Charles Shiflett Column February 13, 2005

Fund Your Retirement With Canned Tuna

We've all watched as a teenager manning a cash register struggled to make change. Your thoughts
may have turned to the poor quality of education in our nation and how we are creating a generation of
know-nothings.

If you hand a kid a ten-dollar bill for a purchase of $8.50, he'll probably come back with $1.50 as
correct change. But what if the total purchase price is $8.58 and you give him a ten-dollar bill and
three pennies? How many agonizing seconds or even minutes elapse before Johnny Pimpleface can
correctly calculate in his head that you are to receive $1.45? Fortunately for Johnny, the register
probably calculated it for him. All he has to do is correctly count the change.

I dare say that most folks who graduated high school prior to 1970 would nail the correct change
without hesitation and you'd be on your way. But starting in the early 1970's, something funny
happened on the way to graduation. Schools stopped teaching real world math in favor of theory and
many students just couldn't relate.

Now let's fast forward a few years and watch as test scores continued to drop. Educators in their panic
and haste decided that kids weren't spending enough time on the core subjects. Never mind that
earlier generations had mastered the basics with plenty of time for electives and ancillary classes; the
new solution was to cut back on everything to give additional classroom hours to reading, writing,
arithmetic, and Spanish… but that's a topic for another day.

PE? Outta here… Personal Finance? No time… Home Economics… Who cooks or sews any more?
Basic Law? Hey, if you've been wronged, hire a lawyer!

We now have a generation of young adults who are overweight, don't understand basic nutrition, can't
cook, can't balance a checkbook, and don't understand the most important law of modern financial
management… compounding. What a country! Seriously though, a significant portion of the population
now has no concept of good financial management.

While the two most important factors in buying and financing a new car are drive-out price and interest
rate, most folks have no idea if they are being gouged… they are simply buying a payment. Ms.
Johnson, can you swing $375 a month? Great! Here are your keys, just sign on the dotted line.

Never mind she could have purchased the car for $1,200 less and could have gotten an interest rate
around 6% instead of 15%; she's just thrilled to be tooling down the road in her quickly depreciating
purchase.

So she could have saved a few bucks if she played hardball to make a good deal, but naw, it's too
much trouble. Well, let's use our friend “compounding” to see what she could have done with that
extra $1,200. We won't even factor in the interest she could have saved. Let's say Ms. Johnson is 25
and plans to retire at age 65. She takes this $1,200 and invests it in mutual fund inside a Roth IRA
and leaves it alone. Let's assume the fund returns an average 8% over her lifetime.

So how much money would Ms. Johnson have at age 65 even if she never puts another dime into the
Roth? $28,155. And what if she left it until age 75? Try $60,785. Not taking a couple of extra hours to
ensure getting a better deal on that car purchase has potentially cost her many thousands.

So here's a test for your teenagers or the grocery shopper in your family: You have a 50 cents off
coupon for any size Brand X dishwasher detergent and Smith's Grocery doubles coupons. There are
two sizes of Brand X… a 32-ounce box for $2.29 and a 64-ounce box for $3.99. Which one is the
better deal?

Before the coupon, the small box is 7.15 cents per ounce, while the large box is 6.23 cents per ounce.
Many times buying larger sizes can be more economical. We know the coupon will be doubled to
$1.00 regardless of which size we buy. So after the coupon, the small size is 4.03 cents per ounce
and the large size is 4.67 cents per ounce. Surprise! If you just automatically assumed that larger is
cheaper, you would have overpaid.

By using coupons, browsing the sales papers, and buying in bulk, I save significant sums of money.
As an example, our family consumes about six cans of tuna each week. Normally, the brand we buy
is priced around 69 cents per can. Recently, I found the tuna at 49 cents per can, buy one get one
free. Now this stuff will keep for a couple years, so I purchased ten cases of forty-eight cans each.
Yep, I bought 480 cans! We would have purchased and consumed that much in just over a year's time
anyway.

On 480 cans I saved $213.60 over regular price! With a little real world education in our school
systems, maybe our children could learn to fund their retirements with canned tuna. All hail Clark
Howard!