Poverty in America is by and large a curable problem, caused largely by an atrocious lack of basic financial education and discipline. That destructive cycle can and should be broken.
Think about your own financial situation for a minute. Unless you're unemployed or have serious medical conditions, how much of your income goes toward paying for things you absolutely need just to stay alive and in basic shelter? How much goes to things that make your life a little nicer or more convenient? And how much goes to servicing debt of some sort?
It's all about choices
If push really came to shove, most of us could cut back on some of our expenses, put in a few more hours to earn more cash, and/or move somewhere with lower costs of living. Even debt -- aside from debts caused by things like expensive medical conditions or legal judgments stemming from genuine accidents -- largely originates from the choices we make. It's not necessarily easy and the options aren't always pleasant, but they are choices, nonetheless.
Unfortunately, far too many people don't even realize how powerful and long-ranging their financial choices really are. Things like how a $20 pizza, financed on a credit card, might really wind up costing $100. Or how $20 a day, prudently invested rather than spent on pizza in the first place, can help you become a millionaire over the course of a career.
Break the cycle
When given full knowledge of the consequences of their decisions, most people will do what seems to be right for themselves and their families. If people don't understand how money really works, though, they're much more likely to wind up paying $100 for their pizza or giving up their potential million-dollar retirement fund. The toughest part is catching people early enough – before they're trapped by debt or run out of the time that it takes to let their money compound.
That's what makes this year's Foolanthropy partner, Thurgood Marshall Academy, so very critical. A D.C. charter school that educates some of the most at-risk students in the country, Thurgood Marshall teaches its pupils key life skills as well as traditional academics. The partnership with Foolanthropy brings the school Foolish financial training as well as the cash donations provided through the charity drive.
By teaching those students to be smart with money while they're young, Foolanthropy hopes to break the cycle of poverty that otherwise threatens to ensnare yet another generation. After all, you don't need to be rich to need to know how to manage money, and thanks to Dividend Reinvestment Plans (DRIPs), you don't even need a lot of money to start investing.
A little at a time adds up
DRIPs allow people of even modest means to both become investors in the first place and to make occasional additional investments as their cash flows allow. Some, like the ones in the table below, even allow people to make their ongoing investments and reinvest their dividends with no fees at all.
|
Company
|
Current Yield
|
Recent Price
|
Minimum to Open DRIP
|
Minimum Optional DRIP contribution
|
More Information
|
| Duke Energy (NYSE: DUK ) |
5.6% |
$17.54 |
$250 or 1 share of stock |
$50 |
Click Here |
| 3M (NYSE: MMM ) |
2.5% |
$85.30 |
1 share of stock |
$10 |
Click Here |
| Ashland (NYSE: ASH ) |
1.2% |
$51.69 |
$500 or 1 share of stock |
$25 |
Click Here |
| Dr. Pepper Snapple (NYSE: DPS ) |
2.7% |
$37.04 |
$250 or 1 share of stock |
$50 |
Click Here |
| ExxonMobil (NYSE: XOM ) |
2.4% |
$72.36 |
$250 or 1 share of stock |
$50 |
Click Here |
| Hasbro (NYSE: HAS ) |
2% |
$48.39 |
$25 or 1 share of stock |
$25 |
Click Here |
| Union Pacific (NYSE: UNP ) |
1.6% |
$92.18 |
$250 or 1 share of stock |
$50 |
Click Here |
DRIPs are a fantastic tool for nearly anyone to use to join the ranks of the investor class. To even get that relatively small amount of capital to invest, though, people first have to get the rest of their financial houses in order. Their debts need to be manageable. They need to have positive cash flows that allow them to save a buck or two a day in order to make those contributions.
Above all else, they need to understand the basics of how money works so that they are willing and able to make the tough choices needed to become financially secure. It's not easy, especially for folks starting out in a deep hole. But if Foolanthropy can catch these students early and help them establish good money habits while they're young, then they can break the bonds of their poverty. And that's the first step to eliminating the chains of poverty throughout the country.
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