Financial literacy is a passport to financial freedom(ft.com)
ft.com
Financial literacy is a passport to financial freedom
https://www.ft.com/content/80480742-9853-4144-9c91-238021414bc8
169 comments
> My guess would be that any observational claim would be confounded badly by the kinds of factors that select people into financial literacy
That’a what I think, also. It’s easy to boast of “financial literacy” when one is living a quiet and comfortable middle-class life with almost no financially-related existential dread, it’s a totally different conversation when you’re living day by day. I’m on mobile and too lazy to search but there was an article linked on this forum a few years ago written by a young lady (in her early 20s, I think) describing how after working 10-hour shitty shifts and coming back home to a very poor household one doesn’t think of ETFs and carried interest, but more about “let me have a few cigarettes, some fast food and a coke so that I could forget for some moments about my condition as a poor person”.
More on that, I think this insistence on “financial literacy” is a very dirty play by today’s middle class (of which I’m a part, I confess) so that it won’t accept responsibility for the condition of the poor classes, it’s a sort of “it’s their fault for being poor because they are financially illiterate, there’s nothing much that we can do, the system works, the main proof being that we’re not poor”.
That’a what I think, also. It’s easy to boast of “financial literacy” when one is living a quiet and comfortable middle-class life with almost no financially-related existential dread, it’s a totally different conversation when you’re living day by day. I’m on mobile and too lazy to search but there was an article linked on this forum a few years ago written by a young lady (in her early 20s, I think) describing how after working 10-hour shitty shifts and coming back home to a very poor household one doesn’t think of ETFs and carried interest, but more about “let me have a few cigarettes, some fast food and a coke so that I could forget for some moments about my condition as a poor person”.
More on that, I think this insistence on “financial literacy” is a very dirty play by today’s middle class (of which I’m a part, I confess) so that it won’t accept responsibility for the condition of the poor classes, it’s a sort of “it’s their fault for being poor because they are financially illiterate, there’s nothing much that we can do, the system works, the main proof being that we’re not poor”.
> one doesn’t think of ETFs and carried interest
This is more financial savvy than literacy.
Financial literacy is mostly learning how to not get screwed. Understanding the cost of check-cashing services. Knowing that you should not be paying a monthly fee for a basic bank account. Learning how to file a tax return and collect your credits and refunds. Knowing how to opt out of overdraft protection. Knowing how to compare credit card offers. Learning about sending money home via money order versus TransferWise versus Bitcoin.
These are powerful intellectual tools. If you’re born into the middle class, you got them informally. If you weren’t, you likely didn’t. That’s an oddity somewhat orthogonal to the economic plight.
This is more financial savvy than literacy.
Financial literacy is mostly learning how to not get screwed. Understanding the cost of check-cashing services. Knowing that you should not be paying a monthly fee for a basic bank account. Learning how to file a tax return and collect your credits and refunds. Knowing how to opt out of overdraft protection. Knowing how to compare credit card offers. Learning about sending money home via money order versus TransferWise versus Bitcoin.
These are powerful intellectual tools. If you’re born into the middle class, you got them informally. If you weren’t, you likely didn’t. That’s an oddity somewhat orthogonal to the economic plight.
It’s possible to get them off of r/personalfinance and r/fire.
Meanwhile the high school accounting class that I was going to take was teaching how to day trade rather than actual accounting or personal finance.
The advice to save half your income and go into a well paying career is not that difficult to follow if you grow up poor in this country and know where to look.
Meanwhile the high school accounting class that I was going to take was teaching how to day trade rather than actual accounting or personal finance.
The advice to save half your income and go into a well paying career is not that difficult to follow if you grow up poor in this country and know where to look.
> More on that, I think this insistence on “financial literacy” is a very dirty play by today’s middle class (of which I’m a part, I confess) so that it won’t accept responsibility for the condition of the poor classes, it’s a sort of “it’s their fault for being poor because they are financially illiterate, there’s nothing much that we can do, the system works, the main proof being that we’re not poor”.
Why the focus on middle class? At least middle class bloggers point out the benefits of financial literacy and at least a few people in poverty benefit from this education. The upper classes on the other hand don't do even that.
And anyway, concretely as an individual neither major political party in the US wants to tackle this meaningfully so votes on this front are irrelevant. Providing genuinely useful financial information can be argued to be far more positively impactful than whatever regressive housing policies (e.g., Prop 13) are enacted by our elected governments in the US.
Why the focus on middle class? At least middle class bloggers point out the benefits of financial literacy and at least a few people in poverty benefit from this education. The upper classes on the other hand don't do even that.
And anyway, concretely as an individual neither major political party in the US wants to tackle this meaningfully so votes on this front are irrelevant. Providing genuinely useful financial information can be argued to be far more positively impactful than whatever regressive housing policies (e.g., Prop 13) are enacted by our elected governments in the US.
And yet, people by the hundreds of thousands walk a thousand miles with nothing for a chance to get into America.
>> let me have a few cigarettes, some fast food and a coke so that I could forget for some moments about my condition as a poor person”.
Just to state the obvious, this is ONE way to think but it's not how people who climb their way out of poverty think.
Eg - consider dirt poor Chinese immigrants to the US. They aren't thinking about coke and junk food, they are thinking about how to improve their family's lot and their kids' future, which is why they actually manage to.
I grew up immigrant and very poor. So I "get it" but I also know first hand that when you are poor, toy can't afford to be stupid or careless to boot.
Just to state the obvious, this is ONE way to think but it's not how people who climb their way out of poverty think.
Eg - consider dirt poor Chinese immigrants to the US. They aren't thinking about coke and junk food, they are thinking about how to improve their family's lot and their kids' future, which is why they actually manage to.
I grew up immigrant and very poor. So I "get it" but I also know first hand that when you are poor, toy can't afford to be stupid or careless to boot.
As another immigrant who came to the US dirt poor, I can absolutely say that I consumed cheap fast food as an escape from constantly thinking about how to improve my lot and climb out of poverty.
I bet that has had a non-trivial negative effect on my health.
Once I was more financially comfortable, I began making way more of the optimizations that most middle and upper class folks in the US treat as just "standard good practices", like maxing out your 401k, putting it in market-tracking funds, not picking stocks, etc.
I bet that has had a non-trivial negative effect on my health.
Once I was more financially comfortable, I began making way more of the optimizations that most middle and upper class folks in the US treat as just "standard good practices", like maxing out your 401k, putting it in market-tracking funds, not picking stocks, etc.
I don't think those groups smoke less than the majority population. Perhaps more.
Top comment is kind of true, the one you are replying to I don't really agree as well.
Top comment for me is saying about that it is putting blame on poor people for being poor like "you want to afford apartment, just stop drinking Starbucks lattes every day".
We know world does not work like that and a lot of dirt poor immigrants are not hitting jackpot or getting super rich by being frugal. Lots of people are not getting into being financially independent by simply being frugal. They mostly get by and that is it, some get better of course.
On the other hand the comment you reply to is advocating that, well people have shitty jobs, they go back home and they don't have enough energy to do anything with their life but just smoke/watch tv, whatever. Which is advocating for wrong things.
I totally understand if someone tried at lest something to make his life better, quitting smoking, not drinking lattes every day, even if he failed we cannot say he is just a lazy bum - at least there was some effort.
Who I don't sympathize with are people who will nag day in and out how bad their life is, but they would blame whatever is out there and who never would attempt to do something but would just indulge in smokink/drinking/tv series.
Top comment for me is saying about that it is putting blame on poor people for being poor like "you want to afford apartment, just stop drinking Starbucks lattes every day".
We know world does not work like that and a lot of dirt poor immigrants are not hitting jackpot or getting super rich by being frugal. Lots of people are not getting into being financially independent by simply being frugal. They mostly get by and that is it, some get better of course.
On the other hand the comment you reply to is advocating that, well people have shitty jobs, they go back home and they don't have enough energy to do anything with their life but just smoke/watch tv, whatever. Which is advocating for wrong things.
I totally understand if someone tried at lest something to make his life better, quitting smoking, not drinking lattes every day, even if he failed we cannot say he is just a lazy bum - at least there was some effort.
Who I don't sympathize with are people who will nag day in and out how bad their life is, but they would blame whatever is out there and who never would attempt to do something but would just indulge in smokink/drinking/tv series.
>More on that, I think this insistence on “financial literacy” is a very dirty play by today’s middle class [...] so that it won’t accept responsibility for the condition of the poor classes [...]
I'm not sure why you went straight for the "people are doing it because they're bad people" explanation. Why can't it be something less sinister, like creating anti-poverty programs that make the recipients self-sufficient, rather than subsidizing them for the rest of their lives?
I'm not sure why you went straight for the "people are doing it because they're bad people" explanation. Why can't it be something less sinister, like creating anti-poverty programs that make the recipients self-sufficient, rather than subsidizing them for the rest of their lives?
“anti-poverty programs” are a scam. What will really reduce poverty (at least in the Western world) is a total rethink of the housing policies. Unfortunately the middle classes are against that, because most of their wealth consists of real-estate. Or a real de-segregation of the school-system (which is both race-based and especially social-based). The middle classes are against that, cue their desperate search for property in “good school districts”. Or an abolition of all the regressive taxes, the cigarettes smoked by the poor are taxed to high-hell while the middle-classes pay almost no taxes for the money put aside for their pensions or to purchase their (first) house. The middle classes will vote out of power any politician who will dare to touch these tax privileges of theirs. When all these circumstances will change I’ll be the first to say that “the middle classes really want to help the poor”, otherwise I just can’t.
> What will really reduce poverty (at least in the Western world) is a total rethink of the housing policies.
Very much true in urban areas, but rural poverty is a thing too. Housing is a key piece of the puzzle but hardly the full story.
Very much true in urban areas, but rural poverty is a thing too. Housing is a key piece of the puzzle but hardly the full story.
People who are living "day-to-day" need financial literacy the most. The point of being financially literate is not learning about ETF's and carried interest, but how to climb out of the stress-inducing "day to day" trap as quickly and effectively as possible.
There's quite simply no excuse for 'existential dread', if you're not in actual North Korea-style extreme poverty you can build a precautionary buffer of savings and escape all that stress.
There's quite simply no excuse for 'existential dread', if you're not in actual North Korea-style extreme poverty you can build a precautionary buffer of savings and escape all that stress.
Agree. I have family living "day-to-day" and the causes are not lack of financial literacy. Rather their poverty flows from a more generalized lack of literacy. They have no marketable skills and no desire to gain them. In both cases college education was paid for. I think there's a dimension of cultural rot, especially for men, in the United States. They smoke pot and play video games and languish. I thought they would age out and get it together, but it hasn't happened by 50 and it isn't going to.
Barbara Ehrenreich wrote an excellent book, "Nickel and Dimed," on how exhausting and precarious the lives of poor (= minimum wage-earning) people are, based on her experience trying to live off minimum wage.
In my life, I have been dirt-poor (homeless) and pretty well-off ($200k/yr), and my experience agrees with her reporting. Financial predators seek out the poor because 1) there are lots of them; 2) they don't have a lot of effective defenses; and 3) society, and poor people themselves, tend to blame the poor for their poverty (as the parent comment mentions).
I have a running dad-joke with my kids that "I'm not smart enough to be poor." The truth is, I'm not hard-working enough either. Being poor sucks. The poor know it. Many of them are as smart and hard-working as the statistical "us" are. I wouldn't be surprised if there's a correlation between financial literacy and revolutionary attitudes about changes to the economic status quo.
In my life, I have been dirt-poor (homeless) and pretty well-off ($200k/yr), and my experience agrees with her reporting. Financial predators seek out the poor because 1) there are lots of them; 2) they don't have a lot of effective defenses; and 3) society, and poor people themselves, tend to blame the poor for their poverty (as the parent comment mentions).
I have a running dad-joke with my kids that "I'm not smart enough to be poor." The truth is, I'm not hard-working enough either. Being poor sucks. The poor know it. Many of them are as smart and hard-working as the statistical "us" are. I wouldn't be surprised if there's a correlation between financial literacy and revolutionary attitudes about changes to the economic status quo.
Planet Money or something similar did some interviews with people who use payday loan/check cashing places and asked them why they don't just have a normal bank account. Pretty much to a person they said it was because the fees that the payday lender charged were smaller than the banks and more predictable because they (or their brother or uncle or whatever) got charged an overdraft and then a convenience fee for an account below minimum balance and then and then and then and it all turned out to be way worse than just paying for a single financial service. Most of the "unbanked" are just as intelligent and rational as you or I, but for other reasons choose not to get entangled with the banks.
This is illogical, I don’t buy their argument. Just open up a bank account that doesn’t have fees and use that.
> got charged an overdraft and then a convenience fee for an account below minimum balance and then and then and then and it all turned out to be way worse than just paying for a single financial service.
That's a fun anecdote but it falls right into the illiteracy problem. There are tons of normal banks now that allow you to opt out of overdraft (all of them might now might even be legally required to offer that as an option).
You've inadvertently just shown why financially illiterate people end up way worse off (someone using a payday lender because of a story they heard from their uncle from a bank 20 years ago).
That's a fun anecdote but it falls right into the illiteracy problem. There are tons of normal banks now that allow you to opt out of overdraft (all of them might now might even be legally required to offer that as an option).
You've inadvertently just shown why financially illiterate people end up way worse off (someone using a payday lender because of a story they heard from their uncle from a bank 20 years ago).
IIRC, Overdraft protection is a premium service, requiring depositor maintaining minimal balances.
A better answer is zero-fee check cashing services. Charging people money to use their money is evil.
A better answer is zero-fee check cashing services. Charging people money to use their money is evil.
> You've inadvertently just shown why financially illiterate people end up way worse off (someone using a payday lender because of a story they heard from their uncle from a bank 20 years ago).
I am not sure this is true. In order to know what you know you need to have free time to actually follow the changes in bank rules, for example.
A person with a financial education from 20 years ago who is also poor today would not know that the overdraft is optional.
I am not sure this is true. In order to know what you know you need to have free time to actually follow the changes in bank rules, for example.
A person with a financial education from 20 years ago who is also poor today would not know that the overdraft is optional.
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> I'd like to see this claim validated experimentally.
In 2020, there was a meta-analysis of 76 RCT studies reviewing the impact of financial education programs on financial knowledge and human behaviors [0, 1].
Based on the abstract, the authors write: “The evidence shows that financial education programs have, on average, positive causal treatment effects on financial knowledge and downstream financial behaviors. Treatment effects are economically meaningful in size, similar to those realized by educational interventions in other domains and are at least three times as large as the average effect documented in earlier work. These results are robust to the method used, restricting the sample to papers published in top economics journals, including only studies with adequate power, and accounting for publication selection bias in the literature.” [0]
[0]: https://repository.upenn.edu/prc_papers/676/
[1]: https://www.oecd.org/financial/education/webinar-financial-e...
In 2020, there was a meta-analysis of 76 RCT studies reviewing the impact of financial education programs on financial knowledge and human behaviors [0, 1].
Based on the abstract, the authors write: “The evidence shows that financial education programs have, on average, positive causal treatment effects on financial knowledge and downstream financial behaviors. Treatment effects are economically meaningful in size, similar to those realized by educational interventions in other domains and are at least three times as large as the average effect documented in earlier work. These results are robust to the method used, restricting the sample to papers published in top economics journals, including only studies with adequate power, and accounting for publication selection bias in the literature.” [0]
[0]: https://repository.upenn.edu/prc_papers/676/
[1]: https://www.oecd.org/financial/education/webinar-financial-e...
The biggest thing in my mind, which you sort of imply, is that you need money to be ale to utilize that financial literacy. I dont care how financially literate someone is - if your making $7.50/hr and have no capital to invest, then it's pointless.
Wages and prices are relative and there is always going to be groups of people at the bottom that are not going to have capital to invest.
So what? What is your point? There is no way around this fact. Of course this does not apply to them but so what? You must think this can somehow not be the case to even mention it.
Of course you are not going to get to financial freedom making the lowest wage possible? So what?
So what? What is your point? There is no way around this fact. Of course this does not apply to them but so what? You must think this can somehow not be the case to even mention it.
Of course you are not going to get to financial freedom making the lowest wage possible? So what?
Financial literacy means not losing your paycheck to payday lenders, pawn shops, etc. Knowing how to invest when you have spare money is only a tiny portion of it.
Dollar stores survive entirely on financial illiteracy. Everything at them costs more per unit than at regular stores but people think they are getting a good deal because it's only $1.
Dollar stores survive entirely on financial illiteracy. Everything at them costs more per unit than at regular stores but people think they are getting a good deal because it's only $1.
"Financial literacy means not losing your paycheck to payday lenders, pawn shops, etc."
Yes, but it won't lead to financial freedom at such a low income level because all the money goes to basic necessities. There's no room for discretionary spending or even investing.
Yes, but it won't lead to financial freedom at such a low income level because all the money goes to basic necessities. There's no room for discretionary spending or even investing.
// your making $7.50/hr and have no capital to invest, then it's pointless.
Not pointless at all. It makes a difference whether you enter a vicious or virtuous cycle.
Imagine - Bob and Alice bothake 7.50. Bob is financially illiterate and doesn't have a bank account, so he pays a ridiculous fee to a check caching place every time. He also doesn't know to file his taxes so that he can get essentially all his taxes back since he makes so little.
So let's say Bob makes $6 after taxes and the check cashing fee.
Alice meanwhile is savy enough to have a bank account and file a tax return so she keeps all 7.50 of it.
At the end of the year, Alice has an extra $3,120 compared to Bob assuming 40 hours a week for 52 weeks. If she then saves it or invests it, she'll start making some return on it. Compared to Bob who has nothing.
My mom and I were very poor when we came to the US and we saw many people live like Bob but we recognizes that with a little thinking we can do much better than that.
My wife grew up wealthy-ish and never had to learn this stuff. She's a hard worker and always made more than she spent and she never really had to learn how to be smart and efficient with money. But if you are poor, you HAVE to figure that stuff out or you are dead. Financial literacy matters.
Not pointless at all. It makes a difference whether you enter a vicious or virtuous cycle.
Imagine - Bob and Alice bothake 7.50. Bob is financially illiterate and doesn't have a bank account, so he pays a ridiculous fee to a check caching place every time. He also doesn't know to file his taxes so that he can get essentially all his taxes back since he makes so little.
So let's say Bob makes $6 after taxes and the check cashing fee.
Alice meanwhile is savy enough to have a bank account and file a tax return so she keeps all 7.50 of it.
At the end of the year, Alice has an extra $3,120 compared to Bob assuming 40 hours a week for 52 weeks. If she then saves it or invests it, she'll start making some return on it. Compared to Bob who has nothing.
My mom and I were very poor when we came to the US and we saw many people live like Bob but we recognizes that with a little thinking we can do much better than that.
My wife grew up wealthy-ish and never had to learn this stuff. She's a hard worker and always made more than she spent and she never really had to learn how to be smart and efficient with money. But if you are poor, you HAVE to figure that stuff out or you are dead. Financial literacy matters.
Only... it isn't like this at all.
Bob messed up his math some time ago and now can't get a bank account: Alternatively, most banks in his area charge fees to poor people - enough that it pays to have a prepaid card because the fees are lower than a bank. Heck, it might even be through the employer because more and more employers have stopped offering paper checks.
Bob probably pays someplace like H&R block for his taxes. It is really, really difficult to miss that it is tax return time if you are poor, so most folks will file if they think they are getting some back. People finally get their cars fixed and are able to go to the doctor or finally buy some shoes.
Or Bob might not. If Bob and Alice do not have children, they won't get much back in taxes, assuming they make minimum wage and work 35-ish hours a week. They might even owe if they are married - assuming that two full time jobs will still put the couple in a higher tax bracket. (Unless, of course, they have fixed this in the last decade, but I doubt it). If Bob avoids filing, it is probably because either he owes or doesn't think he'll get enough back to pay the folks to do it.
Alice might make similar choices due to fees and things. Or she might find herself in a similar situation simply because she got sick and lost pay or lost a job - especially if she wasn't taught how to deal with being poor. It doesn't always matter if something is better long-term if you are struggling month to month, and you don't always get a say in how vicious your cycle is.
Bob messed up his math some time ago and now can't get a bank account: Alternatively, most banks in his area charge fees to poor people - enough that it pays to have a prepaid card because the fees are lower than a bank. Heck, it might even be through the employer because more and more employers have stopped offering paper checks.
Bob probably pays someplace like H&R block for his taxes. It is really, really difficult to miss that it is tax return time if you are poor, so most folks will file if they think they are getting some back. People finally get their cars fixed and are able to go to the doctor or finally buy some shoes.
Or Bob might not. If Bob and Alice do not have children, they won't get much back in taxes, assuming they make minimum wage and work 35-ish hours a week. They might even owe if they are married - assuming that two full time jobs will still put the couple in a higher tax bracket. (Unless, of course, they have fixed this in the last decade, but I doubt it). If Bob avoids filing, it is probably because either he owes or doesn't think he'll get enough back to pay the folks to do it.
Alice might make similar choices due to fees and things. Or she might find herself in a similar situation simply because she got sick and lost pay or lost a job - especially if she wasn't taught how to deal with being poor. It doesn't always matter if something is better long-term if you are struggling month to month, and you don't always get a say in how vicious your cycle is.
Broken_hippo, your response seems illogical to me. I am comparing a savvy person (Alice) and an un-savvy one (Bob) to show an example how even in a hard situation, being thoughtful about your finances is worthwhile.
You respond with a list of generic hardships but the points remains that one can navigate them poorly or well. For example:
> Alternatively, most banks in his area charge fees to poor people
One example of being savvy is being aware of things like that. The fact that most banks do X doesn't matter as long as you have the savvy to use one which does not. So 99% of people might go for these rip-offs but the 1% of the people who doesn't is better of.
That's the point I am making - being poor but able to navigate this puts you at a massive advantage compared to others, all other things equal.
You respond with a list of generic hardships but the points remains that one can navigate them poorly or well. For example:
> Alternatively, most banks in his area charge fees to poor people
One example of being savvy is being aware of things like that. The fact that most banks do X doesn't matter as long as you have the savvy to use one which does not. So 99% of people might go for these rip-offs but the 1% of the people who doesn't is better of.
That's the point I am making - being poor but able to navigate this puts you at a massive advantage compared to others, all other things equal.
I'm pointing out that your examples just aren't based in reality, and aren't describing things that are "savvy" and "un-savvy".
These also aren't massive advantages: The folks with tax checks are generally folks with children, and they aren't generally getting an advantage others in a similar situation aren't getting: Pretty much everyone knows about tax refunds. Childless folks don't get much, though, so it isn't really a massive advantage. None of it is. Even when "All other things equal".
Unfortunately, what actually IS often a massive advantage is luck of circumstance. Somewhere to stay so you can get back on your feet, for example, or lucky enough to qualify for help paying for your medicine or your child's private school tuition. Lucky enough to be poor in an area you can walk to stores and work or lucky enough to live somewhere with a robust safety net. Lucky enough to be healthy, lucky enough to avoid getting pregnant, lucky enough to be able to buy birth control.
These also aren't massive advantages: The folks with tax checks are generally folks with children, and they aren't generally getting an advantage others in a similar situation aren't getting: Pretty much everyone knows about tax refunds. Childless folks don't get much, though, so it isn't really a massive advantage. None of it is. Even when "All other things equal".
Unfortunately, what actually IS often a massive advantage is luck of circumstance. Somewhere to stay so you can get back on your feet, for example, or lucky enough to qualify for help paying for your medicine or your child's private school tuition. Lucky enough to be poor in an area you can walk to stores and work or lucky enough to live somewhere with a robust safety net. Lucky enough to be healthy, lucky enough to avoid getting pregnant, lucky enough to be able to buy birth control.
Which banks don't charge anything for having a bank account?
Except neither of them make enough to pay rent, so that 'extra' never gets invested.
> Except neither of them make enough to pay rent, so that 'extra' never gets invested.
The only way to properly compare things is on an "all else equals basis" and focus on changing the variable you're discussing.
In my example, Bob "makes do" with the $6/h he gets to keep. Alice can chose to live a lifestyle identical to Bob despite "making" $1.5/h more due to her smart finance management. She can then invest (vs, if she was unsavy like Bob, she would be forced into the $6/h lifestyle anyway and not have the option to invest.)
You can tell yourself whatever you want, but there are lots of poor people who are no longer poor (or at least have some savings) because they DON'T allow themselves to think like you're suggesting.
The only way to properly compare things is on an "all else equals basis" and focus on changing the variable you're discussing.
In my example, Bob "makes do" with the $6/h he gets to keep. Alice can chose to live a lifestyle identical to Bob despite "making" $1.5/h more due to her smart finance management. She can then invest (vs, if she was unsavy like Bob, she would be forced into the $6/h lifestyle anyway and not have the option to invest.)
You can tell yourself whatever you want, but there are lots of poor people who are no longer poor (or at least have some savings) because they DON'T allow themselves to think like you're suggesting.
I like to think what youre saying is true, but my gut tells me -- both end up losing it all anyway. The problem with saving $3,000 or something like that a year, especially with a family, is that there are numerous things that you really need that arent covered, so the $3,000 means the difference between really poor and destitute.
Some examples that come to mind, from my own former life -- medical co-pays, medical co-pays, medical-copays, medical co-pays, emergency dental work, dental co-pays (esp for urgent issues), schools stiffing you on aid you are owed but dont get due to "system says otherwise", bank fees (sometimes unjustified but try fighting it), fines for stupid stuff that you're not connected enough to fight.
The most devious of these are medical-copays and pharma co-pays. Even stupid things like here is a real example: doctor gives you a prescription (at the front desk, not in their office.) You get the prescription and "use generic isnt checked" -- but now the doctor is gone. Front desk wont let you speak to the doctor again. You try and fill the Rx, and the Pharmacist says $300 copay because a generic is available, but Rx doesnt say you can use the generic. Now you need the meds, so you're down $300. Or you go see the doctor again to clarify and you're down $40 on the copay. Welcome to being poor. You get screwed around every corner.
Note, this doesnt happen to me anymore because I have a pretty decent doctor reachable via email and msg, but not one I could afford when I was poor.
Some examples that come to mind, from my own former life -- medical co-pays, medical co-pays, medical-copays, medical co-pays, emergency dental work, dental co-pays (esp for urgent issues), schools stiffing you on aid you are owed but dont get due to "system says otherwise", bank fees (sometimes unjustified but try fighting it), fines for stupid stuff that you're not connected enough to fight.
The most devious of these are medical-copays and pharma co-pays. Even stupid things like here is a real example: doctor gives you a prescription (at the front desk, not in their office.) You get the prescription and "use generic isnt checked" -- but now the doctor is gone. Front desk wont let you speak to the doctor again. You try and fill the Rx, and the Pharmacist says $300 copay because a generic is available, but Rx doesnt say you can use the generic. Now you need the meds, so you're down $300. Or you go see the doctor again to clarify and you're down $40 on the copay. Welcome to being poor. You get screwed around every corner.
Note, this doesnt happen to me anymore because I have a pretty decent doctor reachable via email and msg, but not one I could afford when I was poor.
TuringNYC, I hear you, but similar to another response - you're talking about the difficulties of being poor while I am talking about the relative difficulty of being poor while savvy vs not.
The fact is that in every single way, it's better to have that extra 3k versus not. Alice is strictly better off than Bob. Even if she spends it on tuition rather than saving it, that's an option that Bob doesn't have at all.
Even in your own example, you're talking about "generics" which is already more savvy than someone else may have. You're describing a problem but can you imagine how much harder your life would be if "generic drugs are as good but cheaper" wasn't a thing that existed in your brain? Now apply that to everything.
Nobody is saying being poor is easy - it's not and it sucks. The point is you can make it even worse by being bad with money on top of it, or you can make the best of it with whatever tools and options are available.
This by the way is true at every level. I know people making 350+ who can't afford to lose their job even for a few months, while others who have never made more than 50, have multi-year runways saved up.
The fact is that in every single way, it's better to have that extra 3k versus not. Alice is strictly better off than Bob. Even if she spends it on tuition rather than saving it, that's an option that Bob doesn't have at all.
Even in your own example, you're talking about "generics" which is already more savvy than someone else may have. You're describing a problem but can you imagine how much harder your life would be if "generic drugs are as good but cheaper" wasn't a thing that existed in your brain? Now apply that to everything.
Nobody is saying being poor is easy - it's not and it sucks. The point is you can make it even worse by being bad with money on top of it, or you can make the best of it with whatever tools and options are available.
This by the way is true at every level. I know people making 350+ who can't afford to lose their job even for a few months, while others who have never made more than 50, have multi-year runways saved up.
Please tell me, do you actually think $3000 per year is financial freedom? That's what this article is about. I'm saying below a certain threshold that is false because one does not have enough to cover basic living expenses to be able to take advantage of that financial literacy.
Financial freedom is a spectrum. For me, when I was working for minimum wage, the equivalent of $3,000 back then meant 3 or 4 or months to find a new job if I got fired, without getting evicted. And it meant if my car broke down, I could either repair it or buy another one instead of taking a loan at a car lot, or relying on public transportation, which would have severely limited my employment opportunities. And it meant having a wider range of places to live since you could afford first, last and security deposit, which almost no one else working for minimum in that time and place could.
If you can save $30,000 a year, do that, but in my experience $3,000 was orders of magnitude better then $0.
If you can save $30,000 a year, do that, but in my experience $3,000 was orders of magnitude better then $0.
No, $3K a year is nothing.
But, if you are poor, $3K is amazing to have if you'd otherwise have 0.
All I am saying is you're better off being smart with your money. I don't understand how this is controversial.
But, if you are poor, $3K is amazing to have if you'd otherwise have 0.
All I am saying is you're better off being smart with your money. I don't understand how this is controversial.
@xyzelement, I agree that $3K is amazing to have if you'd otherwise have 0. From personal experience, i'll note that money probably moves you from point ~7 to point ~9 on the Maslow's hierarchy of needs, assuming the hierarchy was 0 to 100. You're right on an absolute level that you're better off -- perhaps at point 9 you can get a chronically painful tooth fixed (and opposed to point 7 where you couldn't).
There are several problems with this discussion though, none to do with your point (which again I agree with, at a micro level.)
The $3000 does very little. You cannot invest it. Heck, having $3000 in your bank account would even invalidate you for Medicaid -- at which point you have no healthcare and you're poor literally the instant you're sick.
Its been a while since I was very poor, but here is a random article I found: https://www.agingcare.com/articles/asset-limits-to-qualify-f... This one suggests that a single person cannot have over $2000 in assets -- and lost benefit qualification if they do. These are usually bright-line tests, you cant reason your way out of them. And once you lose your benefits its really hard getting them back, and you'll be broke from medical bills before you do. The exact limit changes from state to state and year to year and also depends on your depdenents. But you lose benefits really quickly.
Ideas suggesting that another $3000 a year will "break people out of poverty" or somehow allow people to traverse socioeconomic barriers is usually fodder fed to us by hyper-libertarians who like to pretend everyone can become a billionaire. It is nothing but false hope as an opiate causing us to ignore real change.
We can indeed have positive change, but not by saving our way to it. While I agree with the need for financial literacy and while i agree with @xyzelement on a micro level -- the real solutions are getting individuals educated and onto growth jobs where they have an incentive to work hard. Also, means testing needs to become more realistic to 2021 -- how realistic is it to disallow a $3000 emergency fund?
On a side note, so many things I had growing up are not even available to my children in the same location (NYC) (though thankfully we arent poor anymore.) For example, I thank almost all my socioeconomic success to G&T programs, exam-tested schools, and the upward cycle this puts you into. Currently, G&T programs are largely patronage programs (in NYC) for the connected and exam-driven high schools are being replaced with "leadership based applications" for a 12yo which is a euphemism for "how connected are you and how rich are you?"
There are several problems with this discussion though, none to do with your point (which again I agree with, at a micro level.)
The $3000 does very little. You cannot invest it. Heck, having $3000 in your bank account would even invalidate you for Medicaid -- at which point you have no healthcare and you're poor literally the instant you're sick.
Its been a while since I was very poor, but here is a random article I found: https://www.agingcare.com/articles/asset-limits-to-qualify-f... This one suggests that a single person cannot have over $2000 in assets -- and lost benefit qualification if they do. These are usually bright-line tests, you cant reason your way out of them. And once you lose your benefits its really hard getting them back, and you'll be broke from medical bills before you do. The exact limit changes from state to state and year to year and also depends on your depdenents. But you lose benefits really quickly.
Ideas suggesting that another $3000 a year will "break people out of poverty" or somehow allow people to traverse socioeconomic barriers is usually fodder fed to us by hyper-libertarians who like to pretend everyone can become a billionaire. It is nothing but false hope as an opiate causing us to ignore real change.
We can indeed have positive change, but not by saving our way to it. While I agree with the need for financial literacy and while i agree with @xyzelement on a micro level -- the real solutions are getting individuals educated and onto growth jobs where they have an incentive to work hard. Also, means testing needs to become more realistic to 2021 -- how realistic is it to disallow a $3000 emergency fund?
On a side note, so many things I had growing up are not even available to my children in the same location (NYC) (though thankfully we arent poor anymore.) For example, I thank almost all my socioeconomic success to G&T programs, exam-tested schools, and the upward cycle this puts you into. Currently, G&T programs are largely patronage programs (in NYC) for the connected and exam-driven high schools are being replaced with "leadership based applications" for a 12yo which is a euphemism for "how connected are you and how rich are you?"
> If she then saves it or invests it, she'll start making some return on it.
I think people react to claim that this will make Alica invest or save meaningful amount of money. That is what original conflict was about. Whether Alica will invest and rise out of poverty.
Alica now can afford one more thing in sea of things she needs is moving goalpost.
I think people react to claim that this will make Alica invest or save meaningful amount of money. That is what original conflict was about. Whether Alica will invest and rise out of poverty.
Alica now can afford one more thing in sea of things she needs is moving goalpost.
"The only way to properly compare things is on an "all else equals basis" and focus on changing the variable you're discussing."
No, it's not. You're measuring output. We should be focusing on outcomes. The outcome is that it won't make a difference.
No, it's not. You're measuring output. We should be focusing on outcomes. The outcome is that it won't make a difference.
I disagree. I think having an extra 3k or not is a meaningful outcome to have control over. If Alice is as smart as she seems compromised to Bob, she might just have the power of will to hold on to that extra 3k. Certainly more likely to succeed compared to not even trying.
Except there is no extra money at that level because one can't even afford basic needs. There's no financial freedom - it goes to basic necessities.
It's actually been disproven multiple times. There have been several studies that showed that giving poor people cash results in better results than financial literacy education (I don't have the book in front of me, but R. Bergman gives several sources for this in Utopia for realists).
The whole financial literacy education bit seems to just be a continuation of "poor people are poor because of laziness/bad education/bad decisions" while reality is more poor people are poor because of lack of funds.
The whole financial literacy education bit seems to just be a continuation of "poor people are poor because of laziness/bad education/bad decisions" while reality is more poor people are poor because of lack of funds.
>it's unclear whether or not most of these come from a lack of financial education or rather a sense of struggle and fatalism around pre-existing lack of economic opportunity
Even if they make bad decisions due to fatalism, this fatalism comes from one's attitude towards their circumstances more than society not giving enough handouts. Plenty of immigrants are more than happy to abandon their lives at home, make minimum wage in the US in jobs citizens won't touch, live minimalistically, and send most of their money to their families.
Even if they make bad decisions due to fatalism, this fatalism comes from one's attitude towards their circumstances more than society not giving enough handouts. Plenty of immigrants are more than happy to abandon their lives at home, make minimum wage in the US in jobs citizens won't touch, live minimalistically, and send most of their money to their families.
Yeah, but if you're living in the US and your kids are, too, your trick doesn't work. There's no arbitrage power.
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I see responses like this all the time and to me they are so bizarre.
It seems to imply that the only valid way to accrue knowledge is by going to the high priests at the university systems and performing the sacred study rituals because self obviously this is the one true way of producing knowledge.
Should i put my hand into an open flame? I dont know,tough to say without performing a meta study of existing flame temperature studies to confirm what the best journals think. otherwise theres just no way to know so I'll just have to test it out.
Im not against science or the scientific method. In fact im extremely pro. but it's not the only way to come come valid conclusions about things.
im going to go ahead and suggest that on average learning about finance is going to be helpful for people to manage their finances. call me a crackpot but It's not particularly important for me to verify this belief with a study.
and all of this is before you get into the issues with the non trivial number of junk papers published in social science and psychology journals and the like that at best seem to say that even in cases of more difficult questions where more rigorous methods are valuable, this system of knowledge production fails a non trivial amount of the time.
It seems to imply that the only valid way to accrue knowledge is by going to the high priests at the university systems and performing the sacred study rituals because self obviously this is the one true way of producing knowledge.
Should i put my hand into an open flame? I dont know,tough to say without performing a meta study of existing flame temperature studies to confirm what the best journals think. otherwise theres just no way to know so I'll just have to test it out.
Im not against science or the scientific method. In fact im extremely pro. but it's not the only way to come come valid conclusions about things.
im going to go ahead and suggest that on average learning about finance is going to be helpful for people to manage their finances. call me a crackpot but It's not particularly important for me to verify this belief with a study.
and all of this is before you get into the issues with the non trivial number of junk papers published in social science and psychology journals and the like that at best seem to say that even in cases of more difficult questions where more rigorous methods are valuable, this system of knowledge production fails a non trivial amount of the time.
> ...
> and all of this is before you get into the issues with the non trivial number of junk papers published in social science and psychology journals and the like that at best seem to say that even in cases of more difficult questions where more rigorous methods are valuable, this system of knowledge production fails a non trivial amount of the time.
As an aside, this hasn't been limited to just soft sciences like the humanities, social sciences, psychology, and the like. Going back several years, a few MIT students created a random paper generator and used it to create and submit papers that were accepted into computer science related conferences [1].
Some, many seemingly motivated by politics, have pulled similar stunts with fields related to social sciences [2]. But this ignores that the same issue is also prevalent in other areas that could be labeled as hard sciences [1]. (Of course, this is ignoring the humongous amount of papers that represent extremely niche incremental advancements that advance the state of the art in very specific but extremely limited areas.)
[1] https://news.mit.edu/2015/how-three-mit-students-fooled-scie...
[2] https://en.wikipedia.org/wiki/Grievance_studies_affair
As an aside, this hasn't been limited to just soft sciences like the humanities, social sciences, psychology, and the like. Going back several years, a few MIT students created a random paper generator and used it to create and submit papers that were accepted into computer science related conferences [1].
Some, many seemingly motivated by politics, have pulled similar stunts with fields related to social sciences [2]. But this ignores that the same issue is also prevalent in other areas that could be labeled as hard sciences [1]. (Of course, this is ignoring the humongous amount of papers that represent extremely niche incremental advancements that advance the state of the art in very specific but extremely limited areas.)
[1] https://news.mit.edu/2015/how-three-mit-students-fooled-scie...
[2] https://en.wikipedia.org/wiki/Grievance_studies_affair
The compsci papers were obly accepted in a non reviewed setting. Whereas the sokol squared papers were accepted into "reputable" journals
Experiment is surely not the only way to acquire knowledge, but it’s one of the easiest ways to reduce the frequency of tricking yourself into reinforcing what you wanted to believe to begin with. As you say, the system of knowledge production is imperfect, so let’s try to use rigorous tools more often, not less.
I think we all agree that financial literacy is probably, on average, good. But, as the parent post said, the magnitude is unknown. Is it the “passport to financial freedom”, in which case it’s probably reasonable to spend a lot of class time in school on it? Or is it just nice to have, and outcomes are mostly dependent on other factors, in which case we could just as well use those classroom hours for something else. This is a hard thing to disentangle from good survey data, and nearly impossible from the kind of anecdotal reporting in most of the article.
Personally, I think some of the article cuts against its own thesis. “ Leanne Fielden fits the bill for the disadvantaged. She is an unemployed woman living in the deprived Middlesbrough region. […] Her profile belies her own financial expertise. “I’m fortunate that I’ve worked for Barclaycard and Visa. I often help family and friends with money issues,” she says. So she herself has no fear of finance.” If financial literacy were a magic bullet, why is she disadvantaged? Let’s not motte and Bailey this argument from the title (“financial literacy is a passport to financial freedom”) to the more defensible position of “financial literacy is helpful, in most situations”.
I think we all agree that financial literacy is probably, on average, good. But, as the parent post said, the magnitude is unknown. Is it the “passport to financial freedom”, in which case it’s probably reasonable to spend a lot of class time in school on it? Or is it just nice to have, and outcomes are mostly dependent on other factors, in which case we could just as well use those classroom hours for something else. This is a hard thing to disentangle from good survey data, and nearly impossible from the kind of anecdotal reporting in most of the article.
Personally, I think some of the article cuts against its own thesis. “ Leanne Fielden fits the bill for the disadvantaged. She is an unemployed woman living in the deprived Middlesbrough region. […] Her profile belies her own financial expertise. “I’m fortunate that I’ve worked for Barclaycard and Visa. I often help family and friends with money issues,” she says. So she herself has no fear of finance.” If financial literacy were a magic bullet, why is she disadvantaged? Let’s not motte and Bailey this argument from the title (“financial literacy is a passport to financial freedom”) to the more defensible position of “financial literacy is helpful, in most situations”.
“ Everyone has a plan until they get punched in the mouth." -Mike Tyson
I take the view that it doesn’t matter how financially literate you are when you have limited wealth to begin with and something in life happens that wipes most of it out. This isn’t to say being financially savvy isn’t useful, but having that literacy doesn’t necessarily insulate you from hardship.
I take the view that it doesn’t matter how financially literate you are when you have limited wealth to begin with and something in life happens that wipes most of it out. This isn’t to say being financially savvy isn’t useful, but having that literacy doesn’t necessarily insulate you from hardship.
Wow. Although there are elements I disagree with, that said is a very well argued and explained point.
I suspect there are few here that will read through it though. Might be better as a blog.
I suspect there are few here that will read through it though. Might be better as a blog.
> extremely bad decisions around payday loans, high APR leasing
Are taking those things actually the extremely bad decisions themselves, or are they necessary consequences of previous extremely bad decisions? For example, if you let your last car get repossessed, and you live/work somewhere with poor public transit, then what choice do you have other than a BHPH car with sky-high APR?
Are taking those things actually the extremely bad decisions themselves, or are they necessary consequences of previous extremely bad decisions? For example, if you let your last car get repossessed, and you live/work somewhere with poor public transit, then what choice do you have other than a BHPH car with sky-high APR?
> if you let your last car get repossessed, and you live/work somewhere with poor public transit
Exactly! Why don’t the poor just stop doing these things?
Exactly! Why don’t the poor just stop doing these things?
Doesn't this seem like a bit of a dick move. Oh yeah poor people are poor because they're bad with money. They can't even tell that 3% of 100 is less than £5. Well, sure, but 70% of the bottom quintile are financially literate and are still in the bottom quintile (whilst 10% of the best off are still financially illiterate).
>Some questions proved a leveller for all. Asked to compare the relative cost of borrowing on a credit card and through a bank overdraft with specific charges, barely half got the right answer — virtually regardless of wealth bracket, age, ethnicity, region or gender. We could all do with a financial literacy boost.
Ah yes, these multi-billion dollar businesses have constructed businesses so convoluted that most people don't even know what they're really getting, and instead of doing the responsible thing - legislating against these deliberate anti-consumer practices, let's just blame the people who are being deliberately mislead. If my boss found out that the over 50% of the people who use my products don't actually understand them he certainly wouldn't be publishing a news article about how stupid our customers are.
If you look at the data the truth is clear - financial literacy goes almost nowhere in explaining why people are poor. If you look at the financial times editorial line, we would let them have cake.
>Some questions proved a leveller for all. Asked to compare the relative cost of borrowing on a credit card and through a bank overdraft with specific charges, barely half got the right answer — virtually regardless of wealth bracket, age, ethnicity, region or gender. We could all do with a financial literacy boost.
Ah yes, these multi-billion dollar businesses have constructed businesses so convoluted that most people don't even know what they're really getting, and instead of doing the responsible thing - legislating against these deliberate anti-consumer practices, let's just blame the people who are being deliberately mislead. If my boss found out that the over 50% of the people who use my products don't actually understand them he certainly wouldn't be publishing a news article about how stupid our customers are.
If you look at the data the truth is clear - financial literacy goes almost nowhere in explaining why people are poor. If you look at the financial times editorial line, we would let them have cake.
> legislating against these deliberate anti-consumer practices
Ironically, in the question posed, the overdraft was the cheaper option. The question is flummoxing because most people think of overdraft fees as exclusively a penalty. They are that. But they can also be the cost of financing the overdraft.
Ironically, in the question posed, the overdraft was the cheaper option. The question is flummoxing because most people think of overdraft fees as exclusively a penalty. They are that. But they can also be the cost of financing the overdraft.
A wealthy friend, once while parked in a restricted parking spot, was told they can’t park there. They responded, “I can: the fee is $200.”
It rhymes, but it’s different.
Overdrafting is literally in your deposit agreement. If you’ve ever looked at a restaurant or hotel’s books, they often make copious use of overdraft financing. Your relationship with your bank is a commercial one; your relationship with your community is civic.
If your credit card will charge $100 interest if you don’t pay the balance at the end of the month, your next pay check clears in a week, and your bank charges $30 for an overdraft, it could make financial sense to overdraw.
Overdrafting is literally in your deposit agreement. If you’ve ever looked at a restaurant or hotel’s books, they often make copious use of overdraft financing. Your relationship with your bank is a commercial one; your relationship with your community is civic.
If your credit card will charge $100 interest if you don’t pay the balance at the end of the month, your next pay check clears in a week, and your bank charges $30 for an overdraft, it could make financial sense to overdraw.
>>They responded, “I can: the fee is $200.”
>your relationship with your community is civic.
That's true, but attaching a dollar value to it makes it transactional, which makes people feel more okay with breaking the law. It's similar to a story I heard on freakonomics: a daycare was tired of parents picking up their kids late, so they instituted a fine (trivial amount like $10) in hopes of disincentivizing parents from doing so. Late pickups actually went up after the fine was instituted.
>your relationship with your community is civic.
That's true, but attaching a dollar value to it makes it transactional, which makes people feel more okay with breaking the law. It's similar to a story I heard on freakonomics: a daycare was tired of parents picking up their kids late, so they instituted a fine (trivial amount like $10) in hopes of disincentivizing parents from doing so. Late pickups actually went up after the fine was instituted.
That's why you make the fines exponential and you add a hard stop (kid gets kicked out).
[deleted]
That old (in tech terms) chestnut - “If the penalty for a crime is paying a fine, that law only exists for the lower classes.”
Interestingly there are some places where certain fines are proportional to one's income:
https://en.wikipedia.org/wiki/Day-fine
https://en.wikipedia.org/wiki/Day-fine
> and instead of doing the responsible thing - legislating against these deliberate anti-consumer practices
Sure. We'll write a 3.504 pages terms and conditions, so that the consumer never bother to read it even if he is able to understand what it means.
Sure. We'll write a 3.504 pages terms and conditions, so that the consumer never bother to read it even if he is able to understand what it means.
[deleted]
I'm not completely sold on the hype of financial literacy.
Main reason being this: Most schools teach basic nutrition, i.e that eating less/more food than you need, can/will result in losing/gaining weight. In this day and age, it is common knowledge that eating junk and being sedentary will cause obesity. And even if there are groups of people that don't know this, obesity has hit all socioeconomic classes - not only poor people.
Likewise, I don't think that if we suddenly teach everyone financial literacy, we're suddenly going to poverty plummeting. I don't think poor people are poor because they don't know how to pay their bills on time, invest in index funds, or that having a maxed out 35% credit card will make your debt outgrow a 8% savings fund.
I think poor people are poor because they're trapped in low-wage jobs, and are often forced to use more expensive services, as well as being victims to centralization and ever-growing rents.
edit: With that said, I think basic financial knowledge should be school curriculum - but I don't think it's going to be the magic bullet.
Main reason being this: Most schools teach basic nutrition, i.e that eating less/more food than you need, can/will result in losing/gaining weight. In this day and age, it is common knowledge that eating junk and being sedentary will cause obesity. And even if there are groups of people that don't know this, obesity has hit all socioeconomic classes - not only poor people.
Likewise, I don't think that if we suddenly teach everyone financial literacy, we're suddenly going to poverty plummeting. I don't think poor people are poor because they don't know how to pay their bills on time, invest in index funds, or that having a maxed out 35% credit card will make your debt outgrow a 8% savings fund.
I think poor people are poor because they're trapped in low-wage jobs, and are often forced to use more expensive services, as well as being victims to centralization and ever-growing rents.
edit: With that said, I think basic financial knowledge should be school curriculum - but I don't think it's going to be the magic bullet.
>Main reason being this: Most schools teach basic nutrition, i.e that eating less/more food than you need, can/will result in losing/gaining weight. In this day and age, it is common knowledge that eating junk and being sedentary will cause obesity. And even if there are groups of people that don't know this, obesity has hit all socioeconomic classes - not only poor people.
They do teach what can lead to weight gain, but they've stopped putting emphasis on how unhealthy it was. In the 80-90s when I was in high-school we had our BMI measured in front of the rest of class. If you came in overweight the teach just stated matter-of-fact that you were overweight and that it could lead to health problems.
That is absolutely unheard of today. Parents now complain if their child's doctor mentions that the child is overweight because of "body shaming". The reason obesity is a problem today is because convincing people to lose weight somehow became an attack on their identity.
They do teach what can lead to weight gain, but they've stopped putting emphasis on how unhealthy it was. In the 80-90s when I was in high-school we had our BMI measured in front of the rest of class. If you came in overweight the teach just stated matter-of-fact that you were overweight and that it could lead to health problems.
That is absolutely unheard of today. Parents now complain if their child's doctor mentions that the child is overweight because of "body shaming". The reason obesity is a problem today is because convincing people to lose weight somehow became an attack on their identity.
Please talk to real people rather than reading things online and taking them as fact. This is on the face of it a completely ridiculous claim to make. When you announce to an entire classroom that someone is overweight and unhealthy that person becomes defacto target for bullying and abuse, that's probably why this practice has disappeared. Doctors do still tell people that they are overweight, despite your wild assertion that they do not.
I left highschool in the mid-2000s, I was told that I had high blood pressure for my age and to watch out for it. I had friends given advice to lose weight. I was given that same advice by doctors when I was gaining weight after having left school in the mid-2010's.
A young relative who was overweight was given advice to lose weight by his doctor, his parents agreed and made some changes to his diet with his cooperation.
Obesity correlates with a whole slew of different environmental, social and cultural variables, to reduce all of that complexity down to "we can't shame people into losing weight anymore" is absurd.
Even worse, it's not even the first time I've come across this take, so I actually have a link to share with you. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4236245/
Read at your leisure, it's not that long.
I left highschool in the mid-2000s, I was told that I had high blood pressure for my age and to watch out for it. I had friends given advice to lose weight. I was given that same advice by doctors when I was gaining weight after having left school in the mid-2010's.
A young relative who was overweight was given advice to lose weight by his doctor, his parents agreed and made some changes to his diet with his cooperation.
Obesity correlates with a whole slew of different environmental, social and cultural variables, to reduce all of that complexity down to "we can't shame people into losing weight anymore" is absurd.
Even worse, it's not even the first time I've come across this take, so I actually have a link to share with you. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4236245/
Read at your leisure, it's not that long.
> I don't think poor people are poor because they don't know how to pay their bills on time, invest in index funds, or that having a maxed out 35% credit card will make your debt outgrow a 8% savings fund.
I know people that don't know:
* How to recover their bank accounts (they told me it's impossible, so I recovered it for them)
* What an index fund is. Even when I do tell them, it seems to be a bunch of hocus pocus to them.
* Ok, I don't know people with credit card trouble. Dutch people tend to not have credit cards.
There are enough people that don't know a single thing about finance. Most of these people are 60+ and middle class. At least, that's what I have seen in my world of anecdata.
I know people that don't know:
* How to recover their bank accounts (they told me it's impossible, so I recovered it for them)
* What an index fund is. Even when I do tell them, it seems to be a bunch of hocus pocus to them.
* Ok, I don't know people with credit card trouble. Dutch people tend to not have credit cards.
There are enough people that don't know a single thing about finance. Most of these people are 60+ and middle class. At least, that's what I have seen in my world of anecdata.
I see that - and I think it's quite a cultural thing. Most of the people I know in such positions, are also 60+ and have either retired, or on their path to retiring.
Here in Norway most of the older folks either retired at 62 or 67, so being acutely aware of things like diverse investment portfolios, strategic credit card usage, etc. weren't really a thing. They'd get their pensions, and live normal lives.
Here in Norway most of the older folks either retired at 62 or 67, so being acutely aware of things like diverse investment portfolios, strategic credit card usage, etc. weren't really a thing. They'd get their pensions, and live normal lives.
I am envious of the 250,000 $ every Norwegian has in his or her portfolio, properly diversified over the world economy with 0.16 % TER, just by the virtue of being born Norwegian.
I think most retired people in Europe just live off their state pensions.
Likewise, I don't think that if we suddenly teach everyone financial literacy, we're suddenly going to poverty plummeting. I don't think poor people are poor because they don't know how to pay their bills on time, invest in index funds, or that having a maxed out 35% credit card will make your debt outgrow a 8% savings fund.
Cause of being poor and in financial distress is multifactorial. Some of the problem can be blame on poor spending habits and lack of education.
Cause of being poor and in financial distress is multifactorial. Some of the problem can be blame on poor spending habits and lack of education.
I disagree with your conclusion in relation to the points you presented:
> I think poor people are poor because they're trapped in low-wage jobs, and are often forced to use more expensive services, as well as being victims to centralization and ever-growing rents
That might be another issue, but in terms of what you have presented I think the issue is that knowing isn't enough, executing on the knowledge matters more. And most people can't execute, which is why people are still fat.
> I think poor people are poor because they're trapped in low-wage jobs, and are often forced to use more expensive services, as well as being victims to centralization and ever-growing rents
That might be another issue, but in terms of what you have presented I think the issue is that knowing isn't enough, executing on the knowledge matters more. And most people can't execute, which is why people are still fat.
Wouldn't that kind of be the case for poor people too?
I mean, even if you transferred all the knowledge of personal finance to them in an instant - investing or putting aside $0 is still going to yield the same result: $0. For many, it is impossible to execute such things, because they simply do not have any money to spend - nor do they have the chance to make more money, because they're already trapped with multiple jobs, children, and what not.
I mean, even if you transferred all the knowledge of personal finance to them in an instant - investing or putting aside $0 is still going to yield the same result: $0. For many, it is impossible to execute such things, because they simply do not have any money to spend - nor do they have the chance to make more money, because they're already trapped with multiple jobs, children, and what not.
Having access to facts, and acting on them are just two different things. In fact even having the motivation to act on knowledge isn't exactly covered in education.
These are really issues related to larger character building of a person.
They come from a different kind of education which is basically life experiences themselves. You really need some kind of journey for self discovery.
These are really issues related to larger character building of a person.
They come from a different kind of education which is basically life experiences themselves. You really need some kind of journey for self discovery.
> Most schools teach basic nutrition, i.e that eating less/more food than you need, can/will result in losing/gaining weight.
That is not basic nutrition. We don't eat solely for calories and the composition of food affects how you feel and how you perform. Whether you are hungry and how much. Weight gain or loss is not the only parameter affected by food.
Plus, kids don't have control over what they eat. Composition of school lunch is what they lunch.
So maybe it is fully understandable that obesity goes up while we pat ourselves on backs.
That is not basic nutrition. We don't eat solely for calories and the composition of food affects how you feel and how you perform. Whether you are hungry and how much. Weight gain or loss is not the only parameter affected by food.
Plus, kids don't have control over what they eat. Composition of school lunch is what they lunch.
So maybe it is fully understandable that obesity goes up while we pat ourselves on backs.
The article talks about financial literacy as it pertains to ordinary folks.
But - perhaps more relevant to the HN audience - I have noticed a surprising amount of financial illiteracy among the tech-savvy middle-to-wealthy class as well. A lunchtime conversation with my coworkers showed that most put more faith in their own instincts with picking stocks than in index or mirror funds (something that evidence shows is very unlikely, but people like to believe). Another time, I found that a majority of my coworkers were filing their stock-option taxes incorrectly.
Though no doubt wealthy folks are more literate (including financial literacy) than the poor, my suspicion is that most of the difference in financial outcomes comes to the fact that poor people simply have less capacity to save than middle/wealthy, and more severely feel the impacts of poor decision making.
But - perhaps more relevant to the HN audience - I have noticed a surprising amount of financial illiteracy among the tech-savvy middle-to-wealthy class as well. A lunchtime conversation with my coworkers showed that most put more faith in their own instincts with picking stocks than in index or mirror funds (something that evidence shows is very unlikely, but people like to believe). Another time, I found that a majority of my coworkers were filing their stock-option taxes incorrectly.
Though no doubt wealthy folks are more literate (including financial literacy) than the poor, my suspicion is that most of the difference in financial outcomes comes to the fact that poor people simply have less capacity to save than middle/wealthy, and more severely feel the impacts of poor decision making.
the amount of people I've met that say "they can't do numbers", and are proud of it always surprises me
(and this includes people like lawyers)
then if you ask them if they would be proud to be illiterate the answer is always a forceful no
why the difference?
(and this includes people like lawyers)
then if you ask them if they would be proud to be illiterate the answer is always a forceful no
why the difference?
Can't bullshit your way around numbers.
RE: Stock-picking skills, versus trusting the market.
I think it boils down to at least the following factors:
- The belief that you are a smart and capable person, and that this intellect will translate into all other domains, especially those close to what your won domain of expertise is. i.e "I'm good with numbers, and work in tech - thus, I should be good at picking tech companies by looking at their reported numbers"
- DIY mentality, which a lot of hacker-types posses. People in tech absolutely love to roll out their own things.
- Exposure to the various industry sectors. If you work in industry [x], you're probably going to get exposed to most parts of it - including other companies. Maybe that gives you a false sense of confidence in your pickings.
I think it boils down to at least the following factors:
- The belief that you are a smart and capable person, and that this intellect will translate into all other domains, especially those close to what your won domain of expertise is. i.e "I'm good with numbers, and work in tech - thus, I should be good at picking tech companies by looking at their reported numbers"
- DIY mentality, which a lot of hacker-types posses. People in tech absolutely love to roll out their own things.
- Exposure to the various industry sectors. If you work in industry [x], you're probably going to get exposed to most parts of it - including other companies. Maybe that gives you a false sense of confidence in your pickings.
> A lunchtime conversation with my coworkers showed that most put more faith in their own instincts with picking stocks than in index or mirror funds (something that evidence shows is very unlikely, but people like to believe)
Very unlikely in what circumstances? E.g. 5 year period, 20 year period, holding the same stocks the entire time, etc.
Very unlikely in what circumstances? E.g. 5 year period, 20 year period, holding the same stocks the entire time, etc.
Very unlikely in all your examples, exceedingly unlikely the longer the game is played.
I know enough non-tech educated people who don't invest in anything. They have no inclination to. They have no one to guide them. Even when someone tells them to invest, it is a concept too hard for them to grasp.
Not everyone is looking to make money. Sometimes circumstances won't allow them to understand it. By the time they do, it's already too late.
Not everyone is looking to make money. Sometimes circumstances won't allow them to understand it. By the time they do, it's already too late.
> They have no inclination to.
One shtick I have is the "Young person, why don't you have a brokerage account"?
I know so many people, who are not so young any more, who are professionals and with solid salaries, who will do things like have credit cards, have cars they finance, a coinbase account, maybe a robinhood account, certainly a facebook and instagram account.... but no Schwab, Vanguard, or other basic Individual brokerage account.
They have the income and technical know-how to make complicated online accounts and make use of financial services.. but even though it takes ten minutes to make a Vanguard account, and 2 business days to credit it and buy boring index funds... so few people who can (ie have money and knowledge), actually do... or even have much interest. It's sad and fascinating at the same time.
One shtick I have is the "Young person, why don't you have a brokerage account"?
I know so many people, who are not so young any more, who are professionals and with solid salaries, who will do things like have credit cards, have cars they finance, a coinbase account, maybe a robinhood account, certainly a facebook and instagram account.... but no Schwab, Vanguard, or other basic Individual brokerage account.
They have the income and technical know-how to make complicated online accounts and make use of financial services.. but even though it takes ten minutes to make a Vanguard account, and 2 business days to credit it and buy boring index funds... so few people who can (ie have money and knowledge), actually do... or even have much interest. It's sad and fascinating at the same time.
I understand their perspective though. Some of them are very driven people. They are just not interested or oblivious to the power of wealth.
Some of them only care about career ladder. They must climb and optimize for that. Others care only about fame. Some clamor for benefit of their children.
It's true money can bring a lot of freedom. But to many people, it is not the be all end all.
Some of them only care about career ladder. They must climb and optimize for that. Others care only about fame. Some clamor for benefit of their children.
It's true money can bring a lot of freedom. But to many people, it is not the be all end all.
> Though no doubt wealthy folks are more literate (including financial literacy) than the poor
I’m not sure this part is true. One of the privileges of being relatively wealthy is that you don’t have to pay as much attention to your finances if you don’t want to. You don’t have to worry about budgeting if you know you have enough income to cover your expenses. You don’t have to pore over every inch of your insurance policies if you know you generally have enough money if you get hurt.
Of course, you do need enough awareness to live within your means. But generally speaking, you probably have enough financial headroom that you can make suboptimal financial decisions and still get by. Many poor people don’t have that luxury.
I’m not sure this part is true. One of the privileges of being relatively wealthy is that you don’t have to pay as much attention to your finances if you don’t want to. You don’t have to worry about budgeting if you know you have enough income to cover your expenses. You don’t have to pore over every inch of your insurance policies if you know you generally have enough money if you get hurt.
Of course, you do need enough awareness to live within your means. But generally speaking, you probably have enough financial headroom that you can make suboptimal financial decisions and still get by. Many poor people don’t have that luxury.
Not all poor are stupid, but many stupid people are poor because of their financial decisions.
For example: I have a friend who has bought at least 5 new cars in the past year despite making less than a third of my income. He has no self control and just wants the latest and greatest.
My group of friends all roll our eyes collectively whenever this person starts talking about a new car. Just on schedule, roughly 1.5 years after the last car.
But hey, at least this person has a job these days. There was a time where he was unemployed and still was pulling these shenanigans.
---------
On the other hand: I had a great talk with a nice old lady the other day about reducing risks by making a bond ladder. She didn't know the term was called bond ladder, but she's been using CDs and other instruments (not equities) to build up her savings while reducing interest rate risks.
I know she's poorer than me, based on how she scoffed at the amount of years I thought it'd take to save up for various purchases (car, house, etc. etc.) near the end of the discussion. (Talking exact numbers is a faux pas and I didn't mean to. But if I say something like "and I think my new $20k car will take 1 year of savings", the reaction of myself, as well as the other person, will set the expectations of income innately) But she was clearly highly financially literate, maybe a bit lower on the risk spectrum than I'd personally be, but she'd hold her side of the conversation about equities, bonds, CDs, and other instruments.
For example: I have a friend who has bought at least 5 new cars in the past year despite making less than a third of my income. He has no self control and just wants the latest and greatest.
My group of friends all roll our eyes collectively whenever this person starts talking about a new car. Just on schedule, roughly 1.5 years after the last car.
But hey, at least this person has a job these days. There was a time where he was unemployed and still was pulling these shenanigans.
---------
On the other hand: I had a great talk with a nice old lady the other day about reducing risks by making a bond ladder. She didn't know the term was called bond ladder, but she's been using CDs and other instruments (not equities) to build up her savings while reducing interest rate risks.
I know she's poorer than me, based on how she scoffed at the amount of years I thought it'd take to save up for various purchases (car, house, etc. etc.) near the end of the discussion. (Talking exact numbers is a faux pas and I didn't mean to. But if I say something like "and I think my new $20k car will take 1 year of savings", the reaction of myself, as well as the other person, will set the expectations of income innately) But she was clearly highly financially literate, maybe a bit lower on the risk spectrum than I'd personally be, but she'd hold her side of the conversation about equities, bonds, CDs, and other instruments.
Some people struggle because they make poor financial decisions, sure, but I’d bet that’s the exception rather than the rule. There’s a post about being poor(ish) that’s shown up on HN a few times [1]. I think far more people in that situation are financially savvy, acutely aware of the pros and cons of their limited options, simply because there’s so little margin for error.
[1] https://residentcontrarian.substack.com/p/on-the-experience-...
[1] https://residentcontrarian.substack.com/p/on-the-experience-...
I mean CD ladders were not a bad idea in the era of nontrivial interest rates...
Yeah, given her age and the time period she lived in, it certainly was a workable strategy. She was clearly retired at this point and was proud of her nest-egg and was willing to talk to me about it ("impart her wisdom"), which I definitely appreciated.
It really wasn't until the end of the discussion when I appreciated how different our income levels were. A lesson I'll remember later: its easy to forget income levels, as well as assume other people's income levels based off of conversation topics. Something I'll work on in the future.
It really wasn't until the end of the discussion when I appreciated how different our income levels were. A lesson I'll remember later: its easy to forget income levels, as well as assume other people's income levels based off of conversation topics. Something I'll work on in the future.
What resources would you suggest to help your coworkers?
"Financial literacy" has been en vogue since the 1980s.
https://books.google.com/ngrams/graph?content=financial+lite...
Financial solvency for the typical wage-earner has plummeted over the same period, illustrated here by the widening gap between productivity and median wages:
https://commons.wikimedia.org/wiki/File:Productivity_and_Rea...
(Household wealth would be a better measure, that data's harder to turn up on a moment's notice. The Federal Reserve's Survey of Consumer Finances is probably among the best references, it was last updated in 2019, and is published every three years: https://www.federalreserve.gov/econres/scfindex.htm)
If insanity is doing the same thing and expecting different results, then with all respect to Mr. Jenkins and the Financial Times, it seems that what's needed are stronger wage protections and collective bargaining power, a better social safety net, and some goddamned reality-based assessments and human compassion.
https://books.google.com/ngrams/graph?content=financial+lite...
Financial solvency for the typical wage-earner has plummeted over the same period, illustrated here by the widening gap between productivity and median wages:
https://commons.wikimedia.org/wiki/File:Productivity_and_Rea...
(Household wealth would be a better measure, that data's harder to turn up on a moment's notice. The Federal Reserve's Survey of Consumer Finances is probably among the best references, it was last updated in 2019, and is published every three years: https://www.federalreserve.gov/econres/scfindex.htm)
If insanity is doing the same thing and expecting different results, then with all respect to Mr. Jenkins and the Financial Times, it seems that what's needed are stronger wage protections and collective bargaining power, a better social safety net, and some goddamned reality-based assessments and human compassion.
Another piece of financial literacy that should really be taught in every high school is the Kelly Criterion. Even a basic understanding of the concept can improve many people's risk/reward over time.
And while it's often mentioned in the context of high-risk bets, it's equally applicable to low-risk savings / investments (how much of savings to keep in cash vs the general stock market, given X% estimated inflation).
Surprisingly, I've come across a large number of people in (seed) investment circles, active investors and entrepreneurs who didn't know about it.
https://en.wikipedia.org/wiki/Kelly_criterion
And while it's often mentioned in the context of high-risk bets, it's equally applicable to low-risk savings / investments (how much of savings to keep in cash vs the general stock market, given X% estimated inflation).
Surprisingly, I've come across a large number of people in (seed) investment circles, active investors and entrepreneurs who didn't know about it.
https://en.wikipedia.org/wiki/Kelly_criterion
There is a book that taught me a great deal: Systematic Trading by Rob Carver.
In it, he notes that betting/investing at the Kelly criterion implies you are quite confident in your abilities to forecast.
For a margin of safety, invest less, say, half-Kelly. That way, you allow for unknown-unknowns.
In it, he notes that betting/investing at the Kelly criterion implies you are quite confident in your abilities to forecast.
For a margin of safety, invest less, say, half-Kelly. That way, you allow for unknown-unknowns.
I don’t really buy this. The Kelly criterion is fundamentally assuming log utility of money which I think doesn’t really apply to most people (that is, I think utility is more linear or superlinear around where their earnings are. I don’t think it applies to a VC fund either.) It is also mathematically somewhat complicated and hard for ordinary people to apply to the real world (note that as a Hacker News reader, you are already likely much more literate and numerate than an average person). I think it is better to try to give people a more intuitive understanding of risk (that is, what is risky and what it means for something to be risky) and push them towards safer, more diversified investments.
> utility is more linear or superlinear around where their earnings are
I am not sure what you mean. An extra $1k per month means tons more when you earn $1k compared to when you earn $5k.
I am not sure what you mean. An extra $1k per month means tons more when you earn $1k compared to when you earn $5k.
Ok, I take back superlinear, but log utility says that an extra $500 when you earn $1k is like earning an extra $2500 when you earn $5k, but I claim it is more like earning say $1000 when you earn $5k (so not linear but not really log either—more like square root)
Financial literacy is in the same class of policies as abstinence-based sex education and "just say no" anti-drug campaigns. Unless this education is about giving the poor access to capital and lucrative, reliable investment opportunities, all that penny-pinching gives you is an awareness of being trapped in an interlocking web of systems of financial predation: risks, costs, fees, and liabilities systematically offloaded onto you, a mostly defenseless consumer of necessary basic services.
What really works is giving up on yourself and admitting that you will die broken, sick, and poor, and putting all your energies into your offspring who will vindicate your sacrifice. Pressure your children into challenging academic pathways, reduce their leisure time, and help them get into prestigious occupations. That's the only reliable path to building family wealth.
What really works is giving up on yourself and admitting that you will die broken, sick, and poor, and putting all your energies into your offspring who will vindicate your sacrifice. Pressure your children into challenging academic pathways, reduce their leisure time, and help them get into prestigious occupations. That's the only reliable path to building family wealth.
You have a very grim and victim-based view of financial reality. While you are partially correct, the system is working against the individual, you are also dismissing that there is some wiggle room for these people to improve their financial standing.
By improving your own education, working hard, and learning good financial habits, you can be at least somewhat better off. You will always suffer at the hands of this capitalist machine that chews the poor and spits them out. But with some level of self-discipline you can (at least slightly) improve your life and the lives of your offspring.
Lots of success is based on probability, so with luck, hard work, and financial literacy you may even be much better off.
By improving your own education, working hard, and learning good financial habits, you can be at least somewhat better off. You will always suffer at the hands of this capitalist machine that chews the poor and spits them out. But with some level of self-discipline you can (at least slightly) improve your life and the lives of your offspring.
Lots of success is based on probability, so with luck, hard work, and financial literacy you may even be much better off.
Sure, but financial literacy programs targeting the poor are always scams (offered as a hurdle on the road to obtaining basic benefits). Investment opportunities targeting the poor are also always scams (like huckster workshops about flipping houses for profit or blowing money on risky investments). Financial services targeting the poor are usually scams (e.g., the recently deregulated payday loan "industry").
I am reminded of working with poor clients when some consumer bank in the US started offering a "financial health" program, wherein they would round up every card purchase to the next dollar, deposit that fraction of a dollar into a savings account, and then match it for you up to $100 a month.
All the other counselors at our org were super excited to tell our clients about this: "It's free money from your bank! You just got to start making a lot more transactions on your card to earn out the full $100!"
I am reminded of working with poor clients when some consumer bank in the US started offering a "financial health" program, wherein they would round up every card purchase to the next dollar, deposit that fraction of a dollar into a savings account, and then match it for you up to $100 a month.
All the other counselors at our org were super excited to tell our clients about this: "It's free money from your bank! You just got to start making a lot more transactions on your card to earn out the full $100!"
As a former poor person from an environment somewhere between working class and middle class (dad worked in auto parts stores, mom as a government bureaucrat) – I credit Hacker News and the internet at large with my relative financial freedom these days. Yes it took 10 years to get here, but ho boy would I never have even known to begin to start without what folks like patio11, tptacek, et al talked about and shared on here. Ramit’s newsletter helped too but he’s not on HN afaik.
The extent of my financial literacy education growing up was there is always more month at the end of the money … oh and you should save. The saving part never made sense to me, why would you put money in a savings account that just gets wiped out by taxes at the end of the year? So dumb.
And then I learned there’s more out there than savings accounts with 0.01% interest and that you yourself can be a good investment and just thinking about assets vs liabilities and how you prioritize each … oof. Whole new world!
To be fair to my parentals, my dad did make me read Rich Dad Poor Dad in high school or college after he started discovering this world himself. I think that formed a good fertile ground for much of what HN had to share.
Point is: The environment that influences you has a huge impact on life outcomes. Probably more than any other factor.
The extent of my financial literacy education growing up was there is always more month at the end of the money … oh and you should save. The saving part never made sense to me, why would you put money in a savings account that just gets wiped out by taxes at the end of the year? So dumb.
And then I learned there’s more out there than savings accounts with 0.01% interest and that you yourself can be a good investment and just thinking about assets vs liabilities and how you prioritize each … oof. Whole new world!
To be fair to my parentals, my dad did make me read Rich Dad Poor Dad in high school or college after he started discovering this world himself. I think that formed a good fertile ground for much of what HN had to share.
Point is: The environment that influences you has a huge impact on life outcomes. Probably more than any other factor.
Don't criticize your parents for not knowing as much as you do. I'm sure they hoped that would be the case.
I would encourage everyone to make a spreadsheet (or math tool of choice) and work out how much an extra $X/mo saved and invested buys in terms of years until retirement. That number is a really important one in my financial planning because while you’re young a little bit goes a really long way.
I also wonder how much innumeracy contributes to financial illiteracy. They seem to go hand in hand in my experience.
I also wonder how much innumeracy contributes to financial illiteracy. They seem to go hand in hand in my experience.
This is a great way to quantify the benefits of saving instead of spending in terms of something other than a dollar amount. Just saying, save $ABC today and you'll have $XYZ in your bank account when you're 80 is not as powerful as saying "Save $ABC more every week, and you can retire two years earlier." Also, keep in mind that a dollar saved in your 20s has a much bigger impact on your retirement date than a dollar saved in your 30s, 40s or 50s. I wish I would have saved every penny in my 20s, as I'd probably be close to retirement by now.
It's also good to remember that each $1000 you save in your 40s has a bigger impact than each $100 you save in your 20s. That $1000 may also be easier to afford.
For many (most?) people, early career is the time when the financial pressure is the worst. Income is still low, while expenses are not much lower than later in life. You may have student loans to repay and mortgage down payment to save for, and you can't delay having kids indefinitely. It's one thing to know that each decade should double the real value of your savings, and it's another thing to afford saving any meaningful sum of money.
The real choice comes when your income increases or your mandatory spending decreases. Do you then increase your discretionary spending, or do you save some of the extra money instead?
For many (most?) people, early career is the time when the financial pressure is the worst. Income is still low, while expenses are not much lower than later in life. You may have student loans to repay and mortgage down payment to save for, and you can't delay having kids indefinitely. It's one thing to know that each decade should double the real value of your savings, and it's another thing to afford saving any meaningful sum of money.
The real choice comes when your income increases or your mandatory spending decreases. Do you then increase your discretionary spending, or do you save some of the extra money instead?
> It's also good to remember that each $1000 you save in your 40s has a bigger impact than each $100 you save in your 20s.
Not necessarily. Historically that is a very close call. I just googled, 8.3% real returns of S&P 500, which would make $100 invested at your 20th birthday exactly $1009 (after inflation) when you are 49 years old.
Not necessarily. Historically that is a very close call. I just googled, 8.3% real returns of S&P 500, which would make $100 invested at your 20th birthday exactly $1009 (after inflation) when you are 49 years old.
The spreadsheet that stuck in younger me's mind was as follows: How long do I have to keep contributing $X periodically until the returns are greater than my periodic $X contributions?
It's going to be tougher and tougher to preserve financial discipline as useful advice in today's increasingly meme'y world of GME-style overnight successes. I know a waitress that made ~$20k on Moderna. She was doing alright before but now she's talking about leaving the profession.
Sure it'll be right there for her when she needs it again, but the reality is, financial strategies only work over the long term, and willing to keep maintaining a contribution schedule. Everything else is betting / entrepreneurship. While there's nothing wrong with entrepreneurship the mindset is almost completely at odds with investment / finance. A $20k windfall is best put down on property, not on more stock bets.
Sure it'll be right there for her when she needs it again, but the reality is, financial strategies only work over the long term, and willing to keep maintaining a contribution schedule. Everything else is betting / entrepreneurship. While there's nothing wrong with entrepreneurship the mindset is almost completely at odds with investment / finance. A $20k windfall is best put down on property, not on more stock bets.
When, like most people in existence (even in the USA or UK), you're barely making ends meet week to week financial literacy means something entirely different than what this article is talking about.
Knowing the ins and outs of the rigged game that is getting a loan from a fractional reserve bank doesn't matter when the bank will never give you a loan in the first place. And all the financial literacy problems they do face, like how to deal with predatory behavior from the "financially literate" banks regarding overdrafts and credit cards are artificial situations created by the banks.
>New survey data, commissioned for the Financial Times from Ipsos Mori, reveals striking shortcomings in financial understanding that cement inequality.
Becoming aware of how the banks and CC companies scam you doesn't really stop it. Ignorance doesn't cement the inequality, fractional reserve banking does.
Knowing the ins and outs of the rigged game that is getting a loan from a fractional reserve bank doesn't matter when the bank will never give you a loan in the first place. And all the financial literacy problems they do face, like how to deal with predatory behavior from the "financially literate" banks regarding overdrafts and credit cards are artificial situations created by the banks.
>New survey data, commissioned for the Financial Times from Ipsos Mori, reveals striking shortcomings in financial understanding that cement inequality.
Becoming aware of how the banks and CC companies scam you doesn't really stop it. Ignorance doesn't cement the inequality, fractional reserve banking does.
> Becoming aware of how the banks and CC companies scam you doesn't really stop it
I’ve seen educated friends do mind-bogglingly stupid things financially. Stuff like having savings wiped out for lack of renter’s insurance, paying off a low-rate card while a high-rate balance persists, paying hundreds of dollars in fees for banking services they never use, et cetera. To say nothing of not being aware of the myriad of government programs available to most people in a developed country.
I’ve seen educated friends do mind-bogglingly stupid things financially. Stuff like having savings wiped out for lack of renter’s insurance, paying off a low-rate card while a high-rate balance persists, paying hundreds of dollars in fees for banking services they never use, et cetera. To say nothing of not being aware of the myriad of government programs available to most people in a developed country.
> savings wiped out for lack of renter’s insurance
Wait what? How does renter's insurance have anything to do with savings? Or are these people who were keeping wads of cash under their bed?
Or is it that they had to use all their savings to buy back all their stuff due to disaster or theft? (which seems weird to me because I imagine most renters tend to have more value in cash+securities than stuff; home owners probably are the opposite because of the sheer value of the home)
Wait what? How does renter's insurance have anything to do with savings? Or are these people who were keeping wads of cash under their bed?
Or is it that they had to use all their savings to buy back all their stuff due to disaster or theft? (which seems weird to me because I imagine most renters tend to have more value in cash+securities than stuff; home owners probably are the opposite because of the sheer value of the home)
> How does renter's insurance have anything to do with what's in the bank?
Long story short, damage was caused to the apartment by a house sitter. The landlord sued for the cost of the repairs. The litigation and costs would have been covered by a vanilla renter’s insurance policy.
Long story short, damage was caused to the apartment by a house sitter. The landlord sued for the cost of the repairs. The litigation and costs would have been covered by a vanilla renter’s insurance policy.
That's a nice ideal and all but buying food usually comes before renters insurance. $200 a year matters. Seriously. To a lot of the world population that's a lot of money they can't afford to throw away on a chance.
> buying food usually comes before renters insurance. $200 a year matters. Seriously.
I agree. Was echoing the observation that financial literacy and education can be disconnected. At lower levels of income, the key lessons tend to revolve around the cost of check cashing and payday lending, avoiding banks that charge fees, doing your taxes and getting your credits and refund and keeping an eye on recurring bills.
I agree. Was echoing the observation that financial literacy and education can be disconnected. At lower levels of income, the key lessons tend to revolve around the cost of check cashing and payday lending, avoiding banks that charge fees, doing your taxes and getting your credits and refund and keeping an eye on recurring bills.
Presumably having to spend their savings to pay for something catastrophic renters insurance would have covered.
Note that the opposite calculation applies if you have (enough) money.
One day, some years ago, I wrote a Facebook post something like. "That's interesting. The sound of water which woke me was in fact water pouring from the flat above into the bathroom. Those of you who've always said I should have insurance now get the last laugh".
It turns out that the damage was relatively minor except to walls, ceilings and carpets which were - at the time - insured by the building owner, so, I think I spent less than a grand on some re-decorating and it would have been even less if the upstairs neighbour (who needed emergency plumbing etc.) had actually done her paperwork since that's one incident and one insurance claim excess.
But the reason I was so calm about it was that I've done the arithmetic years earlier, if my stuff is destroyed I have to buy new stuff, using money, which I have, whereas if I carry insurance I have to pay the premiums every year, also using money, which includes a healthy profit for the insurer.
Now, many people have no choice because in reality a bank owns their home, they pay a mortgage and the bank wants no chance of you walking away from that so it insists you also buy insurance. But I don't have a mortgage, I paid cash, and so I don't need to carry insurance.
This a really edge case example of the widely true but counter-intuitive observation that being poor is expensive. It isn't at all surprising that the FT would rather blame the poor for their circumstances than help them. Very on brand.
One day, some years ago, I wrote a Facebook post something like. "That's interesting. The sound of water which woke me was in fact water pouring from the flat above into the bathroom. Those of you who've always said I should have insurance now get the last laugh".
It turns out that the damage was relatively minor except to walls, ceilings and carpets which were - at the time - insured by the building owner, so, I think I spent less than a grand on some re-decorating and it would have been even less if the upstairs neighbour (who needed emergency plumbing etc.) had actually done her paperwork since that's one incident and one insurance claim excess.
But the reason I was so calm about it was that I've done the arithmetic years earlier, if my stuff is destroyed I have to buy new stuff, using money, which I have, whereas if I carry insurance I have to pay the premiums every year, also using money, which includes a healthy profit for the insurer.
Now, many people have no choice because in reality a bank owns their home, they pay a mortgage and the bank wants no chance of you walking away from that so it insists you also buy insurance. But I don't have a mortgage, I paid cash, and so I don't need to carry insurance.
This a really edge case example of the widely true but counter-intuitive observation that being poor is expensive. It isn't at all surprising that the FT would rather blame the poor for their circumstances than help them. Very on brand.
I have made the same calculation regarding a form life insurance, which only pays in case of death. Which in my jurisdiction is a weird product, which makes sense, if you have a little bit to lose, so you are above the minimum guaranteed by society, but you are not already above the point where the effects you described kick in.
What makes the calculation even nicer if you are well-off enough to not have to buy it: If you actually put the money into your portfolio instead, each year you do not need it, the advantage increases further through compound interest, so at some point it literally pays for itself, while the insurance premiums would stay exactly the same.
What makes the calculation even nicer if you are well-off enough to not have to buy it: If you actually put the money into your portfolio instead, each year you do not need it, the advantage increases further through compound interest, so at some point it literally pays for itself, while the insurance premiums would stay exactly the same.
It does help a bit, finance aware people (rich people) look at life differently, they chase fads less and wait a bit more with their capital.. they benefit a lot from uneducated mass going around buying stupid stuff and throwing it 6 month later to buy new stupid stuff.
Now that said, being rich does allow a lot of stuff that no education can compensate for, I agree.
Now that said, being rich does allow a lot of stuff that no education can compensate for, I agree.
[deleted]
The other thing is, the concept of financial literacy is changing with the times.
The likes of Warren Buffet would probably tell you to never touch cryptocurrency, for example, but today, as of 2021, pretending it doesn't exist and being afraid of it is being horribly oblivious to what is going on in the financial world right now.
Four years ago you'd look like "one of those financially-illiterate hippies" for investing in Bitcoin, and become part of the laughing stock after the 2018 crypto crash, but if you had held onto a diversified portfolio of cryptocurrencies you'd probably be doing very well right now.
The truly financially literate learn to adapt to a changing world, embrace and try to understand new investment vehicles, and try to make sense of how they might shape the future.
The likes of Warren Buffet would probably tell you to never touch cryptocurrency, for example, but today, as of 2021, pretending it doesn't exist and being afraid of it is being horribly oblivious to what is going on in the financial world right now.
Four years ago you'd look like "one of those financially-illiterate hippies" for investing in Bitcoin, and become part of the laughing stock after the 2018 crypto crash, but if you had held onto a diversified portfolio of cryptocurrencies you'd probably be doing very well right now.
The truly financially literate learn to adapt to a changing world, embrace and try to understand new investment vehicles, and try to make sense of how they might shape the future.
Financial literacy means, among other things, understanding that an investment decision can never be justified after the fact based on the observed outcome of that particular investment.
Tulip mania can go on for years, as it has in all previous bubbels. Maybe they are good investments, but they still show all the signs of a bubble to me.
I was involved in a massive study (n=40k) of Canadians related to financial matters. In Canada, just over 50% receive financial advice from a financial professional (advisor, accountant, etc). However, a mere 40% of those receiving advice (in 2014 it was ~30%) are aware that those professionals charge for their services (they all charge!). In the same research we asked a financial literacy quiz with basic questions about debt, investment, and common retirement products and it was extremely rare for anyone (other than a very small contingent of saavy 30-something males) to get all the answers correct.
Questions about debt are the most often misunderstood. When regulators ask us what we think - we have the same answer for them as the companies that paid for the research: engage Canadians and teach them about financial literacy - it should be part of the high school curriculum! If this is happening in Canada with it's rather high rates of education, it's probably happening in a lot of other places too.
Questions about debt are the most often misunderstood. When regulators ask us what we think - we have the same answer for them as the companies that paid for the research: engage Canadians and teach them about financial literacy - it should be part of the high school curriculum! If this is happening in Canada with it's rather high rates of education, it's probably happening in a lot of other places too.
Maybe the first step to financial literacy is learning that if a company or a person you don't know is doing something for you for "free", you need to figure out what the hidden catch is before you take the "free" stuff or service.
So the author went to Middlesbrough, saw the total deprivation everywhere, and thought...these people just need financial literacy lessons?
I accept the micro point that people in these situations make bad financial choices but the reason they make these choices, as the survey shows which finds a high overall level of financial literacy, is the lack of better options.
I accept the micro point that people in these situations make bad financial choices but the reason they make these choices, as the survey shows which finds a high overall level of financial literacy, is the lack of better options.
Financial literacy is only one google search away (the easy part), then spending a few hundreds hours studying (medium hard part), and then make better decisions based on long term preferences and not short term pleasure.
Alas, the Marshmallow Test would indicate Nature and not Nurture.
Alas, the Marshmallow Test would indicate Nature and not Nurture.
[deleted]
The problem is the facts that everyone agrees on rarely give the best results. Best comment from the ft article:
> A financial literate person probably would not borrow lots of money to buy properties since around 2005 when the market was pretty obviously overvalued. How wrong the person had been.
> A financial literate person probably would not buy the cryptos either, for a long time at least. How wrong the person had been.
> A financial literate probably won't buy the MEME stocks either, for a time at least
> A financial literate person save money in the bank account, only to face real rates of -4%.
> I can't even be sure the money printers that drove asset prices to such valuations are financial literate either
> A financial literate person probably would not borrow lots of money to buy properties since around 2005 when the market was pretty obviously overvalued. How wrong the person had been.
> A financial literate person probably would not buy the cryptos either, for a long time at least. How wrong the person had been.
> A financial literate probably won't buy the MEME stocks either, for a time at least
> A financial literate person save money in the bank account, only to face real rates of -4%.
> I can't even be sure the money printers that drove asset prices to such valuations are financial literate either
Feels like all the reasons you quoted are strawmans of financial literacy.
> A financial literate person probably would not borrow lots of money to buy properties since around 2005 when the market was pretty obviously overvalued. How wrong the person had been.
Financial literacy advises against timing the market.
> A financial literate person probably would not buy the cryptos either, for a long time at least. How wrong the person had been.
> A financial literate probably won't buy the MEME stocks either, for a time at least
Do financial literacy advocates claim that you'll get the best outcome every time? Or that you'll capture all the opportunities? It also advocates against you betting all your life savings on black 10 times in a row, even though if you won all 10 times you can turn $1k in savings into a million dollars.
> A financial literate person save money in the bank account, only to face real rates of -4%.
Financial literacy tells you to adjust your portfolio based on your investment horizon/risk tolerance, not stick it all in a savings account.
> A financial literate person probably would not borrow lots of money to buy properties since around 2005 when the market was pretty obviously overvalued. How wrong the person had been.
Financial literacy advises against timing the market.
> A financial literate person probably would not buy the cryptos either, for a long time at least. How wrong the person had been.
> A financial literate probably won't buy the MEME stocks either, for a time at least
Do financial literacy advocates claim that you'll get the best outcome every time? Or that you'll capture all the opportunities? It also advocates against you betting all your life savings on black 10 times in a row, even though if you won all 10 times you can turn $1k in savings into a million dollars.
> A financial literate person save money in the bank account, only to face real rates of -4%.
Financial literacy tells you to adjust your portfolio based on your investment horizon/risk tolerance, not stick it all in a savings account.
Back in 2016 I've coded a small app for basic investment/retirement calculations because a friend asked for it. Building it made me aware of many things I honestly didn't give a damn, and since then I've been able to save, invest and be in general much less worried about my retirement.
No it will not give you financial freedom. You still need to earn the money .this should be obvious.
Please, link some goog links and literature to enforce financial literacy :)
vxcv
I have two thoughts on the matter:
1. I tend to be pretty wary of assuming that poor people make poor financial decisions because they don’t know any better. Often their choices may be sensible given the circumstances or better options may not be available. See: http://www.businessinsider.com/check-cashing-stores-good-dea... which has some US examples (going to a check-casher is expensive but you get money immediately, which can be important for paying bills if you live paycheck-to-paycheck, and you don’t risk expensive overdraft fees—these don’t apply so much in the U.K. where overdraft fees are less insane and electronic payments typically come in faster, but a separate advantage to cash is having more control over money)
2. For wealthier people, I think it is hard to get good advice. Most people in financial services will be trying to make a profit, people you work with/know personally are unlikely to have truly good advice as they have similar problems getting it to you, and there is little media interest in repeating basically the same bits of advice every week. If you listen to Money Box (a radio programme about personal finance in the U.K.) then you may get the impression that the sensible way to invest is by finding obscure lucrative schemes that aren’t scams rather than going for simple broad-ranged ETFs or Index funds (or maybe talk about savings accounts or REITs.) This is because each episode typically contains some discussion of changing laws (regarding tax) or some kind of scam/fraud that some people fell for. It is probably good to put pressure on such schemes and if some listener writes to the show about one, the reporting often leads to them being reimbursed. But little thought is given to why people fall for them and what one should do to avoid them. For example, there was a case of someone who wanted a really really safe investment and went for making loans to (or maybe buying bonds from) some dodgy German company that was apparently building luxury houses in Turkey, and offering a return over 10%. The lesson here is that high returns tend to correspond to high risk, scams tend to promise high returns (at low risk), scams tend not to sell liquid products, and the listener should probably have bought gilts or some investment grade fixed income ETF/mutual fund. But none of that gets discussed (I think partly it is generally difficult to publish general investing advice) and one gets the impression that it is easy to fall for such scams in the ordinary process of investing. I also like Matt Levine’s tongue-in-cheek suggestions for improving personal finance: brokerages should have “technical difficulties” during a market crash and anything other than simple investments in diversified products (and maybe single stocks) requires getting a “stupid investment certificate” which involves being slapped in the face by a civil servant and promising not to tell the New York Times that you didn’t know what you were getting into)
1. I tend to be pretty wary of assuming that poor people make poor financial decisions because they don’t know any better. Often their choices may be sensible given the circumstances or better options may not be available. See: http://www.businessinsider.com/check-cashing-stores-good-dea... which has some US examples (going to a check-casher is expensive but you get money immediately, which can be important for paying bills if you live paycheck-to-paycheck, and you don’t risk expensive overdraft fees—these don’t apply so much in the U.K. where overdraft fees are less insane and electronic payments typically come in faster, but a separate advantage to cash is having more control over money)
2. For wealthier people, I think it is hard to get good advice. Most people in financial services will be trying to make a profit, people you work with/know personally are unlikely to have truly good advice as they have similar problems getting it to you, and there is little media interest in repeating basically the same bits of advice every week. If you listen to Money Box (a radio programme about personal finance in the U.K.) then you may get the impression that the sensible way to invest is by finding obscure lucrative schemes that aren’t scams rather than going for simple broad-ranged ETFs or Index funds (or maybe talk about savings accounts or REITs.) This is because each episode typically contains some discussion of changing laws (regarding tax) or some kind of scam/fraud that some people fell for. It is probably good to put pressure on such schemes and if some listener writes to the show about one, the reporting often leads to them being reimbursed. But little thought is given to why people fall for them and what one should do to avoid them. For example, there was a case of someone who wanted a really really safe investment and went for making loans to (or maybe buying bonds from) some dodgy German company that was apparently building luxury houses in Turkey, and offering a return over 10%. The lesson here is that high returns tend to correspond to high risk, scams tend to promise high returns (at low risk), scams tend not to sell liquid products, and the listener should probably have bought gilts or some investment grade fixed income ETF/mutual fund. But none of that gets discussed (I think partly it is generally difficult to publish general investing advice) and one gets the impression that it is easy to fall for such scams in the ordinary process of investing. I also like Matt Levine’s tongue-in-cheek suggestions for improving personal finance: brokerages should have “technical difficulties” during a market crash and anything other than simple investments in diversified products (and maybe single stocks) requires getting a “stupid investment certificate” which involves being slapped in the face by a civil servant and promising not to tell the New York Times that you didn’t know what you were getting into)
If people need money so badly why wouldn’t they just train for jobs with high paying salaries as early as they can? Education is the passport.
It's unfortunate but most of the time people tend to imitate what the people in their social/peer group are doing. That's partly why parents want their kids going to good schools - they'll pick up good habits from those around them.
If your friends are all talking about investing and saving to buy a house chances are you'll start looking into it too. I know its not an excuse either but people want to be part of a group more than anything and if that group were to mock you for your financial literacy or none of them are bothering to be financially savy I can see why many people are failing to grasp some of these concepts.
In my opinion financial literacy should be promoted via movie stars/ athletes. The very people many poor people look up too. I know Kevin Heart the actor was saying that this is something he really thinks would change a lot of poor peoples lives for the better and he's helped roll out campaigns to try and teach people some financial skills: https://hartofitall.chase.com/index.htm
If your friends are all talking about investing and saving to buy a house chances are you'll start looking into it too. I know its not an excuse either but people want to be part of a group more than anything and if that group were to mock you for your financial literacy or none of them are bothering to be financially savy I can see why many people are failing to grasp some of these concepts.
In my opinion financial literacy should be promoted via movie stars/ athletes. The very people many poor people look up too. I know Kevin Heart the actor was saying that this is something he really thinks would change a lot of poor peoples lives for the better and he's helped roll out campaigns to try and teach people some financial skills: https://hartofitall.chase.com/index.htm
Problem is the wealthy can't act poor. When you have a ton of money putting 10k in a designer purse you use once isn't a factor to your net worth, so why not.
Education is now a net lose for a sizable fraction of the people who go to college on credit.
Source? The math does not check out with the average student loan balance on graduation of $30k[1], and lifetime earning difference of $400k+ between high school degree and associate's degree[2]
[1] https://www.cnbc.com/2019/05/20/how-much-the-average-student...
[2] https://www.aplu.org/projects-and-initiatives/college-costs-...
[1] https://www.cnbc.com/2019/05/20/how-much-the-average-student...
[2] https://www.aplu.org/projects-and-initiatives/college-costs-...
Goldman Sachs, 2015.[1] "Graduates studying lower paying majors such as arts, education and psychology face the highest risk of a negative return."
[1] https://money.cnn.com/2015/12/09/news/economy/college-not-wo...
[1] https://money.cnn.com/2015/12/09/news/economy/college-not-wo...
Your original claim is disingenuous. People who go to college and get high value degrees come out ahead. You should only pursue a worthless degree if you are independently wealthy.
Pretty much any advice that has the word “just” in it was given by people who doesn’t understand the situation. This applies to the situation here. And it also applies to work where you maybe have been working on figuring out a problem for weeks and somebody looks for five minutes and asks “why don’t you just do X?”
That isn't an option in this part of the UK. There are almost no jobs. And the schools there are not good (and university isn't really an option for these people anyway, even if you get the grades). It also isn't easy to move anywhere, there is nowhere to move to, housing is short in any area people want to live.
For reference, Middlesbrough is one of the most deprived places in Europe (inc. Eastern Europe). I know people who grew up round there, I have been there quite a bit...it is unlike anything you see in most developed countries (the only place I have ever been like this was slum areas in Milan, and rural areas of Eastern Europe).
Even if schools had the teachers (most of them just don't teach some subjects, like computer science, at all...they don't have the staff, no-one will live there), bullying is off the charts, sexual violence against girls in school is an epidemic, teachers sexually abusing students is an epidemic...although hopefully ending...I would say it is close to impossible for most people in this situation to lift themselves out (particularly given the parents, not just school). I know people who went to schools around here, I know people who teach in these kind of areas in the UK...these places aren't developed country.
Btw, if you grow up in an urban environment in the South in the UK, even if the area is heavily impoverished...your school is top-tier. The issue is complex.
For reference, Middlesbrough is one of the most deprived places in Europe (inc. Eastern Europe). I know people who grew up round there, I have been there quite a bit...it is unlike anything you see in most developed countries (the only place I have ever been like this was slum areas in Milan, and rural areas of Eastern Europe).
Even if schools had the teachers (most of them just don't teach some subjects, like computer science, at all...they don't have the staff, no-one will live there), bullying is off the charts, sexual violence against girls in school is an epidemic, teachers sexually abusing students is an epidemic...although hopefully ending...I would say it is close to impossible for most people in this situation to lift themselves out (particularly given the parents, not just school). I know people who went to schools around here, I know people who teach in these kind of areas in the UK...these places aren't developed country.
Btw, if you grow up in an urban environment in the South in the UK, even if the area is heavily impoverished...your school is top-tier. The issue is complex.
this reads like something out of the Guardian
I grew up in one of the poorest parts of England (poorer than Middlesbrough), attended a comprehensive (non-selective) school, and had no problem getting into a top UK university (post tuition-fees)
as did almost all of my friends, all of whom went to the same crappy school in the same crappy area, and are all now gainfully employed
the UK is not Afghanistan
I grew up in one of the poorest parts of England (poorer than Middlesbrough), attended a comprehensive (non-selective) school, and had no problem getting into a top UK university (post tuition-fees)
as did almost all of my friends, all of whom went to the same crappy school in the same crappy area, and are all now gainfully employed
the UK is not Afghanistan
Okay, and how do you explain the fact that the statistics don't bear this out? The North East has the second-lowest proportion of young people attending university in England.
Everything that I said is also based on data. There are stats on who is attending uni, there are stats on sexual violence in schools, there are stats on bullying.
What is surprising is that you imply that my account is not representative in some way, and then say that I am wrong because you did it...how does this make sense to you? What you did makes no difference.
And, unless you are more specific about where you came from, it makes no difference because, as I took great care to mention, the issue is not about poverty. There is nowhere else poorer than Middlesbrough in the UK but the issue is that there is nowhere else with lower opportunities for you in life. So this is a problem that is specific to regions, it is largely non-existent below Birmingham. In all of these areas which have poverty, there is high social mobility...this is least true in the North-East, some places along the East coast, some places in the Midlands, many places in Wales and Scotland.
Also, I think it is truly tragic when someone points out things like bullying in schools and sexual violence against children for someone to say..."Oh, you must be a Guardian reader"...is it only people who read the Guardian who care about children being raped? Well...at least we know your views on the subject. I bet the moral high ground feels great. University was wasted on you.
Everything that I said is also based on data. There are stats on who is attending uni, there are stats on sexual violence in schools, there are stats on bullying.
What is surprising is that you imply that my account is not representative in some way, and then say that I am wrong because you did it...how does this make sense to you? What you did makes no difference.
And, unless you are more specific about where you came from, it makes no difference because, as I took great care to mention, the issue is not about poverty. There is nowhere else poorer than Middlesbrough in the UK but the issue is that there is nowhere else with lower opportunities for you in life. So this is a problem that is specific to regions, it is largely non-existent below Birmingham. In all of these areas which have poverty, there is high social mobility...this is least true in the North-East, some places along the East coast, some places in the Midlands, many places in Wales and Scotland.
Also, I think it is truly tragic when someone points out things like bullying in schools and sexual violence against children for someone to say..."Oh, you must be a Guardian reader"...is it only people who read the Guardian who care about children being raped? Well...at least we know your views on the subject. I bet the moral high ground feels great. University was wasted on you.
not sure I want to spend time responding to someone who resorts to "you don't care about child rape"
classy
classy
Not sure I want to respond to someone who suggests that only people who read the Guardian care about child rape.
classy
But yes, take the moral high ground...you are showing everyone how smart you are.
classy
But yes, take the moral high ground...you are showing everyone how smart you are.
You have to keep in mind that not all people are intelligent enough to be admitted to a top university. It’s not a path anybody can pursue.
Perhaps the whole notion that there exists some path to financial freedom that anybody can pursue is just misleading wishful thinking.
There are some paths that lead to financial freedom, but most of them have some barriers that not everybody will overcome; and universally applicable suggestions (like the financial literacy suggestion) may be helpful and make people a bit less poor, but they are not going to have a sufficiently large effect to lift someone out of poverty and into financial freedom; that will need a bit more and that "a bit more" might not be feasible for all people.
There are some paths that lead to financial freedom, but most of them have some barriers that not everybody will overcome; and universally applicable suggestions (like the financial literacy suggestion) may be helpful and make people a bit less poor, but they are not going to have a sufficiently large effect to lift someone out of poverty and into financial freedom; that will need a bit more and that "a bit more" might not be feasible for all people.
[deleted]
hence including more than myself in the anecdote
growing up in one of the poorest parts of the country: I know of no-one who wanted to attend that couldn't
growing up in one of the poorest parts of the country: I know of no-one who wanted to attend that couldn't
While not everyone from such a disadvantaged background is likely to succeed, those who will succeed will do so through doing the things you assert are hard, perhaps moving out to other areas, perhaps getting good education, perhaps getting marketable skills outside of formal schooling; and for those who will fail at this, no amount of financial literacy will be sufficient to lift them out of poverty if they can't get a job providing decent income.
My sense would be that there are cases where people are taken for a ride -- extremely bad decisions around payday loans, high APR leasing, bad use of credit, gambling, etc. -- but it's unclear whether or not most of these come from a lack of financial education or rather a sense of struggle and fatalism around pre-existing lack of economic opportunity. Likewise, we can all name people we know who are single mothers and are diligent about credit and clip coupons and have great savings tricks, but for the most part this headroom might be enough to stave off drowning but it never enables freedom because the costs and salaries don't enable freedom.
By contrast, I know plenty of 6 figure earners who more or less don't give a shit and still manage to be more or less free. Some of them will reap what they sow come retirement time by virtue of having not invested well, but when we say freedom we typically mean something more here and now.
I'd love to see a longitudinal RCT that actually uses a paired subject design to look at the impact of a 2-4 year financial literacy component to education. My guess is that the effects, though probably positive in sign, would be marginal in magnitude.
The article motivates this as "people on benefits spend them without budgeting", but another way to look at this is that 30 years ago, people on benefits had access to a robust council housing market, the ability to climb the property ladder, career advancement prospects even in unskilled labour, and a better public pension system than now. Maybe financial literacy has declined, maybe scams have increased, but it seems like the biggest free variable is the degree of comfort state support, even if budgeted well, provides. This is pretty well documented; Ken Loach's I Am Daniel Blake covers this, the well-regarded "Up" documentary series is unintentionally almost entirely focused on the effects of the erosion of the welfare state, deindustrialization, and the death of blue collar opportunity...