I found this book to be a pretty interesting read. Olen starts the book with a mini-history of the personal finance industry, starting with S.F. (Sylvia) Porter's 1935 New York Post articles. The key takeaway from this overview for me was the difference between the public's negative reactions to Porter's increasingly ostentatious wealth, and that of finance gurus in the 1990s and beyond. While Porter continued to promote thrift, over her career she became increasingly rich and began appearing on television in diamonds. As Olen states, however, by the mid-1990s, gurus would attract admiration and emulation by appearing on television with ostentatious displays of wealth.
So in my view, one key difference between early personal finance columns or programs and those of today appears to be that gurus now tend to show people what they want and tell them what they want. Porter's mistake was showing people what they want and telling them what they need to do to get it - which of course is not what they want to hear. Another, as Olen outlines, is that interested third parties got in on the action too - advertisers.
Blogs like MMM are a sharp contrast with such 'gurus' in my view. MMM tells us, complete with virtual face-punches, what we need to do to get his lifestyle. He does not simply show up on a stage, dripping in diamond encrusted suits and multi-thousand dollar watches, shouting into a microphone things that make us feel good, and ‘inspire’ us to sign up for courses in the hundreds or thousands of dollars.
Olen also grapples with the ‘issue’ of women and money. Many financial books and products specifically targeting women have emerged in recent years and there are a few reasons for this, as Olen reveals. Firstly, women control quite a proportion of household finances - 5/6 married women are either jointly or solely responsible for their household finances (as Olen notes, this is a significant achievement given women could not own credit cards, for example, until the 1970s). Secondly, women are considered "financially challenged" - or so the industry would like to have us believe. Lacking confidence compared to their male counterparts may be a more accurate characterisation. As a specialist in women's finance more correctly put it, "both genders are woefully financially ignorant" (p. 159). Presenting women as financially challenged has worked wonders for the industry.
Personally, I agree with Olen's conclusion - that some men are quite conservative with money, while many women are capable of engaging in risky investment strategies and being greedy. These traits aren't tied to the genders, but they are reinforced when, as a number of studies Olen cites have shown, men and women are treated differently when it comes to financial advice, with women often being ignored if they show up with a male partner, being asked to come back with their husband if they show up alone, or being given far more conservative, paternalistic advice if they are single. Kudos to Charles Schwab and Co, who debuted a women's investing program which they ended up integrating intgo their mainstream program after realising it was better to "treat each investor as an individual with his/her own unique goals, experiences, and attitudes about investing" (p. 171) rather than grouping people based on stereotypes.
Another disturbing fact is revealed in the final chapter, chapter nine. This report
http://cuffelinks.com.au/clients-understand-adviser-saying/ states that fewer than half of respondents in both Australia and the US were able to answer the five basic financial literacy questions (presumably even fewer could answer the full set of eight, which included three ‘sophisticated’ questions). One of the basic questions was about inflation. The inflation question was one of three underlined questions that researchers said were the most significant indicators of financial literacy. In the US, 87% of people got this question right, compared with 78% in Australia. Worryingly though, according to a study referenced by Olen, only half of Americans 50 and above - precisely the age group who should know for retirement planning purposes - have an accurate understanding of how compound interest affects their savings.
A variety of "fun" financial literacy fads have been developed by interested parties. Such as "Financial Football", sponsored by… Visa. You can learn how to manage credit and protect your credit rating, admirable goals indeed. The main thrust of the curriculum however is "How am I paying for this item today? Does it make sense? What is the best payment choice to make?" Of course, I want to shout "CASH!" but I suspect that the preferred answer is "Visa". As Olen states, the course will teach you when to buy a car (e.g. when it can help you get to work), but is unlikely to explain why you shouldn't buy a car on your credit card.
And then there's Junior Achievement Finance Park, a "financial literacy theme park". Which sounds rather awesome, except that popular chains like Burger King pay $15,000 to $200,000 for shop fronts there, aiming to develop brand loyalty perhaps as much or more than instilling financial literacy.
Looking beyond what is easy and obvious may be advisable. There are lots of comparison websites out there - like
http://mozo.com.au/ - make use of them to find the best deals. Ask your advisors how they make a living - commissions, fees, some combination? Work out whose side they're on. When you read a magazine article, check out what advertising appears in that issue - and then decide how seriously you'll take their claims. It takes a bit of extra effort, but I think we will find it worthwhile. I also think there's something to be said for classic books like The Richest Man in Babylon which aren't pushing any specific products, and even ones like The Intelligent Investor which likewise is more broad principles of analysis than recommendations. Even though these are quite dated (and for those of us outside the US, may have less relevant examples), I think that reading general principles and modifying them to fit your own circumstance may be more helpful than reading specific recommendations which may be biased (and many of the popular finance authors hail from the US in any case, so their advice is not always completely applicable here anyway). These are the sorts of things I’d like to see taught. To me, it’s not so much about financial literacy as it is about critical thinking and logic, alongside basic numeracy and literacy.
In sum, I found Olen's Pound Foolish to be a very interesting, easy read, and would recommend it to anyone who is looking for financial advice and wants to develop a bit of a checklist as to what to look out for, or for anyone who is a bit wary of some of the mega-stars of finance and has an interest in the "dark side" of personal finance.