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Clueless

Richard Quinn

I WAS RECENTLY looking at one of those “whatever happened to” top 10 lists. In this case, it was about a select group of celebrities and their money—or lack thereof. The point of the list: All of these people, who had made millions, were broke or worse. Several had filed for bankruptcy more than once. Others were deep in debt and most owed hundreds of thousands to the IRS. One former star, who once earned several million dollars a year, had $5,000 in the bank.

How does that happen? I guess their celebrity status was no guarantee they’d be smart or act responsibly. In some cases, they were duped into poor investments. But the overriding cause of their woes was out-of-control spending, living lavishly during the peak of their stardom with little regard for the future.

Why should we care about these folks? They provide a good learning experience for us mortals, and especially young people who idolize these celebrities and their lifestyles.

Overspending, ignoring future financial needs and not learning to manage money are common failures for many Americans. But why are we surprised? Formal financial education is very limited.

The Council for Economic Education reports that only 17 states require high school students to take a course in personal finance and only 22 require they take a course in economics. Studies have found that, without financial education, students are more likely to end up with low credit scores and other financial problems.

I also question the effectiveness of the formal education that is offered. In an admittedly unscientific study, I recently asked a few teenagers, who had taken high school financial education classes, some basic money questions. They were clueless. To be fair, we’re talking teenagers here, so they were probably distracted by their phones.

But what about adults? Participants in FINRA’s National Financial Capability Study were asked five questions covering relatively common financial issues, such as compounding, inflation, diversification, mortgages, and bond prices and interest rates. The results weren’t encouraging: 63% of participants got three or fewer questions correct.

The evidence overwhelming indicates all too many people aren’t adequately preparing for their future retirement. One study suggests at least 50% of Americans will see their standard of living drop once they retire. Dealing with the present seems beyond the ability of many, so maybe we shouldn’t be surprised they also struggle to save for the future.

Where does all this leave us? We have a population that’s poorly educated in financial and economic matters, older workers who are ill-prepared for retirement, a younger generation saddled with student loans and finding it difficult to control their spending, and a retired generation calling for higher Social Security benefits.

A bailout would seem to be in order. But who’s going to do the bailing?

Richard Quinn blogs at QuinnsCommentary.com. Before retiring in 2010, Dick was a compensation and benefits executive. His previous articles include Hard EarnedTime to Choose, Reality Check and Mini-Golf, Anyone. Follow Dick on Twitter @QuinnsComments.

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Bart Moran
Bart Moran
2 years ago

I have had multiple conversations with fellow baby boomers. Probably not surprising, many have said they simply plan to work until they are dead. Now that, Billy, is how people in the greatest country in modern times plan for their future.

Dwayne73
Dwayne73
2 years ago
Reply to  Bart Moran

I have had the same conversation. Most people without pension or medical in retirement that I have talked to just plan to work until they are dead. I retired early at 55 with full benefits. I am having some knees issues at age 56 that only showed themselves after I retired. There would be no way that I could continue working in my old job until I was 65 for Medicare or to age 67 for full social security. For my son without a pension or retirement medical benefits, when his time comes he cannot retire early because there is no way he can pay for medical insurance while waiting to get medicare. Therefore he feels he will work until he dies. He would need to save about 2 to 3 times what I save for retirement since he has no pension all the while making only 1/3 of what I made working. Is he trying to save large amounts of money? No. I can’t make him see the benefits of saving now.

Tim Ranzetta
Tim Ranzetta
2 years ago

I saw the same disturbing signs of financial illiteracy and started a non-profit, Next Gen Personal Finance (www.ngpf.org), to address it. After just four years, 50% of high school students attend a school where a teacher is using NGPF’s engaging resources (oh and they’re FREE!). What’s cool is that the #1 source for new teachers on our platform is “word of mouth.” Now we just need to develop more teachers so we can reach more students in more schools. This is why we are hosting our one-day FinCamps in every state this school year. We can do better as a nation to equip students with the financial skills they need to thrive…and WE WILL!

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