Blacks Invest Less Often

If two people – one black, one white – have good jobs with comparable incomes, the black person would still be less likely to have a taxable investment account, such as a mutual fund, a new study finds.

ChartNumerous reports have shown that black Americans have fewer retirement and other savings accounts, and less money in those accounts than white Americans. But the problem with many of these comparisons is that they lump people together, regardless of how much they earn.

A new study by the FINRA Investor Education Foundation looks at one type of account – taxable investment accounts – and controls for income as well as two other characteristics that influence wealth: education and age. The study, using data from a 2012 survey of more than 25,000 U.S. households, found that when everything else is equal, black American households were still 7 percentage points less likely to have taxable investment accounts than white households; and Hispanic households were 4 percentage points less likely to have such taxable accounts than white households.

FINRA also identifies other characteristics typical of the one-third of households with a taxable account. …Learn More

Photo of happy teens

Don’t Worry About Money. Just Be Happy

The adage that money won’t buy happiness has been proved wrong – at least up to a point. One famous study found that one’s well-being increases as income rises, though the benefits subside around $75,000 per year.

But what about the reverse? Do people who are happy earn more money? Yes, say two British economists.

Their study in the Proceedings of the National Academy of Sciences concluded this after following American teenagers for a more than decade through the National Longitudinal Study of Adolescent Health. In 1994 and 1996, this survey asked high school students to react to statements like “You were happy” and “You felt hopeful about the future.” In a 2008 follow-up survey, when most of them were around age 30, they were asked how much money they were making.

People who reported having a happy adolescence earned about $3,400 more than the average gross income of all the survey respondents; the average was $34,642. However, the opposite effect was more consequential: young adults who had a “profoundly unhappy adolescence” were earning 30 percent less – equivalent to a $10,000 hit to their earning power. …Learn More

Lightbulb = $

In Support of Allowances for Kids

With summer’s chaos subsiding and school starting, it’s time for a financial lesson wrapped in an allowance!

The conventional wisdom behind a weekly allowance is that it impresses on children the limited value of a dollar.  But the benefits of financial education are not well-founded in academic research. The benefits of an allowance might have something to do with kids’ confidence in handling their money, which research shows is central to how well adults manage their finances.

Kids between ages 8 and 14 who get an allowance were two times more likely to feel knowledgeable about managing their money than kids who do not – 32 percent versus 16 percent – according to a survey of 1,000 parents and 881 children by T. Rowe Price.  The kids with allowances also feel they know more about credit, student loans, and other financial matters. …Learn More

Retirement: a Priority for Millennials?

Saving for retirement is more crucial for Millennials than for any prior generation. Data are emerging that reveal how they’re doing.

millennialsVanguard’s 2014 data from its large 401(k) client base shows that 67 percent of young adults between 25 and 34 who are covered by an employer plan are saving – this is well above a decade ago.

A survey recently by the Transamerica Center for Retirement Studies found evidence that this generation makes retirement a priority: a majority of working adults in their 20s and early 30s – now the largest single demographic group in the U.S. labor force – view retirement benefits as “a major factor in their decision on whether to accept a future job offer.”

This indicates that Millennials are getting the message, said Catherine Collinson, president of the Transamerica Center for Retirement Studies.

The growth of automatic enrollment in 401(k) plans “has helped pull young people and non-participants into the plans,” Collinson said, “but I also believe it’s also due to heightened levels of awareness.” …Learn More

College Funds Depend on Family Income

How much teenagers must borrow for college often depends on whether their parents can help foot the bill – and how much they can afford.

Fresh data from a survey by Sallie Mae, the private college lender, shed light on how low-, middle- and high-income families find the money to pay for a college education. The data break down how much of students’ total costs – tuition, plus books, room and board, fees, living expenses, and transportation – come from earnings, savings, borrowing, grants or other sources.


Here’s what stands out in the data, which are displayed in this chart:

  • In low-income families, the students themselves take responsibility for saving, earning or borrowing money to cover 32 percent of their costs, and middle-income students pay 29 percent. Students from high-income families cover just 19 percent of their costs; they tend to pay more for their education, so their total dollar costs are higher, which somewhat narrows the dollar difference between what students in each income group pay. …

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Woman in a yoga pose

Saving Is a Lot Like Yoga

Young people in the noon yoga classes here at Boston College bend, twist, or flatten themselves more easily than their much older classmates.

But older people are better savers – 50-year-olds save at more than double the rate of 40-year-olds – and perhaps yoga can explain how this happens.

In yoga, one doesn’t immediately balance into Warrior III without toppling over or find the upper-body strength for the Crow pose shown above. It takes practice to build the balance, strength, focus, or flexibility that each pose requires. Only with time do these pretzel-like configurations become less painful and more convincing. Poorly executed poses, practiced and repeatedly improved, are the only path to perfection.

Like yoga, saving is also a practice. …Learn More

Person screaming

College Debt = Student Stress

It’s hardly surprising that debt causes stress, but this condition seems rampant among the college crowd.

A new study in the Journal of Financial Therapy finds that nearly three out of four students feel stressed about their personal finances, and student loans are a big reason.

In 2012, the average graduating senior owed $29,400. Student debt has already been shown to be a barrier to homeownership and a cause of bankruptcy among young adults. Paying back the loans is also very difficult when borrowers don’t graduate and earn less in their jobs. Add stress to the host of issues that accompany borrowing for college.

Students who have debt or expect to be in debt after college – whether college loans, credit cards, or car loans – are “significantly more likely to report financial stress” than students who did not have any debt, the study reported. …Learn More