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I used to think that if people just knew the basics of personal finance, they would take action to better their lives. Over the years, I’ve changed my stance. I can now see that only people who come naturally to taking an interest will ever even seek the information. This tracks with the ancient saying, “when the student is ready, the teacher will appear?”
Why is that so true? In a way it’s a slight of hand. The teacher didn’t manifest from thin air. The teacher was always there, but the student had no way of knowing of his existence since the student wasn’t ready (interested).
Last summer my cousin and her husband visited us from Iowa. After a fun pool day, she said she had money sitting in a checking account but didn’t know how to invest. I offered them my help getting started with a Roth IRA. They went home to Iowa and I assumed they probably forgot all about it.
On New Year’s Day I got a text from them. The student was ready, and so was the teacher. I walked them through how to start a Roth at Vanguard and suggested the Total Stock Market Index EFT (VTI) to get them started.
They asked me, “how many other people have you helped?” “Including you two…two,” I responded. “Because no one else cared,” I finished.
I feel great with getting them started on their journey, as my mentor (G-d rest him) once did for me.
Have you ever gotten the call? I’d love to hear about it.
I’ve advised friends over the years—back during my USAF career, I also briefed new troops on the Thrift Savings Plan and the importance of paying yourself first. More recently, I put together a small booklet for fellow Fed employees where I work.
I used to hire a young lawyer every year to be one of my law clerks. When they sat down with the court’s HR to fill out forms and sign up for benefits, I’d sit with them later. For many, this was their first real full time job. They don’t know about / understand health insurance, disability insurance, or 401k / TSP investing.
I found that the best approach was to explain without asking them too much about their own finances (debt, savings, etc.). Instead, I would suggest investing a certain amount to get a match on their savings. I would definitely explain the difference between Roth and traditional accounts, and high/low premium health insurance. and yes, Ben, typically nobody had ever explained any of this to these young people in any helpful way. Very proud that I helped them get started.
There often seems to a push for basic financial skills to be taught in school. I tend to think that teaching 15 year old kids about saving, compound interest, taxation, etc. would largely fall on deaf ears. And for those that are interested, I suspect they would seek out that information really easily from family, books, reputable websites etc.
I used to teach a class for first-year college students at my university. We covered many basic life and study skills, since students were away from home for the first time. One area we were required to cover was personal finance (budgeting, financial aid, etc.). At some point, I decided to include some basics of saving, compounding, and investing—not because the students had much disposable income, but because I figured at least they would hear it early and could follow up later when they got their first job.
After a number of semesters, I wondered if the extra time was really worth it.
Lo and behold, to my surprise, one semester I had a veteran who came up to thank me on the last day of class. She told me that she had saved up a good amount of money while serving and that, based on the information from class, she had invested it in a low-cost index fund.
In the early 2000s, I gave some very simple financial advice to some family members who needed it. You know, spend less than you make, DCA into a Roth and other investments, etc. About 10 years after that I figured, conservatively, they had lost over $100K on depreciation churning ownership of expensive vehicles. 25 years later they live paycheck to paycheck, drive $70K vehicles, and are one job loss away from financial abyss. I never gave them advice again.
I once gave some life advice to a union brother who was fired for chronic absenteeism. My words were not well taken at the time, but several weeks later he called and thanked me. I’ve not seen him since, but I hope he’s doing well and contributing to a positive working environment somewhere.
We transferred some investments to our nephews and talked with them about saving and investing. I guess it wasn’t technically “getting the call”; we made the call, and they saw taking it and listening as a condition of getting the gift 😂 But they did take it on board and have raised conversations with us to ask advice since.
In the UK, as a business owner and employer, I was required to set up a pension scheme similar to a 401(k) and automatically enroll all employees. The system deducted a mandatory contribution from their wages, which was automatically allocated to the scheme’s default fund—far too conservative for most of my employees, in my view.
I scheduled individual meetings with all staff to explain my concerns about the default allocation. I advised them to log into the portal and adjust their investments to something more age-appropriate, and offered to help if needed. Out of 67 employees, only three younger staff members took action…the call came, but depressingly, not by many.
Good question! Here’s a case of “she didn’t know what she didn’t know”:
A younger colleague was surprised her school loan balance was going down so slowly despite making hefty automatic monthly payments. She finally asked me to help figure out what was going on.
It turned out she had set her payments to go out from her bank ON the loan servicer’s due date. So they arrived at the loan servicer a couple days AFTER the due date. Thus every month a late fee was being charged, nudging up the balance somewhat and slowing her progress. To make sure the payment arrived on time, she changed the bank autopay date to a few days earlier and with no more late charges immediately began seeing the loan balance drop faster.
And her credit score eventually soared.
Financial literacy aside, it boggles my mind a bit that someone wouldn’t notice that recurring late charge and ask about it. Good you could help.
Of course, we never know the troubles in someone’s life that would explain the situation. For the sake of privacy I omitted mention of hers. That she could overcome them and even arrange for her education, let alone excel, to me that was mind-boggling.
True. Morgan Housel writes, I believe in The Psychology of Money, that everything (in terms of financial behavior) makes sense when you have enough information. Great that it turned out well for her.