I love that Harold and others are addressing the gulf between people who understand money management and the rest of us. A lot has been written about why people don’t do smart things to save for retirement, but I haven’t seen anyone point out the following: all discussions of money management come with two features (a) words we don’t understand and (b) warnings about “experts” who will cheat the unsuspecting in the name of advice. That’s a nice recipe for inaction. Can we do better?
I heard about a little seminar at which a math education expert (who also had financial planning experience) was supposed to be showing young teachers some tricks about teaching certain math concepts. The expert used compound interest and retirement accounts as the example for the lesson. The young teachers in the audience were properly attentive, but when it came time for questions, they blew right over the teaching part and asked about this retirement thing. Would small contributions really grow that much? What should they be doing? Most of them were making less than $40K per year, renting in the pricey Boston area and paying student loans. After assuring them that she wasn’t kidding about compound interest and how much their money would grow, she asked generally about what they spent on entertainment. Not surprisingly, most of them regularly socialized in bars with their friends and thought they were economizing by choosing places with happy hour pricing and free bar food. And so she delivered the advice that is in the title: contribute what you can to your public employee retirement account, and talk your friends into a rotating schedule of hosting evening get-togethers. Drink cheap beer, at home. Now that is advice that I could have used 20 years ago.