countries all over the world use different currencies. Currency is another word for a system of money. Before we had money, we used the barter system. And some people may still barter today. Are you familiar with that term?
Annika: [00:03:43] Is bartered like another word for like trading.
Linda Rogers: [00:03:46] That is what it is. Have you used the barter system with your friends before?
Annika: [00:03:51] Halloween candy.
Linda Rogers: [00:03:52] Perfect, that's a good example, so barter is when you are trading goods or services with someone else without using money. So with Annika's example of the Halloween candy, if I have a lot of chocolate and someone else has a lot of Skittles, we can swap and we're not exchanging money, we're exchanging goods. So while that might be fun when you're doing it for Halloween or every so often with friends, before we had money, we had to use the barter system for absolutely everything that you needed and wanted. So it could be really difficult. If you wanted eggs, you had to find someone that had a surplus of eggs and hope that you have something they want in return. Maybe you had apples from your apple tree and that was in season, so you'd be lucky that day. What if you had an emergency and you had to go to the doctor? You'd have to find out what you might have that they would accept as a form of payment. So it can be messy and very inconvenient. So for that reason, we started to develop currency to replace the system of bartering. Many places started using gold and silver, for example, as their currency. And from there it evolved to having small coins that were stamped showing their value and they were much easier to just carry around - put them in your pocket. They were lighter weight. So let's look at 100 yen coin since we mentioned that is the currency in Japan - yen. We have a coin in front of us, but if you are at home in the United States or elsewhere, you can just google 100 yen coin and you can see a picture of what it looks like. So on the back, yes, it will show 100 so that it's indicating the value 100 yen. And then on the front there's a picture. Do you girls know what that is a picture of? And to give you a hint, I'm going to say, sakura
Annika: [00:05:50] Aren't sakura blossoms, cherry blossoms?
Linda Rogers: [00:05:53] That's exactly what it is. Those are the famous, beautiful, cherry blossoms on the front of the coin. So now let's look at the U.S. quarter, and that is worth 25 cents. Who's that a picture of on the top of the quarter?
Madeline: [00:06:09] George Washington.
Linda Rogers: [00:06:12] And of course, we know George Washington was the first president of the United States, but that's something to look for. Countries will put either an important symbol or an important person on their currency, whether it be coins or bills. So we were living in the United States where they use dollars, we moved to Japan where they use yen, we have to sell our dollars and buy yen so that we can buy things here. The rate at which we do this is the exchange rate. This is very easy for me to do because I can go to the ATM machine on the Navy base. I put my ATM card in the machine so it can see my bank account in the United States. Then I punch in how much yen I want.
Madeline: [00:06:55] So what you're trying to say is you're allowed to use a different type of money in different countries and you could exchange it for their type of money.
Linda Rogers: [00:07:05] Yep. So you can take your money and exchange it for the country's money that you are visiting or living in.
Annika: [00:07:13] And I'm pretty sure that 100 yen isn't exactly the amount of a dollar, is it?
Linda Rogers: [00:07:22] Well, it fluctuates, but you're right - a lot of people say the rule of thumb is 100 yen is a dollar, but right now, technically 100 yen is closer to .9 dollars. So that can get confusing and I'm always using my phone just to make sure I'm doing the conversion correctly. And exchange rates can fluctuate - so the Japanese yen and the U.S. dollar are examples of floating currencies. That means the value of the currency is changing every day and is determined by forces such as supply and demand. This is extremely important to understand. If you have currency of one country and are looking to spend money in another currency, maybe you're a world traveler like you ladies, or maybe you want to start a business that imports goods from another country. For example. What is your favorite Japanese candy?
Madeline: [00:08:14] Hi-chews.
Annika: [00:08:15] I think it might be hi-chews too and they also have really good peach teas because they are very sweet, but hi-chews are basically like a Japanese starburst, except they're like a lot better. I don't know how. And don't mistake them for chuhai, because that's a beer or alcohol in Japan.
Linda Rogers: [00:08:34] Yep, that is true. OK, so let's say you move back to the United States and you tell all of your friends how amazing hi-chews are and they want to eat them so you decide to start a business where you sell hi-chews. Hi-chews are only in Japan, so you would have to import them. To import something means to bring goods or services into a country from another country for sale. So your business model would be to bring hi-chews from Japan into the U.S. and sell them. All of your money is in U.S. dollars. So first you have to convert that money to yen, buy the hi-chews, and then sell them for U.S. dollars. So actually, the amount of money you make, or your profit, will depend a lot on the exchange rate. Using that rule of thumb we talked about, let's assume 100 yen equals one U.S. dollar and let's assume that one pack of hi-chews cost 100 yen. You could take your one U.S. dollar and buy one pack of hi-chews in Japan. Let's say the exchange rate changes so that you're one U.S. dollar lets you buy two packs of hi-chews now. Well, you're going to make more of a profit. You're able to sell more product for the same amount of money you started with. But what if the exchange rate changes again and now it takes 2 dollars to buy that one pack of hi-chews? You're going to make less money and less of a profit. So exchange rates are watched very closely because actually a lot of people do this already. The United States imports a lot of things from other countries such as cars and coffee and chocolate. And the exchange rate can impact the prices that we pay for these goods when we buy them in the store.
Linda Rogers: [00:10:18] I think we covered a lot for this first children's podcast episode - we talked about currency, exchange rates and importing goods. What was the most interesting thing that you learned?
Annika: [00:10:31] The amount of yen, what 100 yen is, can change in hours or minutes. It's very interesting to me.
Madeline: [00:10:39] I liked learning about how to sell hi-chews to my friends and make money.
Linda Rogers: [00:10:46] OK, good. I'm glad you learned something. If you are a kid or you have a kid with money questions, contact me at www.investingforwardpodcast.com and we will try and cover your questions in a future children's episode. Thank you for joining us and we'll see you next time.
Linda Rogers: [00:11:05] My name is Linda Rogers. You were listening to Investing Forward. If you liked what you heard, leave us a rating. Subscribe and stay tuned for next time. Linda Rogers is the owner of Planning Within Reach, a registered investment advisor, Planning Within Reach produces the podcast and makes it available on its website and through other distribution channels. Linda Rogers and any guest on the podcast are providing their own views and opinions and are not necessarily the views and opinions of planning within reach. Nothing on the podcast should be construed as a solicitation or offer or recommendation to buy or sell any security investment. Advisory services are only provided to investors who become planning within reach clients pursuant to a written investment management agreement. Clients of planning within reach may hold positions in securities discussed in this podcast. Past performance is no guarantee of future results. All investments involve risk and may lose money. The Investing Forward podcast is for informational purposes only and should not be relied on for any investment decisions. Consult with a financial advisor, accountant, attorney, or conduct your own due diligence.