Why Learn About Money?

"I mean really, what is the point? I don't have any to start with, and what I do have has to go on bills and rent and food, not to mention the the kid's school meals, and the after school care... which means I am also far to busy to try and fit anything else in, and besides, something will come along soon, and then I really won't need to worry about money again, so for now I'll just keep doing what I am doing, and hope things change eventually..."

Chances are that conversation has gone through your head at least once before. If you are anything like me, then it has been there many, many times before. What I found, however, was that I was never going to really break out of my financial situation (which was not good), until I actually tackled money head on. I suspect you will find the same thing to be true.

My husband and I had an interesting experience a couple of weeks ago when we went into the bank to set up a college account for our new son. All it involves is putting $100 a month into a bank run mutual fund to give him a little cushion of his own when he hits college. We had done the same thing for our daughter six years ago, and had watched the account grow slowly over that time.

Something funny happened this time, however. as we looked at the actual numbers for the education account we were looking at. We realized that the growth rate was fairly feeble, if not downright pathetic - a measly 8% annually, during a time when the stock market as a whole had been going crazy. But, even assuming that the market had been growing at its average rate (11%), the fund was still grossly underperforming.

To put real numbers on it, in order to demonstrate how big an impact his can have over the long term, let us take two examples. In each case, the starting amount invested will be $100, and will be added to at the rate of $100 per month. In the first, however, we will use the bank's interest rate of 8%, and in the second we will use the stock market average of 11%.

In the first (ie, the actual) situation, the money we had invested for our daughter had grown to $9,666, from a base amount of $7,200. In the second situation, that same principle amount had become $10,727. Now, that is only $1,000 difference over six years - nothing great, to be sure. But still, by growing at an increased rate, that adds up to an 11% difference between the two results. If we extend that over the 18 years we will be paying into that fund (assuming our daughter will go to Oxford at the age of 18), then the difference becomes significant: $67,782 vs $48,935. So, with two children going into college, we would be down $40,000 just because we didn't know any better. I don't know about you, but I can think of lots of things I could put that $40K towards.

Anyway, the point is that a little financial education can make a big difference, so the litany of excuses we all come up with to avoid talking about money is costing us dearly in the long run. So stop procrastinating. Buy a book. Take a coaching course. Do something to take control of you finances now, because every day you wait is costing you more than you know.

Miata Edoga is a working actor, as well as being President & Founder of Abundance Bound. Inc, the financial education company for actors & artists. Her vision is to create a community of artists able to pursue their creative goals free from the crushing weight of financial stress.

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