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With 401(k)s, people can be way more participatory than they used to be with pensions.
The problem is, the system is set up (perhaps intentionally) to make regular folk retirement savers the suckers at the betting table. Give the average worker the power to move funds around and a large percentage will either be really conservative (low risk, even less reward) or outright try to sabotage themselves. How many people buy when a stock or fund has gone way up, and sell when it's gone way down? The skilled investors get rich off people like this.
That high school class might help with personal finances, but it might let some bad in with the good for investing...I've heard truisms that the more people participate in their retirement investments, the worse they do. Step on might be taking away their overconfidence! Or said nicely, maybe it's to get them to see the wisdom of buying and holding.
I don't think simple home economics are taught in school anymore. This knowledge is learned either from family members or some early life experiences. However, given the information age, there are many resources out there to help young people learn the ropes of budgeting and managing money.
It is difficult to get through college without accruing debt. People in their 20s and 30s and 40s could all be subject to taking on debt and signing off on something they were likely too financially immature to understand when they were 18 and 19.
In my experience as someone in my 30s, we don't deal with cash as much as people that are 50+. Money to us is a number on our online bank statement as opposed to actual bills in our wallets and purses. My parents did the envelope budgeting method. This money was for groceries, this was for clothing, etc etc. And you had to borrow from one envelope to pay the other if there was some discrepancy and do without.
That's not to say people younger than 50 don't do that. But I think it is managed differently.
Genetic? That's a stretch. Nurture, including community influence? Sure.
Driven by ubiquitous pressure that can look a lot like brainwashing, beginning as soon as Junior can sit up in front of the tube? Absolutely.
It's just like any other addiction. You have to cure the root cause, not help them get a fix.
I think genetic predisposition is underestimated. OK, probably not 100%. But at least 50%. There were also the Swedish twin studies on investing. I wish I participated in studies with blonde Swedish twin sisters, but anyways they concluded that investing behavior is more than 50% genetically predetermined.
Oh, I won't say it's irrelevant, as both intelligence and certain kinds of aptitude are certainly heritable. But it can easily become another dismissal of a group as being too stupid/unable/unworthy to succeed. Which serves only those who think they aren't.
Skills that you pick up early and hold on to will serve you all your life.
I started working at 15, saving for a car, etc. I had friends who were always bumming money. 40 years later, I own my home with no mortgage, no debt, and I am retired. Those old school buddies? none of them own a house or have a 401[k]. Some of them are on SSDI. In a few years each of them will be looking at SS to carry them.
Are 20-somethings of today any better? I have no idea. I live near a state university and manage to rub elbows with the current crop of college students. I do not see how these kids are any better, then we were in the 70's.
On the other hand, my children [ages 25 and 30] have solid jobs and own homes. Maybe there is a genetic component.
There is a LOT more they have access to and that they must analyze when doing any investing. Those that understand it are far more knowledgeable than my generation 40 years ago. Those that don't are probably too scared to move.
When I was 20 I only had access to Checking Accounts (without interest), Pass Book Savings Accounts paying ~4% interest, and Certificates of Deposit paying maybe 7-8% if you deposited a lot and allowed it to be tied up for a decade. Three choices and easy to understand.
My employer's Stock Savings Plan had three choices: Company Stock, Commercial Paper/Bonds (although it had a different name), and a Fixed Income Account. We could also buy Series E Treasury Bonds via Payroll Deduction. Many employers offered none of these choices. Compare that to the list of choices available today in every employer's 401(k) account!
Almost all of my friends save at least 5 - 10k /year in the retirement funds. They are around my age, early to mid 20s. My parents didn't start saving for retirement til their 30s, as did most people in their generation it seems.
I think access to a bunch of financial advice helps.
I don't know, but saving only $5-10k/year doesn't sound like a great savings amount.
One thing to mention, especially as it pertains to the 40 years ago crowd, is that 401Ks weren't even around until 1980. And weren't available at the majority of employers for years after than. Lots of companies did offered pensions. Until they found out they couldn't continue to fund them and they went the way of the dodo taking peoples supposed retirement funds with them. People who started work in 1980 may have spent 10 years "vested" in a pension plan that will never pay them a dime all while having no access to 401K.
This is not to say they couldn't have saved in other ways, but the easy access to a savings/investing vehicle via a simple payroll deduction wasn't available early in their careers.
I might be wrong for ALL companies everywhere but for MOST companies when they eliminate the pension, a cash balance equivalent is given to anyone who was in the original pension. Anyone who was accruing benefits at my former company is still in a great position.
The other things is understanding what a pension is so you can create your own. It's a cash balance annuity. Everyone can still save their own funds and plan on using some or all of the money to purchase an annuity when the time comes.
I think genetic predisposition is underestimated. OK, probably not 100%. But at least 50%. There were also the Swedish twin studies on investing. I wish I participated in studies with blonde Swedish twin sisters, but anyways they concluded that investing behavior is more than 50% genetically predetermined.
i really hope you all are kidding about the genetic factor. It's pretty stupid.
Do you think someone born to savers who was raised in an environment with no knowledge transfer about saving would absorb the concept and value of saving through genetics?
Realistically parents who are savers would have kids who were exposed to that way of thinking and that could make then more likely to practice the behavior but that is environment not genetics.
Partially true, but tolerance for risk, impulsiveness, and other basic contributing traits are reportedly influenced heavily by genetics.
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