ROSWELL, Ga. — Most Americans are woefully underprepared when it comes to financial literacy, according to Robert Balentine, chairman of wealth management adviser company Balentine.
When presented with a basic financial literacy quiz, two-thirds of Americans failed, Balentine said.
“We live in a financially illiterate society,” he added. “Is it any wonder that half of our population has less than $10,000 in savings in the bank for retirement? That we’re all feeling financially stressed?”
Speaking to dozens of Roswell Rotary Club members April 4 in Roswell Area Park, Balentine identified three important areas for people to consider when it comes to their financial journey: financial plan development; why investment is more about managing risk instead of managing reward; and the legacy people wish to leave behind.
One of the most important concepts to understand, Balentine said, is that investment is not about beating the market, but allowing compound interest to work its magic. And, if you don’t know your goals, it’s hard to achieve them.
Balentine added that the earlier someone starts saving money for retirement, for example, the more compound interest will grow. He pointed to the Rule of 72 for an easy way to predict how much someone can earn through investment.
“The Rule of 72 tells you at what rate you have to invest in order for the money to double,” Balentine said. “If you take the interest rate of your money and divide it by 72, it tells you how many years it’ll take to double.”
So, if someone invests at 10 percent, it means that it will take about 7.2 years for it to double.
The best way for people to keep earning money through investment is to keep the ball in the game, Balentine said.
“Investing is a loser’s game,” he said. “Who wins is based on who makes the least amount of mistakes… It’s not about finding the one company, the unicorn company, that will make you rich. It’s about letting compound interest work its magic.”
He said people shouldn’t waste time buying and selling individual stocks, rather they should consider investing in index funds. He also recommended avoiding the media, which can often become obsessed with following every detail, every up and down, in the market.
All of these tips can help people create a lasting legacy and purpose.
“At the end of the day, it’s not just about the money,” Balentine said. “It’s about what you want to do, where you want to go… Wealth is not all about the money. It’s about what it can do. It’s about the children and grandchildren. It’s about wanting things to be better for the next generation.”
Balentine encouraged everyone to mentor their children and students about money as soon as possible.
For more information, visit balentine.com.