A short while back my cousin graduated from high school and was poised to head off to college at the University of Alabama. I wrote her a graduation letter to try and distill the things I thought she needed to know (and throw in a little financial education as well). Thought I would share it with my loyal readers.
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Dear Britt,
Sorry for the delay, but wanted to wish you a happy graduation. I was out of town and missed your actual graduation day but maybe I’ll catch the next one (probably not though considering I didn’t attend either of my college graduations 🙂 ).
Definitely a big step for you and I’m sure there are great things in store at college. If I can offer any collegiate advice based on the fact that you had a similar experience to me in high school (not much studying required, kind of breezed through) then here it is:
- Don’t be afraid to drop a class (some teachers seem to have some chip on their shoulders and relish the fact that students will not succeed). If it isn’t looking good and the drop date is looming, you may want to eject.
- Learn study habits early. I never had to do much in high school since most things came naturally, but college is an entirely different story. I’m a notorious procrastinator so take it from me, don’t wait till the last minute. One can’t memorize 300 pages of material in one night (though I have tried before).
- Listen to your Dad. He actually has some pretty good ideas on the politics of college. I probably should have listened and not been a Chemistry major initially but hey, it all works out in the end. I’ll end up with a Ph.D. not an M.D. but I’m happy with the results.
Now you may notice the enclosed check has an odd amount. I wanted to give you Doug’s 20-second introduction to economics in the form of a graduation gift. When your brother graduated two years ago, I sent him $200. Now there is an economic concept at play called Inflation (http://en.wikipedia.org/wiki/Inflation) that you may hear about in the news. It basically means money doesn’t have the same buying power as the years go by. Just ask your grandpa how much bread cost when he was a kid. Probably a nickel, now it is $2. That is inflation. The value of money degrades over time, so you need more of it to buy the same things.
So, that is where your gift comes in. The rate of inflation is measured annually, and here is what it was for the past two years (taken from http://minneapolisfed.org/Research/data/us/calc/hist1913.cfm).
| Year | Inflation Rate |
|---|---|
| 2004 | 2.7% |
| 2005 | 3.4% |
So if we crunch the numbers, the $200 given to Brad in 2004 would be equivalent in buying power to $205.40 in 2005 ($200 * 1.027). For 2006 the same buying power that $205.40 had in 2005 would be $212.38 ($205.40 * 1.034). So $200 in 2004 money = $212.38 in 2006 money.
And thus while it looks like I gave you more than Brad, alas it really is the same in terms of buying power. Now all of your other relatives that wanted to be fair and gave you the same amount as Brad….they really gave you 6.19% less than Brad. What a bummer, and they said they loved you ?
OK, enough teaching. Enjoy, don’t spend it all in one place, study hard, eat well, get lots of sleep, wash your hands frequently, always floss, don’t kiss on the first date, try and observe all posted speed limits, and remember to always have fun and try to look on the bright side of life.
Love
Cousin Doug
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