Cramer Remix: What you didn't learn in school

Cramer Remix: What you didn’t learn in school
Cramer Remix: What you didn’t learn in school   

If Jim Cramer took over as America's professor, he would make some serious changes in the educational system. He finds it absurd that a student can graduate from school and not know how to write a check, or be required to have knowledge of personal finance.

"They say money can't buy happiness, but I've always found that piece of cliched conventional wisdom to be dubious at best since being broke is a major buzzkill, as I know first-hand from the time I spent living in my '78 Ford Fairmont," the "Mad Money" host said.

For younger investors who are trying to take an active hand in managing their money, the first step in achieving financial freedom is to invest. It's the only way to creating a life that isn't completely dependent on a paycheck, Cramer says.

However, there is a caveat. You must pay off credit card debt. It doesn't matter how much money you make in the stock market, that interest you are paying on a credit card will eat away at your returns and may be more than the profits you make.

For those looking to get involved with investing, Cramer shared three tips for young investors:

No. 1: Invest your savings
No. 2: Take risks if you are young
No. 3: It's never too early to save for retirement

Read More Cramer: Young investor? Here's where to start

Millennial computer
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It's not just retirement that is an important factor for long-term investing. Cramer has read a lot of stories lately that talk about the growing burden of student loan debt for tens of thousands of Americans who owe more than a trillion dollars in debt.

"For any of you who are parents or are thinking about becoming parents, let me just tell you right now that there are very few things you can do for your children that are better than paying for as much of their college education as you can afford," the "Mad Money" host said.

Hands down, the best way to save for college is with a 529 plan. Rules vary by state, but there are certain aspects that are standard across the country.

Due to federal gift tax laws, single investors can only contribute $14,000 a year, or $28,000 if you're married and file taxes jointly. Grandparents can contribute to the plan, as well, and can even start a 529 plan with your child as the beneficiary, though Cramer thinks it is better for a parent to do it.

"The key here, though, is that you want to get that money into your kid's 529 as early as possible. That's because the greatness of these plans is all about the power of compounding."

With all of the different mutual fund and exchange traded fund (ETF) options out there, Cramer's head is spinning. How the heck are investors supposed to know which ones to invest in when there are so many of them?

"The important thing is this: You have all sorts of ETFs and mutual funds out there, and they can all advertise. The companies that run these funds want your money. And of the biggest mistake you can make as an individual investor is to give it to them, with a few significant exceptions," the "Mad Money" host said.

If you are an investor who owns mutual funds, Cramer says you are probably getting hosed. There is just no other nice way to put it.

However, his beef is not with all mutual funds. Specifically, he warned against actively managed mutual funds with people deciding the stocks and securities to buy and sell.

Cramer has an issue with actively managed funds because the managers don't get paid for delivering performance — they collect a fee from investors regardless of the amount of money they make for their client.

The amount of money they make depends on the size of assets that are under management. That means their biggest incentive is not for an investor to do well; it is how much of your money they can bring in.

Read More Cramer: Costly funds could be ripping you off

Roth IRA
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According to Cramer, it does not matter how good an investor is at picking stocks. If the funds are kept in the wrong account, tons of money could be wasted in hidden fees and opportunity could be missed.

This logic is especially applicable to 401(k) and IRA retirement accounts, and whether it makes sense to use a Roth account.

"I think that, aside from the earned income tax credit, the Roth IRA may be the single greatest thing our government has done for low-income families since the end of the war on poverty, which at best, ended in a draw, with poverty possibly winning on points," the "Mad Money" host said.

When deciding between a Roth IRA or 401(k) or a regular IRA or 401(k) it depends if it makes more sense to pay income tax now, or to wait and pay income tax after requirement. This is a complicated decision that has more to do with the specifics of a situation and whether one anticipates they will be in a higher tax bracket at retirement.

With a Roth, contributions are made with after-tax income and the money in the Roth IRA will not be taxed again. There is also an income limit, depending on if you file joint or single. According to the Internal Revenue Service, for 2016, contributions to both traditional and Roth accounts cannot exceed $5,500 for individuals under age 50, and $6,500 for those over 50.

As long as the cash remains in the Roth account, you will not pay dividend tax. The money can then be withdrawn without a penalty after the age of 59 and a half.

Another perk to a Roth IRA is that after five years, money contributed — not your gains — can be withdrawn without the usual 10 percent penalty. This is very different from a regular IRA, where there are no taxes on contributions until money is withdrawn.

"For anyone whose marginal tax rate is 25 percent or less, which is most of America, I think you go with a Roth. Better to take the hit up front, then allow your Roth IRA to compound tax free for the rest of your life," the investor states.

Read More Cramer: Untangling the IRA, 401(k) Roth mystery