Financial Education -

EDUCATION:

Although it’s shocking, only 80% of our high school kids graduate, with three of five minority students not finishing the 12th grade. Fortunately, many do return to pass their GED high school equivalency exam. Also, depending on which survey you look at, between 60-70% of students who finish high school enroll in college. Yet, only 56% of those individuals go on to graduate. The income and career statistics are undeniable regarding the substantial income differential between those who are educated beyond the high school and college level.

Table 1 below shows more detailed information regarding the value of education considering income and net worth accumulation.

However, and this is a key fundamental of The DreamLife PyraPuzzle, we are not telling you that a successful life, career, or financial independence can be obtained only if you collect a college or graduate degree. While I am always in favor of kids going on to college for the education and the socialization experiences gained, college isn’t right or needed by everyone.

In the movie, Nobody's Fool, Paul Newman talks to his son about the six months, years ago, this ‘Jack of all trades' had spent attending college. He told his son, "I was good at it." When his son asked why he didn't stay or graduate, Newman responded, "I said I was good at it, I didn't say that I belonged there." If you have already started a business or want to attend trade school, you still can be wildly successful. Not everyone belongs in college. Bill Gates hasn’t done too badly!

Of course, as the above charts show, advanced education certainly can give you a leg up monetarily towards your financial and career goals, so don’t be dismissive of its benefits. But education alone doesn't necessarily guarantee success. So, I encourage you to attend and graduate from college, especially if you need a degree to achieve your personal goals in career and life. Or, consider a gap year (work for a year or two to save for college expense) to determine what you are good at and what you want. A gap year would also allow you to fund your Roth IRA, travel, or save for college. It’s not a bad alternative!

Financial Education:

I would certainly be remiss if I didn't mention financial education as part your overall learning life. I can guarantee you financial independence if you implement the Kid$Vest principles of financial education and action steps. This is true no matter what career you choose. It comes down to what Suzy Orman says, “Living below your means so you can live above your needs.” Obviously, your life style will be dramatically different if you become a rock star, rather than a teacher. But you can obtain financial independence, give back and have fun...

INCOME:

Income is the gross dollar amount earned each week, month, or quarter. This is the total cash inflow kids must budget, save, and invest. I would strongly suggest you set goals in this area as you progress through your career, as only earning a minimum wage will make it harder to financially succeed. While higher income careers are important to some people, merely having a high income doesn’t necessarily equal financial security or happiness. It is what you do with what you earn that is of the utmost importance.

EXPENSES / DEBT MANAGEMENT:

The monthly bills you pay in a timely fashion ensure a good credit rating. This could include rent, living expenses, car payments, and health insurance. How you manage your expenses throughout your life will be very important to your overall financial security.

Debt management is also important to your financial success. How you handle big debts such as college (if you attend), cars, and house can directly affect your happiness quotient. The Kid$Vest Project has an entire chapter devoted to this topic in Chapter 5—Life’s Big Financial Moments.

EMERGENCY FUND:

You never know when you might need extra funds. Therefore, it is important to have a three to six-month emergency fund available for unforeseen expenses. Not all emergencies are necessarily tragic or devastating to your financial well-being. But most of them must be addressed immediately to avoid larger financial or future health problems. Some of these can include: car repairs, accidents, or toothaches. They often come up unexpectedly and can blow your monthly budget/savings plan. So, set aside a certain amount of income each month to prepare for these surprises. Of course, some surprises may be very positive, like taking advantage of a business opportunity during a financial downturn in real estate, low stock prices, or a fire sale on a new car. If you have these funds set aside, you can access them as needed. Just make sure you replenish the emergency fund for any future needs.

In your teens and early twenties, I suggest you spend less time worrying about your emergency fund and more time on funding your Roth IRA (at least up to $10,000). This is because our basic premise of investing in your future is to take advantage of compound interest. Whether it is you, or mom/dad, who makes your first Roth IRA contributions, this should be your priority. This is so important to your financial future! Once your Roth IRA is funded, then you can start saving for emergency, savings, or investment funds.

Job loss is one setback many people face at one time or another. Establishing an emergency fund will help you overcome such losses throughout your working life. It can be financially devastating if you are not prepared to be out of work for a time. You want to be able to confront emergencies or opportunities as they arise and your emergency fund will offer you this advantage.

Since these thoughts may be somewhat controversial, read what other financial experts say and decide for yourself. I believe my approach is effective because when you are young, your parents might be able to help you with healthcare, housing, car expenses, or other financial emergencies. In addition, your emergency expenses might be smaller dollar amounts when you are young. Most likely this will change when you get older, move away from home, marry, start a family, and are well into a career.

INSURANCE / PROTECTION:

As soon as you can, and certainly when you are building wealth in your twenties, you want your assets protected. Life insurance, health insurance, and disability coverage are the most important three, along with the emergency fund described above. Luckily, most young people are still covered by their parents plans until age 23-26, or can get by with very low-cost insurance coverage. As you start your career, hopefully your employer has basic life insurance, health care, and disability coverages you can opt into. Finally, home insurance (for house and its contents) and car insurance are often mandatory in most states, should you own a home or auto.

Since I have my CLU and worked in the insurance field early in my career, I offer these comments about term vs. whole life coverage. Term life is initially cheap to buy and offers simple protection. Only pay for the protection needed early in life (between $100,000-200.000), but don’t go overboard on the coverage and compromise your savings and investments. Whole life insurance is more expensive early on, but can be a forced savings vehicle if you are a savings procrastinator. However, it is not cheap. I recommend getting cheap protection with term life in your twenties and adding some whole life insurance later, if possible. This will depend on your budget and health at the time. Ask an expert, such as a CPA, JD, or financial planner for recommendations and help understanding your own personal needs.

CAREER:

You may want to be a fireman, coach, mechanical engineer, or entrepreneur. Your ultimate career choice will certainly have a huge impact on the kind of lifestyle you live. There are a fortunate few who grow up wanting to be doctors and then have the required motivation and intelligence to follow that dream. Most of us, however, go to high school, college, or enter the work force without knowing our specific long-term goals. This is not a problem. As we work and learn, we often change our minds about our careers or fall into a career by chance.

For example, you may start out wanting to be a physician and then change your mind when you learn you can't stand the sight of blood or can't get into medical school. Poor eyesight might mean your desire to pilot jets isn't in the cards. Or you might go to trade school to be a plumber, then later start your own residential real estate company. It is very difficult to plan any one’s exact future until experience or luck brings you into a career you hopefully are meant for. In the movie, The Rookie, Jim Morris' father told his talented baseball player son that "It is OK to do what you want to do when you are young, until it is time to do what you were meant to do." Jim Morris Jr. tried out for the Major Leagues at age 30, despite his father's discouraging words. He became a relief pitcher for the Tampa Bay Rays for two seasons. Miracles do happen!

As someone who worked as an executive search recruiter for fifteen years and hired thousands of employees from the front line to the C-suite (CEO, CFO etc.), I have often been asked to give speeches to kids looking for jobs or just beginning their careers. I came up with Seven Steps to Finding a Position, which might be especially helpful early in your career. The steps include:

Know Thyself—Socrates
What are you passionate about?
What industries do you like?
What specific companies appeal to you?
What kind of leader will you be working for?
Just get a job--any damn job!
Offer negotiation knowledge--total compensation, benefits

Know Thyself:

It is critically important that you understand what makes you tick. Do you have some natural leadership skills like vision or strategy? Or are you better managing projects? Is math your thing, or are you more artistic in nature? Are you good at building things or at creative writing?

I learned two very important truths in the executive search business. One, "No-one gets the whole package," so pay attention to your gifts and connect them to a career that fits you well. You will be much happier if you do and will likely be more successful as well. And two, "There is always someone better than you," so deal with it!

If you can't write down your major gifts on a single sheet of paper, or you aren't sure you are doing it correctly, there are numerous assessors that can be of assistance. For instance, the old Myers Briggs tests, Strength-Finder, or Profile XT assessments come to mind. They all offer insights into your best personality traits. There are also numerous life coaches in every community who can interview and test you to discern your personal gifts. Finally, Addendum 1, Section 1 (My 3 Year Personal Assessment & Financial Goals) of The Kid$Vest Financial Binder offers a quick assessment of strengths, gifts, passions, and financial goals. This can be completed annually to keep you on track. But you can obtain financial independence, give back, and have fun in almost any career.

Personal Passions:

Once you really know yourself--likes, dislikes, and interests, then try to find a career that revolves around these passions. Mark Zuckerberg of Facebook noted “if you just work on stuff that you like and you’re passionate about, you don’t have to have a master plan with how things will play out.” Or, as I have often been told, “when you do what you love, you end up loving what you do.” On the other hand, financial literacy author Marty Nemko says, that "We have all been sold a bill of goods when we are told to follow our passions, or do what you love and the money will follow. Yes, some people do what they love and the money follows. Others make less money but still are happy, but millions have followed their passion and still haven't earned enough money to pay back their student loans, let alone make a middle-class living doing what they are passionate about."

So, first see if you can find a position that fits your current passions and gifts. However, if nothing is available in those areas, move forward. Only the lucky few find their passion or gifts fit their first job right out of the box. While you are learning about your individual skills and desires, start planning for what might be your ultimate dream job. If it never occurs and you end up in a career that satisfies you or at least covers your needs, you can always get involved in your passion as a hobby or give back philanthropically. Most people would kill to have either one of these options available to them during their career.

Specific Companies:

If specific industries in your area aren’t hiring, then list approximately twenty-five small or large local companies in any industry that you admire or hear good things about. Network with friends and relatives who work at these companies, or find employees who do. Then ask for help regarding openings that fit your skill set. That is the way many jobs are filled today. Keep companies on your radar and review open positions monthly or quarterly to see if any openings sound good to you. If so, apply, but see if you can find a reference to help you navigate the hiring process.

You may not want to hear this, but getting jobs is still about who you know, not what you know, especially early in your career. The older or more experienced you become, the more you will agree with this truth. For instance, my daughter recently moved back to the Twin Cities and was looking for a new position. She ran into a former friend at a party, who just happened to be in HR at a large Minneapolis company. Her day of fun and networking turned into a contact and future interview with this company. As it turned out, she got the job. She still had to use her talents, knowledge, and skill to get hired, but she got her foot in the door. You must first get your foot in the door before you can knock it down.

Respected Boss:

Your first job offer might come from a company that may not have been at the top of your industry or company list. Yet, it might be a position where you can gain experience and earn a reasonable income. In this case, make sure that your boss is highly respected by her team and executives. You will learn twice as much, and have many more internal growth opportunities by working for a talented, successful person. In any job, industry, or company this will be important, but especially at companies farther down on your passion or industry list. It’s likely you won't stay in this position for long, but you don't want to just kill time working for an unproductive or poor leader. This position can be used as a stepping stone to your next career move, so stay away from a boss who no-one respects.

Take Any Damn Job:

Finally, if you have worked the previous steps and have still not found a position, keep applying like mad and take the best available job. Maybe it's the only job available at the time. Don’t despair. As we suggested before, early in your career you may be clueless as to your path or gifts. Or a recession may cause jobs to be scarce in a field you would choose. Just find a job and start working! You will learn what you like, don't like, and you can pay bills or fund your Roth IRA in the meantime.

Companies often hire people with experience, any experience, so any job is better than no job. Even a so-so position might set you on the path for a great second, or third, position. There are numerous job self-help books out there such as Moving the Needle: Get Clear, Get Free and Get Going in Your Career, Business and Life by Joe Sweeney, What Color Is Your Parachute by Richard Bolles, Getting from College to Career: Your Essential Guide to Succeeding in the Real World by Lindsey Pollak, or The Career Chronicles by Michael Gregory, which can be of assistance.

Compensation Negotiation:

Once you go through the interview process and a company likes you, the next step is a written offer. This assumes you are applying for a true career position, not simply a minimum wage job. With a written offer, you might be able to negotiate a few things. The position and/or title could be negotiable. If this is an entry level position, that may be unlikely. Most important is the compensation for the position. I always try to look at the total compensation package before deciding if the offer is a good one or not.

For example, Total Compensation can include: base salary, bonus or commission, benefits like a matching 401(k) plan, vacation or PT time, health and disability benefits and other perks. Other things might include tuition reimbursement, free parking or lunches etc. If the company wants you badly, or this is more than an entry level position, you should be able to negotiate some things. Always remember, “In basketball, all your short shots don’t go in.” Not asking for additional compensation or benefits is the same as expecting all your short shots to go in the hole. Besides, what can asking hurt? One company's base salary might be less, but the hours, free parking, or bonuses offered could make up this difference in a hurry. Ask for the most you can in total compensation—if you are professional with your questions, the worst that can happen is to be told no.

The main rule of compensation negotiation is—He who speaks numbers first usually loses! So, when a company wants to hire you, typically the hiring manager, or HR person, will ask what you want to earn, or what you have been earning? Your response should always be, what is the range of the position? Let me say this again. What is the range of the position? They will either answer your question or try again to get you to name your price. Once you understand the range, always suggest that you should be at the top of the range.

Why? Because you should value yourself, your skills, and the work ethic will allow you to successfully perform the job. They may disagree with your assessment and suggest they can go no higher than X-dollars, but at least you have a starting point. Once a specific offer is made, you should look down with a slight frown on their face (even if you are ecstatic about the offer) and say nothing until the other person speaks first. Seeing your disappointment and knowing they want you at the company, could get you some additional compensation. At the very least, hopefully they might ask what you are thinking? You could then say you were expecting slightly more compensation, bonus or vacation days. Low and behold, you may get more! You might not like this kind of negotiation, but it has proven successful.

Asking these questions and looking down without speaking first could earn you thousands of dollars more to start in a job. If you ask for and receive $1,000-2,000 more to start, or after a promotion, these additional dollars will set the tone of a higher base for the rest of your life. This is like compound interest on your investments, so pay attention! Over the course of your career, these simple negotiation techniques could earn you tens of thousands of dollars more—simply because you knew how to negotiate and ask for what you want!

For example, my spouse was interviewing for a medical sales job when we moved back to the Twin Cities from Washington D.C. Her previous medical and sales background allowed her to get an offer from a small start-up medical laboratory. She wanted the job and they wanted her, so they started negotiating the salary and bonus for the position. I suggested she use the same techniques I mentioned—asking about the salary and bonus potential?

As you might expect, if you have a higher base your bonus potential might be somewhat less and vice versa. As they were negotiating, the owner threw up her hands and said, “I hate negotiations, how about if we give you both the higher base and bonus. My wife was astounded, but hastily agreed. Stories like this don’t happen often, so she was very fortunate. But some negotiation knowledge led to a win-win for both my wife and the owner, as she worked for the organization for over fifteen years. They were both successful and remain friends today. So, ask the questions and don’t be embarrassed.

In fact, Penelope Wang for Money, recently asked several millennials what was the biggest financial mistake they had made to date. Two people, Stephen Valdivia from the University of Florida and Megan Leonhardt of Ohio University both said they didn't negotiate hard enough for higher salaries on their first jobs. They said they regretted not doing a good job on researching their positions or valuing themselves. This cost them significant dollars up front, and perhaps a great deal more over their careers. So be bold, but professional, when compensation negotiation occurs—ultimately it is your career and no one is more responsible for it than you!

Finally, if you are one of the lucky potential new employees who has multiple job offers, then use these negotiating techniques to get the very best offer possible. I would suggest not playing one company against the other for your services, as you will come off looking egotistical and unprofessional. But you should negotiate the best offer you can and lay the offers side by side when making your decision. Remember, the best offer is not always the one that pays the most.

NET WORTH:

These next six Financial Tools in the PyraPuzzle of net worth, budgeting, saving, investing, taxes, and credit rating will form the basis for what I call the Kid$Vest Financial Binder or Financial Strategic Plan (Addendum 1). These factors are extremely important to your financial success. They should either be tracked electronically or on simple sheets of paper, or both. You should monitor them quarterly or annually for best results.

The first section of your Financial Binder, after your Personal Assessment and Master Vendor List, is net worth. A net worth statement shows all your assets, minus your debts/liabilities, with the difference being your net worth or equity. This is how you keep score of your overall success. While your personal net worth will likely be low or negative until you are in your mid-twenties or thirties, watching and adjusting your progress along life’s journey is very smart. I personally have kept an annual net worth page since I was 30 years old. I know, I should have been keeping track sooner, but no one taught me the Kid$Vest philosophy. Over the years, it has been fun watching my family's assets grow, while our debts decreased. We continuously monitor the progress we are making toward our personal financial security, and you should do so as well.

BUDGET (B):

Next in the Financial Tools and Practices section of the PyraPuzzle is budget, save, invest and taxes. Together they form the heart of The Kid$Vest Project and the guts of your Financial Binder. If you understand and apply these tools properly early in your career, it really will be hard to mess up their financially secure life. I personally use simple written forms for each one of these tools, because I am an old guy. However, I also keep electronic files from numerous apps that can be helpful, as the millennial generation is more likely to do. Both are acceptable, just make sure you do something! Some well-known electronic apps include: Mint, PersonalCapital, or PowerWallet etc.

Budgeting is the process that adds up what income you bring in monthly, then subtracts your expenses and taxes from the total. Simply put, cash inflow versus cash outflows. A budget helps you plan how to spend or save your income and can also track your actual spending habits. Utilized properly, this tool can become one of your greatest weapons for financial security. Once a budget is implemented, your goal is to break even or have a positive remainder. Remainders are discretionary items—gifts from the gods that we can put toward emergency expenses, savings, investments, or even vacations.

Paying yourself first is critical for success of the Kid$Vest Model, or in any self-help financial book you might read. Remember, this means you set aside money for savings, emergency funds, and investments as a priority before expenses, needs, and wants. In fact, we highlight this line in red in our budget example, since at least 10-20% of your income should go toward saving and investing. As we said before, if putting away 10-20% of your income isn’t possible, start out by doing 2-3%, or whatever you can spare. Just make sure the dollars you put away are meaningful and that you continue to raise the percentage as your income and needs allow.

Thus, after taxes (which you must pay), you should be building a personal savings and investment plan, as well as initiating your Roth IRA. Remember, these early savings and investments ultimately become your wealth building machine throughout your life, while the Roth IRA or 401(k) become your retirement (age 60-65) “pot of gold.” This is primarily due to the compound interest accumulation we discussed earlier.

Once you are in the workforce, you should immediately begin contributing to your company’s 401K and/or an individual IRA. This should be done in conjunction with your emergency fund and saving goals.

SAVE (S):

If you get an allowance, have a trust fund, or are gainfully employed and receive a monthly income, you must decide where best to allocate your funds. Before you spend a dime of your net income (after taxes), they should save at least 10-20% (or as we said above, as much as you can) of their total income. A portion of these dollars can then go into your emergency fund, a goal account, investments, or into your retirement savings. It all depends on your prioritized needs at the time. Then you can use the remainder for life's expenses—your needs and wants. This simple concept is critical to becoming financially secure now, and as you age.

One trick I was taught by my first boss was to save your first raise and continue doing so throughout your career. For example, let's say your starting salary is $45,000 at your first job. In year two, you get a 2.5% raise and are then earning approximately $46,125. Take that additional $1,125 (less after taxes) and direct deposit the money into your existing saving account. Essentially, you are still living at your first paycheck level. If you can stay one raise behind for life, you will build up a nice windfall in time. This really works well when you get a significant promotion and your salary jumps quickly.

INVEST (I):

Part of what you save monthly should go into investments. This may include 401(k) or IRAs dollars, but once you exceed the companies match (if they offer one), some of your savings should go into an investment account. How these two accounts are separated into their own pools, depends on one’s specific income and expenses. I don't want you putting all your investing dollars into your retirement account because you may need some of these dollars for expenses, debts, real estate, a home, fun, and the stock market. Yes, the stock market!

If you are not participating in the growth of the US economy, it is very difficult for the average American to become wealthy or financially secure. Oh, you could win the lottery, become a successful entrepreneur, or business owner. But many business owners and entrepreneurs don't make it (80%). This isn't often discussed in the media, but it's is true.

Putting all your eggs in one basket can be a smart move at times, but not for your entire lifetime. That is too risky! For example, Bill Gates, Steve Jobs, and Mark Zuckerberg had their personal incomes tied to their companies early in their lives. They took calculated risks and won the game! But not all business owners or entrepreneurs succeed, especially at that impressive level. We all must have fallback careers and investment programs in place.

Of course, IRA’s or 401(k)'s are typically invested in mutual funds or ETF's, but these funds are tied up until retirement and touching them is generally a bad idea. The penalties and taxes for accessing these funds early can be devastating to your future retirement goals.

Read famed TV investment guru Jim Cramer's books on investing, or one of the hundreds of the other financial guru's books (such as Rich Dad Poor Dad by Robert Kiyosaki) out there if they want to learn how to successfully beat the market, understand investment fees, and product minefields. For our purposes, we want to keep things simple so you can experiment later when they have the time and interest to trade at your own discretion.

For the Roth IRA we hope you initiate in your teens, putting this money in a low-cost index fund is totally appropriate. Both investor Warren Buffet and Jack Bogle (Vanguard Group founder) support this idea. The magic of compounding interest and lower fund fees will make your investment returns the best they can be. Jim Cramer recently said, “A 22-year-old with $10,000 invested for 40 years earns about $450,000 for the investor.” Sounds vaguely familiar, doesn't it? And if you practice The Kid$Vest Project techniques and start saving in your teens, then add more 401(k) dollars throughout your life, you can dollar cost average your way to even more significant wealth. For instance, the $450,000 mentioned above can be substantially higher.

TAXES:

For each dollar earned, Uncle Sam will always take a piece of the action. We can all complain about how this money is being spent, but the fact is we all must deduct this from our income during the year, especially if we don’t look good in stripes or want to end up behind bars. Ask actors Wesley Snipes, Willie Nelson, or Nicholas Cage about their past IRS struggles. Always plan for taxes right away and have the proper amount taken out of your paycheck monthly.

Your tax bill will depend on your income and deductions. The more adjusted gross income you earn, the higher your tax bracket will be, and the higher the percentage of your income will go for taxes. In the United States this is called a progressive tax. Capital gains income or dividends must be included in one’s overall income, but they typically have lower tax rates. Also, try to find ways to legally reduce your tax bills by using deductions and credits. Since you typically don’t earn much from summer jobs, we want you to keep most of what you earn. I personally hope we radically change and simplify our tax system, as so many politicians are advocating.

An example of a tax credit some kids can utilize is the savers tax credit. It was designed to help lower-income families contribute to retirement plans. If you qualify, this credit essentially pays you to put money in your retirement account. You can write off the first $2,000 of contributions made to a qualified retirement plan--like your Roth IRA. Whether you can claim the credit depends on your income and filing status. To qualify, you must not be a full-time student or be claimed as a dependent on someone else's tax return. You must also be 18 years of age or older and your adjusted gross income must meet certain levels. Check to see if you qualify.

An accountant can help you with the numbers and tax statements, or you can buy a program like Quicken's TurboTax and do it yourself. Just remember that too many people forget to factor in your tax load during the year and are surprised by the large bill owed on the 15^th of April.

This often prevents you from taking advantage of additional tax saving techniques such as Health Savings Plans (HAS) plans, charity, 401(k) or IRA plans, and business expenses. Your goal should be to give Uncle Sam the exact amount of money he deserves or that you legally owe--and no more.

CREDIT RATING:

The definition of a credit rating is the evaluation or assessment of the creditworthiness of a debtor/borrower. The ratings predict the ability of the borrower to pay back borrowed funds. For individuals, credit ratings are derived from the credit history maintained by credit reporting agencies such as Equifax, Experian, and TransUnion. They typically are used by banks, credit card companies, and credit unions to deem credit worthiness, indicating how much money they will loan you and at what interest rate. The agencies give a credit score or FICO rating of between 300-850, with 850 being the highest score obtainable. FICO comes from the Fair Isaac Corporation, the largest and best-known company which provides software for calculating a person’s credit score. Chart 1 shows a Credit Score Rating Chart.

Why is the credit score number important to you and why should you check it frequently from some of the free credit reporting sites such as CreditKarma, freecreditreport.com or Credit Sesame? First, a good credit rating means you are more likely to get the car, house, or college loan you are requesting. Second and just as important, the better your score, the lower the interest rate a financial institution will charge you. This could mean hundreds or thousands of dollars in interest savings over the course of a car or house loan. For example, say you take out a $20,000, 60-month car loan and they have poor credit rather than good credit. The difference in credit scores could mean as much as $5,000 more in interest, per the Consumer Federation of America's sixth annual credit score survey.

Or consider the lollapalooza of all debt: a home mortgage. Stacy Johnson from Money Talk News, shares this example. “(If you’re) borrowing 200 grand on a 30-year fixed mortgage and show up at the lender’s office with a 620-639 credit score, you’ll pay 4.88 percent. If you make minimum payments, your total interest bill for that mortgage will amount to $181,248 over 30 years. But if you waltz in with a 760 score, you’ll only pay 3.291 percent and your total interest bill over the life of the loan declines to $114,971. That means that over the life of that loan, that lousy score cost you $66,277: Enough to finance your own business, put a kid through a good college, or retire at least a year earlier.”

Finally, a bad credit score could possibly cost you the job you really want. Some employers check credit scores to learn whether you follow through with your obligations. While interest rates are ever changing and the total dollar amounts differ, the percentage spread for those with excellent credit vs. poor credit is substantial. So yes, good credit is vitally important to your financial security.

Finally, Chart 2 shows credit score factors that can negatively affect a credit score. Some of the main ones include:

Running credit card debts up to the maximum
Having too many credit cards
Applying for too many credit cards
Missing payment due dates on credit cards, your house, student loans, medical expenses or tax obligations
Closing unused credit cards could affect your utilization ratio, which accounts for 30% of your credit score

Generally, if you want to keep up a good credit score, you shouldn’t borrow if you don't have income, spend less than you make, and pay your bills on time. You should check your report frequently for discrepancies, and make sure mistakes are disputed. Finally, you should try not to borrow money for things that go down in value--cars, furniture, etc.

ON-LINE APPS / RESOURCES:

While you can put your own personal financial binder together in approximately 10 pages or less per year, there are hundreds of personal BSI packages or investing apps you can utilize for free or little cost. When you are young, the simpler ones might be best. But this is strictly a personal choice, taking into consideration how you manage your life and commitments. Many financial programs can work, so you should pick the one or two that seem to fit your needs best. One can easily make changes as your budgeting, saving, and investing needs evolve and as you gain more experience and insight into your financial needs. KidsVest.org can help you here as well.

Budgeting Apps:

Left to Spend
LearnVest
Mint
MoneyPoint
PowerWallet
Spending Tracker

Investing Companies or Robo Advisor Programs:

Betterment: This firm charges 0.35 percent for accounts between $0 and $10,000 (if you have automatic deposits of $100 or more, $3 a month otherwise); 0.25 percent for accounts between $10,000 and $100,000; and 0.15 percent for accounts holding more than $100,000. There is no minimum deposit or balance and no fees for withdrawals.
Blooom: Users can connect their 401(k) to Blooom and generate an analysis of their investments. They use the image of a flower to show its valuation. A beautiful flower means the investments are favorable in Blooom’s opinion. A wilted flower, not so much. Change recommendations are then made to the portfolio. For $10 a month, Blooom will implement the asset allocation it has recommended and rebalance the account to keep it in line with the plan.
Future Advisor: This firm offers three months of free management but charges a 0.5 percent annual fee. It has no minimum investment requirement. (Works with Fidelity & Ameritrade)
LearnVest: LearnVest gives you a financial plan, a real person to talk to, and tools to make better financial decisions. They charge a one-time setup fee of $299 plus $19 a month for ongoing support. They are a subsidiary of The Northwestern Mutual Life Insurance Company.
Motif Investing: More closely aligned to a brokerage firm, Motif enables users to create a basket (called a motif) of stocks and ETFs. Once built, an investor can buy a motif of up to 30 stocks and ETFs for $9.95. Investors can create their own motifs, invest in motifs built by Motif Investing, or invest in motifs built by other investors on the platform. (This is effective for active traders)
Personal Capital: Combines sophisticated investing tools with a real live investment advisor. Personal Capital has become known for its free financial software to track your investments. Clients use Personal Capital’s software to track their investments, asset allocation and fees. The cost for its services starts at 0.89% of assets under management.
WealthFront: A $500 minimum deposit is required. There is no advisory fee for accounts less than $10,000, but this firm charges 0.25 percent on any amount more than $10,000. There is an exchange-traded funds fee of 0.12 percent.
WiseBanyan: No annual fee and no minimum balance is required. The average expense ratio for its accounts is 0.12 percent.

Note: Robo investing is a very young industry with many entrepreneurial players. Most are funded by venture capitalists and do not make money. There could be significant changes to individual firms regarding their investment style along with frequent mergers and acquisitions in the Robo investing area, so be cautious.

FINANCIAL PLANNING:

You will want to plan for a host of changes in the future. You may change careers, get married, have kids or simply change as you grow older. At times, we will all need the help of professionals who can guide us through the complexities of wills and trusts, investment assistance, and inheritance assistance, etc. This is especially true if we are not skilled or eager to learn about these areas. There are numerous companies and financial planning professionals who can be of assistance in your local communities.

However, keep learning about your finances so you can ask the right questions of these individuals, especially regarding fees and costs. Turning your financial life over to someone without paying attention to the expenses involved is very risky, and likely very costly. You don’t want to do this!

COMPOUND INTEREST: Rule of 72

We have discussed and shared examples of compound interest throughout the book numerous times. It is the tool that allows us to become financial secure and must be understood. As we previously noted, Albert Einstein suggested that compound interest is one of man’s greatest inventions. He is credited with discovering the mathematical equation—the “Rule of 72.”

This rule is a simplified way to determine how long an investment will take to double, given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors can get a rough estimate of how many years it will take for the initial investment to duplicate itself. The formula for the rule is: Years to double = 72 / Interest Rate.

For example, assuming a 10% interest rate it will take approximately 7.2 years for your money to double. So, if you have $10,000 saved by age 20 you will have nearly $1,000,000 saved by age 65, even if you add no additional dollars to your retirement portfolio. However, if you wait till age 30, your $10,000 initial investment will total approximately $320,000 by age 65. That additional 10 years of compounding cost you roughly $600,000. Note Chart 2 below.

I am still a believer that a savvy investor can earn the historical average of 10% on your money, but many financial experts suggest 8% is a more appropriate interest rate. So, by using 8%, it would take nine years for your money to double. Throw in some inflation and your overall numbers will be significantly less. Google.com and KidsVest.org offer several financial calculators you can utilize to learn and play with your specific numbers.

In summary, the Rule of 72 shows why youth have such a terrific advantage when it comes to wealth generation. Or, as the Rolling Stones sing, “Time, time, time is my side…Yes it is.” By educating ourselves about the importance of saving and investing early on, or so says Robert Hauver of the Double Dividend Stock Alert newsletter, “we can put Einstein’s favorite invention to work and gain some financial security sooner.”

ANGEL INVESTMENT:

If you understand and apply the budgeting, saving, and investment techniques The Kid$Vest Model affords, then your knowledge, experience, and expertise will typically lead you to investment or entrepreneurial opportunities throughout your life. They can provide terrific ways to increase your wealth, but they do carry more risk. Some opportunities could include buying into a business, starting a company, becoming an angel investor, or simply purchasing stocks and real estate.

In my own career, I bought into a data-based management and direct mail company and started two executive search firms. Many friends of mine invested in non-traditional opportunities at the right moment and have done very well financially. Not having the cash or savings on hand to take advantage of these calculated opportunities means you can’t play in these wealth enhancement games. But remember, these investments should be funded with discretionary funds that you can afford to lose. As a good friend of mine frequently says, “never bet the farm” on any of these opportunities. Both angel investment and business ownership are discussed below.

As you achieve success during your career, you will likely rub shoulders with entrepreneurs who may be creating the next hula hoop craze, pizza chain, or Facebook empire. With the leadership/management expertise and/or financial means, you could get involved in these companies as an angel investor. Being an angel investor means lending money to a startup or entrepreneur in the early stages of a company, before it becomes successful and/or they need huge dollars or go public. How much fun would it be for you to help new entrepreneurs succeed and share in the wealth of their organization’s growth?

But remember, both Angel Investing and Business ownership (the next PyraPuzzle piece) are risky at best. They require skill, talent, capital, a long-term horizon, and some luck. A recent article in the Minneapolis Star by long-time business writer Lee Schafer discussed angel investing in his column entitled, A Word to Wise Angel Investors: It Takes Many At-bats Before You Hit a Home Run. His article previews successful CEO Darren Cotter, who continues to invest in startup companies and wrote the LinkedIn essay “What I Have Learned in 3 Years of Angel Investing.” Mr. Cotter’s suggests that:

You need hands-on experience to become a savvy deal maker—multiple deals
You should keep one-half of your capital on hand for additional rounds of financing for those companies that show promise
You must know “the basic math” of angel investing

Cotter’s “the basic math” suggests that seven of ten investments fail quickly, one of four give you back your initial capital and some return, but only one in twenty might get you a home run—returning at least ten times your investment. I don’t know if these numbers are exactly accurate, but they are like what other angel investors have shared.

Also, before you think you know better or are more skilled at picking the right companies than Mr. Cotter, remember he is a successful CEO/entrepreneur and angel Investor. There are numerous horror stories of highly paid professional athletes who have squandered millions of their contract dollars by trying to live richer than they were, or by making lousy investment choices. Mike Tyson, Allen Iverson, Sheryl Swoopes, Dorothy Hamill, Lawrence Taylor, Scottie Pippen, and Michael Vick, are a few famous people who have had money misfortunes.

ENTREPRENEUR / BUSINESS OWNER:

Those who buy into, inherit, or start businesses can have the greatest impact on our society. Business owners create jobs, help grow/build our economy and personally have a chance at solid wealth building and satisfying careers. Most of American millionaires became rich because they started, or built, an existing business. Liz Weston, a financial writer for MSN Money, said “Create the right business, the upside is all yours. The self-employed not only earn more (their household median income was $75,700 in 2007, compared with $56,600 for employees), but they accumulate dramatically more. The median household net worth of entrepreneurs was $388,700, compared with $93,200 for households whose head worked for somebody else.” Remember however, that starting a business is not a guarantee of financial success.

RETIREMENT:

Not everyone wants to retire when they reach 65 years old. Some individuals become successful sooner and leave the workforce early, while some workers need, or want, to work well into their seventies and eighties. Terrific! However, no one wants to work at a job they hate merely for a paycheck, at any age. Following The Kid$Vest Project principles will allow you to have future choices. You can continue what you are doing, give back philanthropically, or spend more time on your favorite hobby. You have earned the right to pursue any of these options during your retirement years, since you wisely spent your life applying the DreamLife principles.

GIVING / PHILANTHROPY:

There are terrific examples of successful people who are now giving back to society with dollars that are impacting millions of lives. Bill and Melinda Gates, Warren Buffet, Mark, and Pricilla Zuckerberg immediately come to mind as individuals who are shaping the future of healthcare and education. But there are people all over the country who are giving substantial sums of money to terrific causes or educational systems to foster learning, ease suffering, and provide affordable housing (Habitat for Humanity).

Just because you can’t offer income to organizations you support doesn’t mean you can’t contribute. There are millions of Americans who are offering their most precious resource—their time. I personally was involved with The Raptor Center in Minneapolis for seven years, serving four of them as the Board Chair. I currently serve as the Chair of the Supervisory Committee for a large credit union. Both opportunities have been great experiences for me. I have received much more than I've given while serving these quality organizations. Each of us should find our own niche and passion for continued growth and giving back.

In conclusion, learning and mastering the DreamLife PyraPuzzle skills in our youth, and throughout one’s career, will ultimately lead you to financial success. There are specific books and on-line articles printed daily and weekly about the various sections of the PyraPuzzle. Refer to them or visit the KidsVest.org website for more detailed information. When we can interest more states and school systems in advancing the DreamLife principles in our K-12 grades, America will be on its way to decreasing our wealth gap and growing a vibrant middle-class!

“All our dreams can come true—if we have the courage to pursue them.” Walt Disney