May 2011

What Is Financial Literacy, Anyway?

The term “financial literacy” is kicked around by financial planners, bureaucrats, and academics. But how does the man on the street define the term?

In this funny video, the California Society of CPAs (CalCPA) interviewed people on the streets of Sacramento, California, on their views about financial literacy.

They also answer such burning questions as: “What’s scarier: thinking about retirement or running into a burning building?” “Spender or saver?” and “Why the hell did I buy that?”

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Young child wearing large glasses and holding a calculator.

Financial Success Begins at Age 3

Professionals trying to improve Americans’ financial literacy pour time and energy into developing school curricula that will help create a generation of financially competent adults.

But something else we can instill in our children may have a greater influence than education on their financial success later in life: self-control.

A recent study, led by researchers at Duke University and King’s College London and published in the Proceedings of the National Academy of Sciences, found that the self-control children develop as early as age 3 – before formal schooling begins – is a powerful predictor of whether they will save more as adults or will be hooked on credit cards.

“Poor self-control in childhood was a stronger predictor of these financial difficulties than study members’ social class origins and IQ,” the authors concluded. …Learn More

Over 50 and out of work logo.

Toll High When Layoffs Hit After 50

The financial impact on older people who find themselves out of work goes far beyond the missed paychecks: it upsets well-laid plans for retirement.

Stan Bednarczyk, an engineer who was laid off in 2009 by a Michigan automobile supplier, has numerous concerns.  He can no longer contribute to the retirement account sponsored by his former employer.  And since Social Security is based on an individual’s 35 highest years of earnings, his future benefit may be lower when he retires.

The total dollar cost of his late-career joblessness, which he detailed in this video, is shocking.

 

Stan Bednarczyk from Over Fifty and Out of Work on Vimeo.

Bednarczyk was among 100 unemployed men and women interviewed for a powerful new video project, “Over 50 and Out of Work,” by New York journalists Susan Sipprelle, Samuel Newman, and Nikolia Apostolou. … Learn More

Choosing Financial Products: Looks Do Matter

Choosing Financial Products:
Looks Do Matter

We like to think we’re rational about money. We go for the credit card or mortgage that has the lowest interest rate.

Think again. Our moods, emotions, and other reactions to aesthetic cues play a decisive role in financial decisions, according to innovative research by Suzanne Shu at UCLA and Claudia Townsend at the University of Miami.

“Everybody expects that it [aesthetics] is not going to influence them, so it’s extra surprising when it does,” Shu said in a recent interview.

The marketing professors’ results carry a message for anyone interested in financial literacy. Their research subjects thought twice about their decisions after receiving very subtle references to aesthetics. In other words, when people are alerted to their unconscious reactions to how something looks, they adjust their thinking to guard against being overly influenced by the aesthetics. …Learn More

White sand beach with clear blue water.

Whoopee! The Kids Are Gone

Many parents feel the tension between competing priorities: saving for their children’s college education and saving for their own retirement. Once the kids graduate and move out, the parents rationalize, we’ll really start socking money away.

But do they?

They do not, according to a recent report from Boston College’s Center for Retirement Research, which is affiliated with Squared Away. The report found that parents, suddenly feeling rich after the children leave the nest, indulge by spending 50 percent more on eating out, going to the movies, or buying new clothes.

There are two risks in doing so. …Learn More

Tipped over jar of change.

5 Tools to Control Spending

Financial planners say poor spending habits are their biggest obstacle to helping clients.
So I asked a dozen financial planners around the country – all members of the National Association of Personal Financial Advisors (NAPFA) – to share their best tools and tips.

This week I’ll provide the five “best” tools and the reason planners like them. Next, I’ll post planners’ top five motivational tips. …Learn More

You're running out of money fast - here are your options Waiter, Warehouse Worker, Temp

Learn Financial Dilemmas of the Poor

A new game on the Web – Spent – is a compelling way to experience the impossible choices the poor must make every day about money.

Spent was created by Urban Ministries of Durham in North Carolina, which operates a food pantry, clothing closet, and homeless shelter; and a local advertising firm, McKinney. The game gets its point across so well because McKinney interviewed the ministry’s clients and translated their real-world predicaments.

The challenge: players must get to the end of the month without depleting their small paychecks on routine bills and unexpected expenses. So, your child is invited to a birthday party, but you cannot afford the $5 gift. Do you send your child to the party without a gift, make her stay home, or buy the gift anyway – and risk running out of money? …Learn More

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