Congratulations, class of 2001! After years of lectures, classes, studying, and exams, your education is... well, not yet complete.

That's right. Despite all your efforts, most of you are simply not up to speed in one critical area: personal finance. According to the Jump$tart Coalition for Personal Financial Literacy, last year the average high school senior answered barely 52% of the questions on Jump$tart's financial literacy test correctly, based on 723 12th-graders who took the test.

Yet this is an area where you must have a grasp of the basics. Maybe you'll never use one-third of what you learned in school -- except for fractions, of course -- but personal finance is a critical, real-world skill.

As a result, you should educate yourself. This article can serve as a first step towards that goal, and in honor of Cliff Hillegass, the founder of Cliffs Notes, who passed away two weeks ago and whose death you've no doubt mourned, we'll just touch on the key points. For a comprehensive source of basic personal finance information, check out The Motley Fool Money Guide, which, by the way, also makes an excellent graduation gift.

Perhaps you feel "personal finance" sounds boring. OK, let's put it this way: Who wants to be a millionaire? No, this is not some cheap rip-off of Regis Philbin. If you are seriously interested in having a million bucks by retirement, you should begin your personal finance education with a few key concepts.

Take advantage of your youth
To begin with, take advantage of something that you all have an equal amount of: time. You don't need much money to start investing in the stock market, if you regularly add more and let it grow over decades.

Time is the most critical element in turning even modest savings into significant wealth. You've probably heard about the roller-coaster the market has been through recently, but don't let that discourage you. In fact, be happy that you missed the downturn.

Let's look at a simple example. If you were to save $2,000 per year (only $167 each month), and earn the market's average annual return of 11%, and begin at age 25 (giving you a few more years to not worry about this stuff), how much do you think you'd have forty years later, at retirement? How does $1.2 million sound?

It may take a while to get there -- after ten years, you'd have only about $37,000 -- but $1.2 million is what $2,000 per year, invested for 40 years, turns into if you achieve the market's average annual return of 11%. Not too shabby. 

Now, let's assume you don't start saving until the age of 45. You've lived a care-free life, but you're behind on your retirement savings. As a result, you sock away twice as much as you would have at the age of 25 -- $4,000 per year -- and you continue for twenty years, until retirement at 65. What do you end up with in that case? A smidgen over $285,000.

In each case, you've invested $80,000, yet doing so for twice as long produced four times as much in savings. And in case you're wondering, as a 45-year old you'd have to save and invest $16,000 a year to come close to $1.2 million twenty years later.

Clearly, starting early, even with small amounts, can make a huge difference to your subsequent financial health.

Avoid credit card debt
The example above demonstrates the power of compounding. As your investments earn a return, that return is then reinvested to produce additional earnings, which are then also reinvested, and so on. That's how $80,000 can turn into $1.2 million over 40 years. 

However, keep in mind that compound interest works both ways. In fact, there's an old saying that those who understand compound interest are destined to earn it, while those who don't are destined to pay it.

Today, many people don't understand the effect of compound interest, and we call them credit card debtors. In fact, plenty of your fellow graduates are already in deep. A recent issue of BusinessWeek reports that the average college student's credit card balance has grown dramatically in recent years, to $2,748. One in ten college graduates owes more than $7,000, while almost a third of you have four or more credit cards.

Which raises one major question: Why? Why start your adult life in such a hole? Instead of going out into the "real world" with a blank slate, those with credit card debt are starting with a handicap.

Always save
While $167 per month, or $2,000 a year, may not sound like a lot, you'll find that it can be hard to regularly save money. Yet if you can make it a habit, you'll be well on your way to millionaire status.

One of the best ways to save is through a company retirement plan that provides matching funds, such as a 401(k). Anytime you work for an employer that matches some portion of your retirement plan contribution, that means free money. Take advantage of it.

If you can, you should save outside your employer's retirement plan as well. Check out Roth IRAs, which you can set up at practically any bank or brokerage, and which enable you to save and invest up to $2,000 per year and withdraw the money tax-free at retirement. If you don't have a retirement plan where you work, the Roth IRA is an excellent alternative.

Keep your costs low: do it yourself
When it comes to managing your money, there are plenty of professionals who will be happy to do it for you. And the day may come when you'll want to consider that option.

However, when you are just starting out and have only a modest amount of savings, there's little reason for you to go through the rigmarole of getting and paying for professional advice. One of your goals should be to keep your investment expenses to a minimum. Unfortunately, most full-service brokers and mutual funds that you'll see lavishly advertised on TV and in personal finance magazines will work against that goal.

Instead, your best bets for low-cost investing are an online discount brokerage account and a low-fee index fund. These tools are a one-two punch against the excessive fees and expenses charged by many financial professionals.

As its name implies, an index fund is simply a mutual fund that tracks a market index, such as the S&P 500. While many managed mutual funds charge expense ratios of 1.5% or higher, meaning you pay the fund 1.5% of your assets every year, the leading index funds charge 0.2% or less, enabling you to keep more of your own money.

What's more, most of these managed funds don't provide a better return than the index fund. In fact, fully three-quarters of managed mutual funds do worse than the market's average, in large part because of the high fees they charge. Index funds ensure that you earn the market's average return, and average can be a great thing in the stock market. For more information on mutual funds, check out our Mutual Fund area, or our Money Guide.

Keep learning
If you start early, avoid credit card debt, save regularly, and keep your costs low, you'll be well on your way towards millionaire-hood. Meanwhile, your peers will be dreaming of striking it rich through the lottery or through public humiliation on TV shows like The Weakest Link or Survivor.

As you probably appreciate more than anyone else right now, a little knowledge can be a powerful thing. Stay up to speed on personal finance throughout your life and you'll be ready for the real financial tests that will be thrown your way.

Chris Rugaber is a child prodigy who hasn't actually graduated from high school yet (not really). The Motley Fool is investors writing for investors.