LONG before most of us understood inflation, interest rates or asset allocation, we were already learning about money.

We learnt from the conversations adults had when they thought children were not listening. We learnt from watching a parent stretch a salary until month-end, hearing that property was the safest investment, being told to save something “for a rainy day,” or actually seeing what happened when a business failed, a currency depreciated or an unexpected expense arrived.

Some lessons were spoken. Others were absorbed.

Years later, when we become investors ourselves, those memories often come with us.

We like to think financial decisions are made entirely in the present: We assess the facts, examine the opportunities and choose what makes sense. But money has a remarkably long memory. Our experiences and sometimes those inherited from our families can influence what feels safe, what feels risky and even what we believe wealth should look like.

The question is whether those lessons are still serving us.

Every generation develops its own financial instincts. Someone who lived through significant currency depreciation may have a very different relationship with foreign currency from someone who did not. A family that built its wealth through property may regard owning land as almost synonymous with financial security. Someone who watched relatives lose money in an investment may approach markets with considerably more suspicion.

Experience is an effective teacher. The problem arises when an experience becomes a permanent rule: “Never borrow.” “Cash is safest.” “Property always goes up.” “Stocks are gambling.” “US dollars are always better.”

There may be wisdom buried inside each statement but very few financial principles remain universally correct regardless of price, circumstances or economic environment. Yet beliefs about money can be unusually resistant to change because they rarely feel like beliefs. They feel like facts.

Financial inheritance is usually discussed in terms of property, investment accounts and businesses passed from one generation to another, but families transfer something else: Financial philosophy. We inherit attitudes toward spending, saving, debt, entrepreneurship and even talking about money.

A parent who struggled financially may raise a child who becomes exceptionally disciplined or excessively cautious. A family that created wealth through a successful business may produce a generation comfortable with concentrated risk.

This is why two people of similar age, income and net worth can react completely differently to the same investment opportunity. Their balance sheets may look similar. Their financial biographies do not.

Countries, like individuals, develop financial memories.

Jamaican investors have lived through periods of high inflation, currency depreciation, elevated interest rates, economic adjustment and financial-sector upheaval. Those experiences inevitably influence the way we think about preserving wealth. There is value in that institutional memory. Ignoring history would be foolish but remembering history and remaining trapped by it are two different things.

The investment universe available to Jamaicans today is considerably broader than it was for previous generations. The question therefore should not simply be, “What worked before?” It should be, “Given what I know now, what makes sense next?” Audit the belief, not just the portfolio. Investors are regularly encouraged to review their portfolios. Perhaps we should occasionally review the beliefs behind them as well.

Why do you hold as much cash as you do? Why do you prefer one asset class over another? Why does a particular investment make you uncomfortable? Why do you invest primarily in one country or currency?

Sometimes there will be a sound financial explanation. Other times, if we trace the answer far enough, we may find a memory. That does not mean the decision is wrong. It simply means it deserves examination. Our financial memories are valuable. They remind us that markets can fall, currencies can move, businesses can fail and circumstances can change unexpectedly but the purpose of experience is to inform our decisions, not make them for us.

As investors, we should be careful not to spend the future solving financial problems that belonged to the past. Your money has a memory. The goal is not to erase it.

It is to make sure that when the past speaks, the present still gets a vote.

Tenagne Griffin is Manager, personal financial planning at Sterling Asset Management. Sterling provides financial advice and instruments in US dollars and other hard currencies to the corporate, individual and institutional investor. Visit our website at
www.sterling.com.jm

Feedback: If you wish to have Sterling address your investment questions in upcoming articles, e-mail us at:
info@sterlingasset.net.jm

Tenagne Griffin.