Let's Save America Dream Round-Up

For the last 3 summers, I've had the privilege of speaking to kids at summer camp (ages 6-10) about the power of compound interest. One of my dreams is to eliminate financial illiteracy in this country and I can't think of a better place to start than children.

After over 20 years in the financial planning industry, I find it absolutely amazing that more people do not understand how simple it is to create financial abundance in the US. It's a mystery to me why our current educational system doesn't teach children how to save and invest. Instead, our kids are constantly bombarded with advertisements and role models that encourage them to spend and incur debt.

Wouldn't it be great to start teaching kids about money when they're in kindergarten, and continue the lessons through the 12th grade? What if we made it a requirement, as a high school senior project, for each student to outline a financial plan for his or her life? What if we taught all students how to recreate their lifetime income, for their use in retirement, so they wouldn't make the mistake of relying on Social Security? What if everyone understood that if you start saving at age 25, you need to save only 4% of your earnings to replace your lifetime income?

OK, I'll get off my soapbox. Let's get back to camp! Here's the conversation I had with the kids.

Q: "How many of you have ever planted a seed?"
A: (All hands went up.)

Q: "What did you grow?"
A: (Carrots, corn, sunflowers, radishes, trees, etc.)

Q: "What happens if you don't plant a seed?"
A: You don't get anything. (Kids are smart! They looked at me like I was an idiot for even asking such a stupid question.)

Q: "If your parents had planted a pine tree when you were born, how tall would it be now?"
A: (Much discussion) 6-10 ft.

Q: "If your grandparents had planted a pine tree when your Mom and Dad were born, how tall would it be now?"
A: (More discussion) 40-50 ft.

Q: "How tall would the pine tree be now if it was planted when your grandparents were born?"
A: (More discussion) 200 ft.

Q: "Now, what happens if you don't plant a tree at all?"
A: (In unison...) YOU GET NOTHING!!!

Q: "What would you have if you planted a tree every year?"
A: A FOREST!

I then explained to the children that I help people grow money. One little girl piped up, "Oh, you grow money trees". (Yes, I help people grow money trees.)
Q: "What happens if you 'plant' money every year?"
A: You'll be rich.

Q: "What happens if you don't 'plant' money?"
A: You'll be poor.

Ten simple questions that explain the power of compound interest. The campers got it right off the bat. If you don't plant any money, you'll be poor. If you plant just a little money every year, you will be rich. You will have a forest of money trees for yourself and for your family.

Brad Dugdale
Dream Round-Up
Founder

OXYMORON: "A combination of contradictory or incongruous words". Some of my favorites are "jumbo shrimp", "original copy" and now, "Social Security Trust Fund".
TRUST: "...in which confidence is placed".
FUND: "money on deposit on which checks can be drawn".

That's the problem with Social Security - the so-called Trust Fund is empty! It exists only to accept the contributions of baby boomers. Barry Andersen, Deputy Director of the Congressional Budget Office said recently,
"...Even calling it a Trust Fund can be misleading and confusing to retirees, members of Congress and the media alike. The Trust Fund holds not money but IOUs from the government to itself. No matter how healthy the Trust Fund is claimed to be, the economy must generate the cash needed to pay the IOUs to fund the claims of future beneficiaries."

Trouble is, the fund is short by $25 trillion. Thus far, the solution has been to raise taxes, reduce benefits, or increase the retirement age. The dirty little secret is that the government has no legal obligation to honor its promises. The Supreme Court has ruled twice, in Nester v. Flemming and Helvering v. Davis, that we have no legal, contractual or property right to Social Security benefits. Politicans determine how much we'll receive in retirement benefits. Congress can change or reduce those benefits any time. It used to be that US corporations could put IOUs in their pension funds. Then Congress passed a law forcing them to fully fund their retirement benefits. How ironic! The U.S. government doesn't apply this same law to itself.

There are a number of possible solutions, which I'll put into a future newsletter if there's enough interest. But here's the bottom line: PLANT YOUR OWN MONEY TREE, and teach your children to do the same. Be independent of this so-called social "security" fund of "trust". That way, you and your family won't be left out in the cold.

~
Bradley E. Dugdale, Jr., is a Senior Vice President and Financial Consultant at D. A. Davidson & Co.
He co-authored Let's Save America! 9 Lessons to Financial Success.
He can be reached at bdugdale@dadco.com.