Important Document Retention - What to Shred and What to Keep

The yearly "file purge" is a sensitive (and somewhat scary) issue for many because there could be consequences if you toss something that you should have kept.  However, document shredding is important to prevent identity theft and safely dispose of confidential information.  If you are not sure what to shred or retain, check with your accountant or attorney before pitching any important legal, business, or financial paperwork. Here are 22 types of general-purpose records retention guidelines.  To Shred or Not To Shred: How Long To Hold On To 22 Personal Documents

How to Help Your Kids Become Financially Independent and Millionaires

Are kids today financially educated and prepared? Well, the Jump$tart Coalition administered a basic financial literacy test to high school seniors, and less than half of the students correctly answered the questions. Over the years, my experience with young adults confirms this as well. Sadly, many parents take the approach, "well they just have to figure it out or learn the hard way like we did."

Would any of us give our kids the keys to the car and say, here you go, give it a whirl without any driver's education or training? Or would you let your kids mow the grass the first time without any instruction and wearing sandals? The answer to both questions is NO! However, due to the demands of life or not knowing how to broach the subject, we allow our kids to take the same kinds of risk with their personal finances.

Regarding this, a 2009 Capital One survey discovered that 50% of teens wished they knew more about personal finances. Whether you have never stepped foot in a bank or you are actively saving and investing for your future, all it takes is a little effort and a lot of patience to become confident in your financial decisions.

One awesome thing that you can teach your teen is how take advantage of compound interest. Just check out this story of Ben and Arthur to understand the power of compound interest.

Ben and Arthur were friends who grew up together and started thinking about their future. At age 19, Ben decided to invest $2,000 every year for eight years. He picked investment funds that averaged a 12% average annual return. Then, at age 26, Ben stopped putting money into his investments. So he put a total of $16,000 into his investment funds.

Now Arthur didn’t start investing until age 27. Just like Ben, he put $2,000 into his investment funds every year until he turned 65. He got the same 12% return as Ben, but he invested 23 more years than Ben did. So Arthur invested a total of $78,000 over 39 years.

Please note, a 12% average annual return is just used for illustrative purposes.  In my opinion, this is overly optimistic for most investors and is not realistic for older, more conservative or income-oriented investors. Remember, it's just an educational story.

When both Ben and Arthur turned 65, they decided to compare their investment accounts. Who do you think had more? Ben, with his total of $16,000 invested over eight years, or Arthur, who invested $78,000 over 39 years?

Investment Chart

Believe it or not, Ben came out ahead … $700,000 ahead! Arthur had a total of $1,532,166, while Ben had a total of $2,288,996. How did he do it? Starting early is the key. He put in less money but started eight years earlier. That’s compound interest for you! It turns $16,000 into almost $2.3 million! Since Ben invested earlier, the interest kicked in sooner.

The trick is to start as soon as possible. A survey by Charles Schwab found that 24% of teens believe that since they are young, saving money isn’t important. Looks like we just blew that theory out of the water! That same survey also discovered that only 22% of teens say they know how to invest money to make it grow.

Saving for retirement is just like baseball, which is a welcome sight in Kansas City as we embrace our Royals. That being said, if we don't give our kids some guidance, then they'll never step into the batter's box or at best continually strike out. Giving our kids some guidance, like the above example, may be the motivation they need to ask more questions and seek more knowledge in the realm of personal finances. Honestly, they may not hit financial grand slams, but we at least equip them to get on base!

Quotes    

"Isn't it appropriate that the month of the tax begins with April Fool's Day and ends with cries of "May Day!"?"

                   Unknown

Quotes selected by the IAG staff

"The greatest gifts you can give your children are the roots of responsibility and the wings of independence."

                    Denis Waitley

"The secret to getting ahead is getting started."

                    Mark Twain

 

Tony Moeller, CPA

The information listed in this commentary is a compilation of various publicly available sources and is for informational purposes only. It is not a recommendation or solicitation of any particular investment or strategy. A risk of loss is involved with investments in the stock and bond markets.

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