Financial Kindergarten to 4th Grade – Find Out Your Grade

What grade level are you in financial knowledge and financial literacy?

This blog will give you some insights on how I invested my money at different grade levels.

The difference between Kindergarten and 4th grade is $67,221.61!

Financial Kindergarten

In Kindergarten, I was just learning about investing. I wanted to be conservative and was scared of another stock market crash.

I met an insurance agent/financial advisor who was also my friend and mentor, and who is paid on commission.

He showed me Term life, which I got to protect my family.

Then he showed me Whole Life Insurance, which looked amazing. I put in $100/mo or so, it had a face value of life insurance of $100,000 and it accumulated cash value.

So when I was at a certain age it was guaranteed to be worth a certain amount, and by the time I was retiring it was worth well over $100,000 in cash value.

The catch, the first year the cash value is $11 because the entire premium goes to the insurance company and my agent’s commission and it takes 11 years for the cash value to equal the amount of money I put in.

Benefit, if I keep up my $100/month, in 20 years the $24,000 in premiums that I put in is worth $32,425.06 in cash value (compounded at 3% average a year).

Financial 1st Grade

In Financial 1st Grade, I spoke to financial advisors at the bank I worked at, and they pointed out that whole life insurance is very costly.

You pay the agent commissions, you pay the insurance company for the insurance (which is a lot cheaper if you just get term life insurance), and you pay for the guaranteed investment return.

He actually got angry about the whole thing, felt what insurance agents do when they recommend whole life insurance is completely unethical.

So he said just investing in the stock market will get you a better return minus all the fees.

Afraid the stock market will crash?

Just invest in index funds, and you’ll make the average over time.

So we got our advisor to put other money in index funds which average 6%. He charges 1% as a fee, so we make 5%.

So the $100/mo invested for 20 years ($24,000 total) grows to $39,944.47.

Financial 2nd & 3rd Grade

So in 2nd and 3rd grade I read 10 Rules for Financial Success by Burton Malkiel and learn more about index funds and brokerage accounts and that a lot of money is lost in paying advisor fees!

So I drop the advisor, and I invest in index funds myself, and make 6% instead of 5%.

So the $100/mo invested for 20 years ($24,000 total) grows to $44,463.42.

Financial 4th Grade

In Financial 4th Grade I read Tony Robbins book Money Master The Game and decide to do a Portfolio called the All Seasons.

It averages 9.72%, so the $100/mo invested for 20 years ($24,000 total) grows to $67,221.61.

Conclusion

I’m just sharing my own personal experiences to give you an idea of the cost of commissions, fees and lack of knowledge or confidence in investing caused me.

There are no guarantees in investing, and I recommend you educate yourself in different options.

I also recommend you do further research.

I notice in my experience the more I learn, the more money I keep and make.