Pound Foolish by Helaine Olen: is MMM part of the problem?

[Ynari]

Currently in Chapter 4, and the discussion of the court defense where Thaler said the 401k would encourage savers but the lady who was a pension supporter (sorry, Audiobook - tried to scrub for her name but couldn't find the place) argued that it would be an overall net negative and divert individual human effort towards money management reminded me of this recent post by ERN: You are a Pension Fund of One (or Two), which points out the inefficiencies of individual money management.

Teresa Ghilarducci
http://teresaghilarducci.org/
https://en.wikipedia.org/wiki/Teresa_Ghilarducci

Thanks! I'm interested to read some of her work, I'm now very intrigued by the idea of pensions in a way I haven't been before...

I just finished the book, and I have to say I feel CALLED OUT! Hah. My county is the county that does the dumb 8th grade finance field trip! I've never been on it, so I don't know the extent of the branding, but it makes sense. The only field trips we get to do are the ones that are somehow free - like 7th grade basically observes nature at a creek as their field trip. The kids do point to the finance field trip as one of the most memorable/useful parts of the year, but that doesn't negate the commercial aspect of it.

I feel like on an individual level, my biggest takeaways from the book were: we do the most harm to ourselves when we don't know how much we know (either over- or underestimating our knowledge), and that our ability to make good decisions changes across time, so make good plans when you can and trust them when things go to shit. On a systemic level, it's that the financial world has gotten crazy confusing and inefficient (like... where do I put my small amount of teacher-savings, the 457, 457a, 403b, or the hybrid county not-pension plan?) and that there are those with a vested interest to keep it that way and blame failures to master an increasingly complex system on the individual.

Reminds me of The Good Place, a bit.

[Daisyedwards800]

Poor and middle-class folks are ABSOLUTELY big business.  A lot of the profits of the 1% and even those who work in the financial industries are made off of people financing everything (more than they can afford).  It's so sad, and that's one of the reasons that Elizabeth Warren is my favorite.  She gets it - that people are being structurally and systematically taken advantage of, on purpose, in full sight of regulators.

[Daisyedwards800]

I put Pound Foolish on my reading list based on @LibrarianFuzz post in another thread. I'm writing about it hear because this thread has more recent activity.

I've only made it through a few chapters so far, but I think Pound Foolish is mostly pandering to the middle class wanting to scapegoat their financial literacy failures on the rich by correctly pointing out that for the majority of the poor financial literacy will never be enough. Olen's thesis seems to be that the personal finance industry is lying to the majority of their customers when they say that we can save ourselves with financial literacy. Plenty of people dismiss "The Latte Factor" because they don't get cafe drinks often at all, but fail to equate it to their personal frequent cheap luxury of choice that is eating away their income. This book seems to be written for them. Of course, the point of "The Latte Factor" is that a few dollars a day in spending actually does matter, not that cafe drinks are a sure way to prevent accumulation of wealth. A middle income combined with about one college course's worth of personal finance knowledge and sufficient discipline and personal responsibility should be plenty to plan a retirement on a 25-30 year working career. Certainly many households in the bottom 40% could have the best discipline and financial literacy without enough income to use it to their advantage and most in the bottom 20% would not survive without assistance. But those aren't really the people the personal finance industry sells to. I believe nearly every household above the 40th percentile can make it financial literacy and discipline alone; but those who don't want to exercise that discipline will flock to the message of Pound Foolish.

MMM as part of the personal finance industry certainly does sell the idea that savings can free us. On an individual level, he seems to claim that even the poor can save themselves (by first getting a better job). Of course that won't save those who don't put in the effort to get those jobs (and it should be obvious that there aren't nearly enough of those jobs for all the poor). I don't think anyone reading MMM gets the impression that simply cutting spending is the solution for those with low income. In the chapters I've read, Olen does point out how personal finance gurus often get quite a bit of their own income by selling sub-optimal personal finance products; one could argue that MMM has done to some extent in some of his recommendations. Not sure if I will finish Olen's book, so far it has had some interesting history, but the promised exposure of the dark side of personal finance seems to be weak.

This is a great point.  Whether or not financial literacy can help the very poor is a very different thing than whether it can help the middle class.