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Bank of America = evil
Credit Union = not so evil
Mom (me) = Mr. Krabs from SpongeBob, or Julian from Trailer Park Boys
threat to withdraw from his college fund to pay for his whim or damage = instant tantrum
We don't talk about the housing bubble in front of him. When I was his age I was reading one of my dad's cop pulp novels and was wondering when the cops were going to let the heroine out of the bag, and why they misspelled heroine. I don't expect his comprehension to be much better.
Just what we need - Financial advice from the lenders that have an interest in getting every single person hooked on debt.
The HELOC liberation of capital scheme, where we were instructed by any means possible that the value was stored ineffiectly in home equity and it was prudent to take it and blow it at will on anything was advice from exactly those chumps.
When my nephew turned five, I gave the kid the option of receiving the $20 bill in my left hand as his walkin' around money and the $2 in quarters in my right hand as a contribution his college fund, or the other way around.
As I predicted and in fact counted on, the kid went for the quarters in the here and now and the $20 in the future, because there were eight coins but only one bill, and eight is bigger than one.
As far as I'm concerned, his bloody college professors can fix the problem. I'm just trying to get him to their doorstep.
Mom and Dad were depression era folks. Brother went and did his thing which was minimalist and poor despite a college education that I had to give up grilled cheese sandwiches. OTOH hand he sailed around the world, climbed mountains, wrote for the Wall Street Journal and other things more worthy of talk than anything I did.
I learned to save and scrimp, and have had a positive book balance all my life.
My kids and step kids have learned to make do on little and continue to do so.
I have heard from my youth about saving and spending. My folks also grew up in the depression and are still saving even though retired. I never figured out how to pay for the necessities of life and save on factory wages. Should have listened to my parents when they said I should be an engineer instead of lazy.
Oh, what a wonderful idea. Hermione grows up and gets a job at Gringotts, where she is such a feared bitch underwriter that even the goblins leave her alone. . . .
Once in a while I inspire my friends, always entirely by accident, and usually because they think I'm nuts, by the things I say. Truth is - I'm always serious when I say them. They ofen remind me about what they characterize as "anti-American" phrases I blurt out, as they giggle, and jot them down as quotes to rib me about at gatherings.
One such quote: "Spending money is overrated."
Is that funny? GWB might not think so and either do I, for exactly the opposite reasons. He seems to think it's patriotic to buy crap from China. I think it's unpatriotic. Maybe I'm mixed up?
When did blowing money especially money that wasn't saved, become American? I must have missed an important history class.
JP Morgan = idiotic morons who can't figure out how to unload timeshares from an estate in three and a half years and use it as an excuse for holidng on to the last part of my mom's money
Credit Unions are the only place to keep your money and get car loans from
Ask mom for gas and food money ONLY. Whatever else you need, get a job.
I guess I am not quite as cynical as you are. I actually think it is a good thing for kids to learn about money management. Certainly by high school they need to learn about compound interest and how it can both help you and hurt you.
I don't think it is inherently bad that the banks -- who hope to lure the kids as customers someday -- are teaching kids about money management. I certainly don't think they are going to (openly) encourage them to run up their credit cards, overdraw their accounts or buy a bigger house or fancier car than they can afford.
Perhaps Tanta's reaction was due to having browsed Prosperity4Kids' site, where the offers include "Special Offer: Read-along CD, Money Mama Piggy Bank and Children's Book all for $59.95 47.90!", "Allowance Chart Price: $ 19.95", and, last but not least, "4 hours of coaching $500.00 (Includes "Design Your Childs Financial Future" Download) Add full package for FREE Buy all this and save $81.90 $581.90
You pay $500.00"
I've always taken a dim view of "coffee - nose - keyboard" humor, but must admit it would have been perilous had I been ingesting any liquid when I the last scrolled into view.
Charlie Stromeyer, The Trailer Park Boys are ex-convicts in their 30s living in a trailer park in Halifax, Nova Scotia. Two of them, particularly Julian, try to get rich doing everything except work: armed robberies, theft, growing and selling weed. They called it their "Freedom 35" program. Every season finale someone from the park would go to jail, and every season opener someone would come back from jail.
Disclaimer: I am not an ex-convict, nor do I rob stores, nor grow weed and sell it. My kid just cottoned onto Julian = money-obsessed = Mommy
Actually I am all in favor of financial institutions putting some actual money and effort--not just splashy PR crap--into the financial education of the young. People like me ought to be sent off into high school classrooms once a week or month or however often it is needed at the bank's expense to get this accomplished. Homebuyer/mortgage lending training for borrowers is absolutely critical.
Buying overpriced crap for kids with the promise that someday they will be worth PILES OF MONEY just makes me want to throw stuff.
OkieLawyer, my nephew of 13 has receives credit-card offers in the mail already --it's another world now - full of befanged lending institutions. I recommend the film "Maxed Out" or book of same name. Biggest eye-opening thing for me was learning thru this film how hard bankers try to get kids hooked on credit - and how valuable debt-hooked customers are -- expecially those that go bankrupt. Teach your children well.
In the movie Maxed Out, my alma mater, the University of Oklahoma, is the school featured in the film as having received kickbacks for allowing the credit card companies to market to students on campus. Of course, they wouldn't be able to do that with kids because the kid could just rescind the contract. Minors are not legally allowed to enter into contracts unless they have been emancipated.
jm:
OK, now I see what you mean. I didn't look at the site before I wrote the post. Mea Culpa. I was thinking they were just setting up free games online and using it as a teaching tool. I didn't realize they were trying to sell overpriced toys and stuff.
Oh, Billy, how much did your mommy and daddy pay for that $59.95 piggy bank when the 29.99% compounding interest is added over 25 years (assume interest is also compounded on a two month billing cycle)? Now that would be a lesson.
Uggh. It's horrible how little knowledge people with graduate degrees seem to have about financial knowledge. I think it should start in grade school. My parents had us able to calculate interest on our bank accounts by then!!! I can remember being 7 or 8, and my father going over how interest worked with me while he was getting ready for work. I think learning to save and budget is a skill that kids should be taught from a very young age.
I spend a lot of time (and some money) trying to help people out. I don't mind helping with a mortgage payment or a medical bill, but it doesn't make a difference for most people unless they learn how to save. That's what most people don't realize. It's much less the income than how you spend it, although no one's solvent on minimum wage or anything close to it nowdays.
Truthfully, though, most of the people I know who got in deep trouble this cycle spent their way into it. I cannot figure out how this happened. I personally know people in their fifties who have always been solvent who are now in trouble on their mortgages. They've got the Harley, they've got the cars, and one of them has got the plastic surgery and the new boyfriend - but they don't have money to pay their mortgage. Real declining wages haven't helped, but also aren't the whole culprit.
I cannot figure out how this happened. I personally know people in their fifties who have always been solvent who are now in trouble on their mortgages.
Most Americans know precious little about managing money, so when they are deceived into thinking they are artificially more wealthy than they actually are by way of deception disguised as monetary policy, they overspend and borrow and get themselves in too much debt. In too deep, they have little in the way of independence; in many cases they are totally dependent on lifestyles they almost cant stand. In short, even though they are in the land of freedom, they become less free.
Martin F. Goldberg, MS, P.E.
Mullin over MOM's They've got the Harley, they've got the cars, and one of them has got the plastic surgery and the new boyfriend - but they don't have money to pay their mortgage. Real declining wages haven't helped, but also aren't the whole culprit.
And I do like the hierarchy of stuff listed there with the new boyfriend last.
All this stuff is supposed to make us happy, but it looks more and more like desperation rather than (as the economists might put it) decreasing marginal utility as the pile grows, no?
If the declining wage is not the whole culprit, is it the job that is associated with that insufficient compensation that makes up the balance? If the job had some more satisfying merits (dare one say intrinsic value?) would we be less inclined to go find something to buy to make us feel better? Apart for the wages, are our jobs making us sick (unhappy, compulsive shoppers looking for a fix, real value, some self-esteem?) and more likely to live for the moment, not because we are such care free liberated people, but because the longer view is too depressing to really consider?
Although wages are not the whole culprit, I think the work that you do for those wages is a mighty big part of this apparent personal financial irresponsibility.
Most Americans know precious little about managing money, so when they are deceived into thinking they are artificially more wealthy than they actually are by way of deception disguised as monetary policy, they overspend and borrow and get themselves in too much debt.
Kevin:
It is also true that businesses used to provide health and pension benefits for their workers. Workers use to not have to worry about saving as much as they do now. Also, moral stigma of businesses filing Chapter 11 bankruptcy and shedding their obligations to pay for health care and pensions would have been much greater because the owners and executives of the business would still live in the same town, go to the same functions and would have to interact with the same people that would have lost their pensions and health care. Maybe I am wrong, but it sure seems like we used to have more close-knit communities where it was harder treat your employees the way they are treated now.
When the system of providing such benefits began, businesses lobbied for it because they could sell it as a benefit that would increase the worker's effective wage without having to increase their wages. The American worker became dependent on this trust relationship between the worker and the (usually) corporate employer.
I don't see any other way to solve the problem. We just can't trust the corporate owners anymore to protect the worker's financial interest. The way things are going now, the risk of a business' failure is being placed on the workers rather than on the corporate owners. This is exactly the opposite of the way it should be.
Now, if you will excuse me, there appears to be a crowd of just-potty-trained little tykes somewhere who have not yet learned that nothing worthwhile can be learned about finances unless you buy a financial-education-themed toy first, and since once they've learned that, the excited little beggars are going to be prime candidates--as it were--for an Option ARM someday, I need to invest in them.
All we need is a 2007 Fannie Mae Intergalactic Mortgage Originator toy.
I'm not going to disagree with any of what you wrote but this has been very obvious to any worker paying attention to what is going on and should have caused a pause and a wake up call that maybe they had better starts saving and prepare for what is likely to not be there as promised. Social security is not going to be there for the boomers or if it is it will be with higher inflation and more then likely an increase in the age before one can collect.
A lot of people in America think there is a trust that we take your money in payroll taxes and then we hold it for you, and then when you retire, we give it back to you .but thats not the way it works. There is no trust fund just IOUs.
George W. Bush , University of West Virginia, April of 2005
Bush didn't lie on this one. If it has to do with our government controlling it count me out, personally Im ready to leave this country as socialism or fascism look like the most likely paths. In the land of freedom we are becoming less free.
I understand what you are saying, but at least a national pension system could be backed up by the Full Faith and Credit of the US Government. That is a lot more stable than a corporation that can shed the obligation in a bankruptcy proceeding. Besides, if we chose to, we could make it into a Trust Fund.
Furthermore, there are many people who I have represented that would not be able to save for themselves if they had to. They simply don't have the intelligence and foresight to do so. Who will look out for them?
San Luis Obispo County - a drop in the median price compared to the same month a year ago. The median price of a home declined to $506,000 in March, a 10.4 percent decrease from the previous year, when the median reached $565,000. A median of $525,000 was recorded in February.
My cousin's husband (in the UK) would very strongly disagree with your premise about locally based enterprises, at least when it comes to advancement opportunities.
He now works in logistics management at quite a senior level, but he told me once it would have been impossible for him to progress from being a miner (OK, he could have got to foreman or shift supervisor, maybe) if his local coal mine had stayed in operation. (Especially since he originally left school at 16 to go down the pit.)
The local community in general, including the mine management, saw he and his entire family as miners and nothing else. His management and planning skills would have never seen the light of day if his pit hadn't been closed down in the 80's, when he went looking for work and finished up where he wasn't a 'known quantity'.
He did tell me a couple of years back that he felt he had reached another glass ceiling now, and doesn't think he will ever get the opportunity to take the step up to Head Office management. He finds this a bit frustrating (especially when a ludicrous decision comes down from board level), but in general within his side of the family he is very much the 'boy made good'.
"but at least a national pension system could be backed up by the Full Faith and Credit of the US Government."
Thats the damn problem, its called Moral hazard. Any taxpayer bailout either means more government borrowing or increased taxes in the event of failure, this crap catches up with you and has a bad habit of attracting fraud and abuse. Also just who is going to manage this large pool of money in a way not be the target of political manipulation to line the pockets of Wall street and not be subject to political manipulation?
The first thing that needs to be done in this country IMHOP is to make lobbying a congress person bribery with a mandatory death penalty.
Stagflationary Mark, you have to bear in mind that parody has never been able to keep up with reality.
I have, in my day, owned an acrylic sparkle-fluid filled Freddie Mac magic wand and an acrylic fluid-filled Fannie Mae "mousetrap game" toy.
I was told recently by a colleague that Countrywide was handing out "back scratchers" at Christmas a year or two ago. (I kiddeth you not; they were supposed to be "stress reducers" or some such nonsense.)
In any event, I just open the wrapping with my MGIC letter opener, toss them into my IndyMac tote bag, and carry the trade. I'm looking out for you all.
Yes....Ag Edwars and Wells Fargo getting em young--creating customers (slaves) for future. May as well get RJ Reynolds and Annheuser Busch in on it as well....
In insurance theory, moral hazard is the name given to the increased risk of problematic (immoral) behavior, and thus a negative outcome ("hazard"), because the person who caused the problem doesn't suffer the full (or any) consequences, or may actually benefit. Such a concern typically arises in the context of a contract (for example, an insurance policy).
But I cannot see how this applies to creation of a national pension system. I fail to see how the insured (the worker) will commit fraud because they will be paid a pension based on the income they have made throughout their lifetime. Social Security is already based on this principle but it is only meant to be a supplemental income. What harm would it be to have Social Security guarantee at least a subsistence level of income for workers who have worked throughout their lives?
Late to game here, but very interesting thread -- Tanta have not read Born to Buy -- but will pick it up-thanks!. Okie, the pitch to my nephew could have been a mistake -- or a very clever way of getting the kids to wave the envelope in front of mommy and daddy and whine 'can I have?' -- and there are plenty of parents who fold -- cosigning these cards. The industry's goal now is to make cash obsolete -- that means for kids too. And even if parents don't give in, it is still a clever way to market to kids.
As far as the Social Security discussion, I point out another gem in Maxed Out, that as far as I'm concerned can't be repeated enough. Social Security isn't in trouble because social progams are inherently bad or didn't anticipate boomer retirement -- as a matter of fact, Sosec worked so well it built up a very nice surplus -- which several presidents subsequently borrowed and borrowed against until all that remaines in it is a great big IOU. What a royal scam it is that those who sucked it dry now advocate for privatizing it because 'it isn't working
What harm would it be to have Social Security guarantee at least a subsistence level of income for workers who have worked throughout their lives?
The problem is, who defines "subsistence level", and who determines at what age one can begin receiving such ?
The system as it currently exists primarily guarantees that the U.S. Federal gov't will be borrowing trillions from the future. It's not optimal, but it may be the best that we can do politically.
The main benefit of privatizing SS is that then it wouldn't be possible for Congress to suck more money from the system.
You are far more trusting of our government then I. Laws can be changed with a pen stroke, and that large of a pool of money would more then likely be tapped for some scam such a home land security or some nonsense like global warming all the while making Wall Street or whoever was in control one of the most powerful political organization seen to date. The losers would be the same as always the American people. The political system is rotten to the core and until that is fixed J6P is nothing more then the happy hosts of a blood sucking tick
Reepicheep, I agree that privatizing won't work -- all we had to do was not permit the govt to borrow against it. Period. It worked well for decades until Reagan, Clinton, Bush and Bush dipped their paws into it.
And it's naive to think that privatizing sosec into the hands that take would not have much more serious social costs later, when these private companies (who can go bust, who can rob, who can overcharge and manipulate customers into poor investments to profit themselves) and these not-always-wise customers join forces to create generations of even poorer people, that we all have to support with even more tax dollars.
It was the influence of "free market" business management that allowed for the emptying of the sosec coffers to begin with.
The best strategy (as should have been the strategy with mortgage lenders) is not to create an unholy mess by allowing greedy, corrupt hands into a system that worked well to begin with.
It's J6P who has to "fix" the political system - but nothing indicates to me that J6P is ready to do anything more than a bit of window-dressing.
Alo:
At the end of the day, there has to be a publicly-funded safety net, but your objections to privatized SS could also apply to IRAs and 401(k)s. Some people make poor decisions and would have to be rescued, but most people do alright.
It's not so much that SS was "a system that worked well to begin with", as it was that as long as the number of workers increased each generation, any problems weren't impossible to solve, as evidenced by the SS reform in '83.
But the bitter truth now is simple: Two workers for every retiree by 2030. That's what's stressing the system.
But at least America's better off than France, Germany, Italy, Japan, Poland, Russia, Spain, and probably a half-dozen others. They have the same basic demographic trends, but are projected to have even fewer workers per retiree in the coming decades than will the U.S.
Reep, I wish 'most people do alright' was true -- actually the average 401k savings is fairly meager for retirement (about 50-60k as of latest estimate - and that is heavily weighted up because wealthier folks have a lot more socked away). Most people are not financially educated and there's no good empirical evidence that they will do well. And even less empirical evidence that any private company will have an overriding interest to see that their customers will do well.
If we've learned anything from the housing bust, it's that the theme of all the private fee-collectors was 'hose the consumer at every turn, and damn the long-term consequences to them and us.' This is no more or less of the attitude I'd expect private firms to have upon receiving the windfall of fee-paying customers for 401ks-Iras etc.
I have found that some toys I already have are useful.
Take Silly Putty for example. If I press it up against a document that has stated income on it I can then stretch the Silly Putty. The stated income's copy actually grows!
You can also use it to show it how housing market problems are barely visible unless you timelapse them.
Socalism will be the next step for our banana republic and a flight of money by the wealthy out of the US. Haliburton is ahead of the curve.
We are not anywhere near socialism. I don't know of any presidential candidate from either political party (no, not even any of the Democrats) that is calling for nationalizing the means of production or transportation.
And if the wealthy leave the country with their wealth, where are they going to go? Besides, why would they leave? Where are they going to move that is going to provide them better protection?
To say that the solution would be to not allow Congress to borrow the money makes no sense. The money has to be invested. Investing money means loaning it to someone by buying bonds or stocks. US Treasury Bonds are the safest investment.
Ever since a committee led by Greenspan back in 1983 recommended that the baby boomers' retirement burden be prefunded by raising FICA withholding above the rate needed to fund current SS expenditures, about a quarter of the SS taxs paid have been used to buy the US Treasury Bonds that have been placed in the Trust Fund.
As an investment, those bonds are just as sound as the US Treasuries you'll find in private pension plan and personal retirement accounts -- and a lot more sound than corporate bonds and common stocks.
If the condition for allowing the wealthy to stay is to let them cheat and steal every which way - then we'd be fools to regret their departure.
I think there are a lot of good business people out there taking the long view -- a big part of which includes not robbing and raping your customer base.
The trick is how to incentivize and reward good, long-term view behavior. When we reward corrupt behavior (sometimes simply by denying it exists) -- it's too much of a temptation for decent businesspeople to follow suit in the name of staying 'competitive.'
I think some for of captialism can work-but you have to have real referees in this game, and real, sharp-toothed penalties for cheaters--you know, like making sure they never prosper.
jm
"about a quarter of the SS taxs paid have been used to buy the US Treasury Bonds that have been placed in the Trust Fund."
President Roosevelt sold Social Security as a retirement plan simply because it could not be politically sold as a welfare program, even though that is what it is: old people didnt/dont want to admit that they take welfare from their children, but rather want to believe that they are getting a return on what they paid in.
Thus, Social Security taxes are commonly called contributions and people many who should know better! talk about various scenarios of the rate of return on those contributions. This is the essence of current talk about how young people would be better off, getting a higher return on the Social Security taxes if they were allowed to keep those contributions and invest them themselves.
Uncle Sam spends Social Security contributions the moment that they hit his bank account, just like he does all other tax revenues. Indeed, Uncle Sam has to float debt securities like $100s of billions of them every year so as to have sufficient cold, hard cash to pay his bills. The Social Security Trust Funds are nothing but an accounting apparatus, to which a credit is given in real-time for current payroll tax receipts in excess of current Social Security payouts.
Uncle Sam doesnt invest the present positive difference, but spends it on other things. And even that excess is not enough, of course, which is why the Treasury has to borrow additional money. There are no Trust Funds. Uncle Sam runs a cash business, spending every bit of cash that comes in, plus that which he borrows.
There is no theoretical need for Uncle Sam to pre-fund future Social Security payments. They are not legal claims of Americas individual citizens, but rather a moral commitment made through the political process. Indeed, the Supreme Court has explicitly ruled that to engraft upon Social Security a concept of accrued property rights would deprive it of the flexibility and boldness in adjustment to ever changing conditions which it demands. (Flemming v. Nestor).
Accordingly, logic implies that there is no a priori reason that Uncle Sam should put aside cold, hard cash to make sure that he can pay my expected future benefits. The collateral, backing my future benefits is nothing more than a bet that the democratic political process will decide to pay them. There is no particular reason that a younger generation should vote to send a check as current law says Uncle Sam will.
Before you start spouting "logic implies" your line of reasoning, you need to be aware that the Supreme Court case you cite has been criticized thus:
Charles Reich, in The New Property, 73 YALE L.J. 733 (1964), argued that Social Security benefits should be considered to be "property" for the purposes of the Fifth Amendment. Social Security, he argued, is a compulsory substitute for private property, is heavily relied on, and is important to beneficiaries. The beneficiarys right to Social Security, he argued, should not be subject to public policy considerations (especially not something resembling a loyalty oath, as was the case in Flemming). According to this argument, allowing government benefits to be revoked in this way too extensively threatens the system of private property. Protecting private property is an important goal, he argued; the Framers thought that protecting private property would be one way of protecting individual liberty.
I find a lot of logic in this argument too. In fact, I find it quite compelling. It may not be the way we do things now, but I think it is a good justification for a modification of the current law.
When you have that fixed could you jump on Medicare and Medicaid whose un-funded liabilities dwarf Social Security all without raising my taxes or causing a massive loss in my purchasing power of my retirement account? TIA
Why should we hamstring the government by not allowing taxes to be raised to fix the Medicare/Medicaid problem?
Especially when we started a war (and all its increased costs) while lowering taxes rather than calling for a shared sacrifice to pay for it. Remember that before the Republicans took power in 2000, we had a federal budget surplus. You can't pin the deficit pin on the Donkey party.
What my five-year-old knows about money:
Bank of America = evil
Credit Union = not so evil
Mom (me) = Mr. Krabs from SpongeBob, or Julian from Trailer Park Boys
threat to withdraw from his college fund to pay for his whim or damage = instant tantrum
We don't talk about the housing bubble in front of him. When I was his age I was reading one of my dad's cop pulp novels and was wondering when the cops were going to let the heroine out of the bag, and why they misspelled heroine. I don't expect his comprehension to be much better.
Just what we need - Financial advice from the lenders that have an interest in getting every single person hooked on debt.
The HELOC liberation of capital scheme, where we were instructed by any means possible that the value was stored ineffiectly in home equity and it was prudent to take it and blow it at will on anything was advice from exactly those chumps.
Them and Greenspan.
When my nephew turned five, I gave the kid the option of receiving the $20 bill in my left hand as his walkin' around money and the $2 in quarters in my right hand as a contribution his college fund, or the other way around.
As I predicted and in fact counted on, the kid went for the quarters in the here and now and the $20 in the future, because there were eight coins but only one bill, and eight is bigger than one.
As far as I'm concerned, his bloody college professors can fix the problem. I'm just trying to get him to their doorstep.
Mom and Dad were depression era folks. Brother went and did his thing which was minimalist and poor despite a college education that I had to give up grilled cheese sandwiches. OTOH hand he sailed around the world, climbed mountains, wrote for the Wall Street Journal and other things more worthy of talk than anything I did.
I learned to save and scrimp, and have had a positive book balance all my life.
My kids and step kids have learned to make do on little and continue to do so.
Frugality is a life style not a game.
I have heard from my youth about saving and spending. My folks also grew up in the depression and are still saving even though retired. I never figured out how to pay for the necessities of life and save on factory wages. Should have listened to my parents when they said I should be an engineer instead of lazy.
Tanta, there's 'Harry Potter and the Underwriters of Doom' book somewhere in you, I just know.
Oh, what a wonderful idea. Hermione grows up and gets a job at Gringotts, where she is such a feared bitch underwriter that even the goblins leave her alone. . . .
Once in a while I inspire my friends, always entirely by accident, and usually because they think I'm nuts, by the things I say. Truth is - I'm always serious when I say them. They ofen remind me about what they characterize as "anti-American" phrases I blurt out, as they giggle, and jot them down as quotes to rib me about at gatherings.
One such quote: "Spending money is overrated."
Is that funny? GWB might not think so and either do I, for exactly the opposite reasons. He seems to think it's patriotic to buy crap from China. I think it's unpatriotic. Maybe I'm mixed up?
When did blowing money especially money that wasn't saved, become American? I must have missed an important history class.
What my kids know about money:
JP Morgan = idiotic morons who can't figure out how to unload timeshares from an estate in three and a half years and use it as an excuse for holidng on to the last part of my mom's money
Credit Unions are the only place to keep your money and get car loans from
Ask mom for gas and food money ONLY. Whatever else you need, get a job.
Tanta:
I guess I am not quite as cynical as you are. I actually think it is a good thing for kids to learn about money management. Certainly by high school they need to learn about compound interest and how it can both help you and hurt you.
I don't think it is inherently bad that the banks -- who hope to lure the kids as customers someday -- are teaching kids about money management. I certainly don't think they are going to (openly) encourage them to run up their credit cards, overdraw their accounts or buy a bigger house or fancier car than they can afford.
Or do you think they would?
Hey Cherry Vanilla, what are the "Trailer Park Boys"?
We can already learn how to make money with Barney and Elmo:
YouTube - Money Maker - Barney feat. Elmo
Funny, not paying off your mortgage passed for "sound financial planning" during the boom. I wouldn't let those bankers near a kid I liked, either.
OkieLawyer,
Perhaps Tanta's reaction was due to having browsed Prosperity4Kids' site, where the offers include "Special Offer: Read-along CD, Money Mama Piggy Bank and Children's Book all for $59.95 47.90!", "Allowance Chart Price: $ 19.95", and, last but not least, "4 hours of coaching $500.00 (Includes "Design Your Childs Financial Future" Download) Add full package for FREE Buy all this and save $81.90 $581.90
You pay $500.00"
I've always taken a dim view of "coffee - nose - keyboard" humor, but must admit it would have been perilous had I been ingesting any liquid when I the last scrolled into view.
piggy banks children’s books - Prosperity 4 Kids
Charlie Stromeyer, The Trailer Park Boys are ex-convicts in their 30s living in a trailer park in Halifax, Nova Scotia. Two of them, particularly Julian, try to get rich doing everything except work: armed robberies, theft, growing and selling weed. They called it their "Freedom 35" program. Every season finale someone from the park would go to jail, and every season opener someone would come back from jail.
Disclaimer: I am not an ex-convict, nor do I rob stores, nor grow weed and sell it. My kid just cottoned onto Julian = money-obsessed = Mommy
OkieLawyer, what jm said.
Actually I am all in favor of financial institutions putting some actual money and effort--not just splashy PR crap--into the financial education of the young. People like me ought to be sent off into high school classrooms once a week or month or however often it is needed at the bank's expense to get this accomplished. Homebuyer/mortgage lending training for borrowers is absolutely critical.
Buying overpriced crap for kids with the promise that someday they will be worth PILES OF MONEY just makes me want to throw stuff.
More employment for the wolves in sheep clothing.
Some don't get it, yet. Boomers ( and now their spoiled offspring) via universities hot air "education" caused this econ mess.
Too many of the hot air- paper professionals and govt. employees who wanted princely lifestyles off the backs of genuine productive & export sectors.
No pain...no gain.
OkieLawyer, my nephew of 13 has receives credit-card offers in the mail already --it's another world now - full of befanged lending institutions. I recommend the film "Maxed Out" or book of same name. Biggest eye-opening thing for me was learning thru this film how hard bankers try to get kids hooked on credit - and how valuable debt-hooked customers are -- expecially those that go bankrupt. Teach your children well.
Alo, did you read Juliet Schor's book Born to Buy on marketing to kids? It's a good book and of course it made me want to throw up.
Alo:
In the movie Maxed Out, my alma mater, the University of Oklahoma, is the school featured in the film as having received kickbacks for allowing the credit card companies to market to students on campus. Of course, they wouldn't be able to do that with kids because the kid could just rescind the contract. Minors are not legally allowed to enter into contracts unless they have been emancipated.
jm:
OK, now I see what you mean. I didn't look at the site before I wrote the post. Mea Culpa. I was thinking they were just setting up free games online and using it as a teaching tool. I didn't realize they were trying to sell overpriced toys and stuff.
Oh, Billy, how much did your mommy and daddy pay for that $59.95 piggy bank when the 29.99% compounding interest is added over 25 years (assume interest is also compounded on a two month billing cycle)? Now that would be a lesson.
Uggh. It's horrible how little knowledge people with graduate degrees seem to have about financial knowledge. I think it should start in grade school. My parents had us able to calculate interest on our bank accounts by then!!! I can remember being 7 or 8, and my father going over how interest worked with me while he was getting ready for work. I think learning to save and budget is a skill that kids should be taught from a very young age.
I spend a lot of time (and some money) trying to help people out. I don't mind helping with a mortgage payment or a medical bill, but it doesn't make a difference for most people unless they learn how to save. That's what most people don't realize. It's much less the income than how you spend it, although no one's solvent on minimum wage or anything close to it nowdays.
Truthfully, though, most of the people I know who got in deep trouble this cycle spent their way into it. I cannot figure out how this happened. I personally know people in their fifties who have always been solvent who are now in trouble on their mortgages. They've got the Harley, they've got the cars, and one of them has got the plastic surgery and the new boyfriend - but they don't have money to pay their mortgage. Real declining wages haven't helped, but also aren't the whole culprit.
MaxedOutMama
I cannot figure out how this happened. I personally know people in their fifties who have always been solvent who are now in trouble on their mortgages.
Most Americans know precious little about managing money, so when they are deceived into thinking they are artificially more wealthy than they actually are by way of deception disguised as monetary policy, they overspend and borrow and get themselves in too much debt. In too deep, they have little in the way of independence; in many cases they are totally dependent on lifestyles they almost cant stand. In short, even though they are in the land of freedom, they become less free.
Martin F. Goldberg, MS, P.E.
A lot of truth in this quote.
Mullin over MOM's
They've got the Harley, they've got the cars, and one of them has got the plastic surgery and the new boyfriend - but they don't have money to pay their mortgage. Real declining wages haven't helped, but also aren't the whole culprit.
And I do like the hierarchy of stuff listed there with the new boyfriend last.
All this stuff is supposed to make us happy, but it looks more and more like desperation rather than (as the economists might put it) decreasing marginal utility as the pile grows, no?
If the declining wage is not the whole culprit, is it the job that is associated with that insufficient compensation that makes up the balance? If the job had some more satisfying merits (dare one say intrinsic value?) would we be less inclined to go find something to buy to make us feel better? Apart for the wages, are our jobs making us sick (unhappy, compulsive shoppers looking for a fix, real value, some self-esteem?) and more likely to live for the moment, not because we are such care free liberated people, but because the longer view is too depressing to really consider?
Although wages are not the whole culprit, I think the work that you do for those wages is a mighty big part of this apparent personal financial irresponsibility.
Most Americans know precious little about managing money, so when they are deceived into thinking they are artificially more wealthy than they actually are by way of deception disguised as monetary policy, they overspend and borrow and get themselves in too much debt.
Kevin:
It is also true that businesses used to provide health and pension benefits for their workers. Workers use to not have to worry about saving as much as they do now. Also, moral stigma of businesses filing Chapter 11 bankruptcy and shedding their obligations to pay for health care and pensions would have been much greater because the owners and executives of the business would still live in the same town, go to the same functions and would have to interact with the same people that would have lost their pensions and health care. Maybe I am wrong, but it sure seems like we used to have more close-knit communities where it was harder treat your employees the way they are treated now.
When the system of providing such benefits began, businesses lobbied for it because they could sell it as a benefit that would increase the worker's effective wage without having to increase their wages. The American worker became dependent on this trust relationship between the worker and the (usually) corporate employer.
Because more and more corporate employers are using bankruptcy as a way to effectively raid retirement funds (to pay "retaining bonuses" to upper management and executives), I have suggested that we should expand Social Security into a pension system. I expanded on the idea in another post "Debt and Taxes."
I don't see any other way to solve the problem. We just can't trust the corporate owners anymore to protect the worker's financial interest. The way things are going now, the risk of a business' failure is being placed on the workers rather than on the corporate owners. This is exactly the opposite of the way it should be.
Oh, don't get me started.
Now, if you will excuse me, there appears to be a crowd of just-potty-trained little tykes somewhere who have not yet learned that nothing worthwhile can be learned about finances unless you buy a financial-education-themed toy first, and since once they've learned that, the excited little beggars are going to be prime candidates--as it were--for an Option ARM someday, I need to invest in them.
All we need is a 2007 Fannie Mae Intergalactic Mortgage Originator toy.
1976 Star Trek Intergalactic Projector
OkieLawyer
I'm not going to disagree with any of what you wrote but this has been very obvious to any worker paying attention to what is going on and should have caused a pause and a wake up call that maybe they had better starts saving and prepare for what is likely to not be there as promised. Social security is not going to be there for the boomers or if it is it will be with higher inflation and more then likely an increase in the age before one can collect.
A lot of people in America think there is a trust that we take your money in payroll taxes and then we hold it for you, and then when you retire, we give it back to you .but thats not the way it works. There is no trust fund just IOUs.
George W. Bush , University of West Virginia, April of 2005
Bush didn't lie on this one. If it has to do with our government controlling it count me out, personally Im ready to leave this country as socialism or fascism look like the most likely paths. In the land of freedom we are becoming less free.
Brian:
I understand what you are saying, but at least a national pension system could be backed up by the Full Faith and Credit of the US Government. That is a lot more stable than a corporation that can shed the obligation in a bankruptcy proceeding. Besides, if we chose to, we could make it into a Trust Fund.
Furthermore, there are many people who I have represented that would not be able to save for themselves if they had to. They simply don't have the intelligence and foresight to do so. Who will look out for them?
CR:
San Luis Obispo County - a drop in the median price compared to the same month a year ago. The median price of a home declined to $506,000 in March, a 10.4 percent decrease from the previous year, when the median reached $565,000. A median of $525,000 was recorded in February.
Okielawyer,
My cousin's husband (in the UK) would very strongly disagree with your premise about locally based enterprises, at least when it comes to advancement opportunities.
He now works in logistics management at quite a senior level, but he told me once it would have been impossible for him to progress from being a miner (OK, he could have got to foreman or shift supervisor, maybe) if his local coal mine had stayed in operation. (Especially since he originally left school at 16 to go down the pit.)
The local community in general, including the mine management, saw he and his entire family as miners and nothing else. His management and planning skills would have never seen the light of day if his pit hadn't been closed down in the 80's, when he went looking for work and finished up where he wasn't a 'known quantity'.
He did tell me a couple of years back that he felt he had reached another glass ceiling now, and doesn't think he will ever get the opportunity to take the step up to Head Office management. He finds this a bit frustrating (especially when a ludicrous decision comes down from board level), but in general within his side of the family he is very much the 'boy made good'.
OkieLawyer
"but at least a national pension system could be backed up by the Full Faith and Credit of the US Government."
Thats the damn problem, its called Moral hazard. Any taxpayer bailout either means more government borrowing or increased taxes in the event of failure, this crap catches up with you and has a bad habit of attracting fraud and abuse. Also just who is going to manage this large pool of money in a way not be the target of political manipulation to line the pockets of Wall street and not be subject to political manipulation?
The first thing that needs to be done in this country IMHOP is to make lobbying a congress person bribery with a mandatory death penalty.
Stagflationary Mark, you have to bear in mind that parody has never been able to keep up with reality.
I have, in my day, owned an acrylic sparkle-fluid filled Freddie Mac magic wand and an acrylic fluid-filled Fannie Mae "mousetrap game" toy.
I was told recently by a colleague that Countrywide was handing out "back scratchers" at Christmas a year or two ago. (I kiddeth you not; they were supposed to be "stress reducers" or some such nonsense.)
In any event, I just open the wrapping with my MGIC letter opener, toss them into my IndyMac tote bag, and carry the trade. I'm looking out for you all.
Yes....Ag Edwars and Wells Fargo getting em young--creating customers (slaves) for future. May as well get RJ Reynolds and Annheuser Busch in on it as well....
Kevin:
This is from Wikipedia's entry on Moral Hazard:
In insurance theory, moral hazard is the name given to the increased risk of problematic (immoral) behavior, and thus a negative outcome ("hazard"), because the person who caused the problem doesn't suffer the full (or any) consequences, or may actually benefit. Such a concern typically arises in the context of a contract (for example, an insurance policy).
But I cannot see how this applies to creation of a national pension system. I fail to see how the insured (the worker) will commit fraud because they will be paid a pension based on the income they have made throughout their lifetime. Social Security is already based on this principle but it is only meant to be a supplemental income. What harm would it be to have Social Security guarantee at least a subsistence level of income for workers who have worked throughout their lives?
Late to game here, but very interesting thread -- Tanta have not read Born to Buy -- but will pick it up-thanks!. Okie, the pitch to my nephew could have been a mistake -- or a very clever way of getting the kids to wave the envelope in front of mommy and daddy and whine 'can I have?' -- and there are plenty of parents who fold -- cosigning these cards. The industry's goal now is to make cash obsolete -- that means for kids too. And even if parents don't give in, it is still a clever way to market to kids.
As far as the Social Security discussion, I point out another gem in Maxed Out, that as far as I'm concerned can't be repeated enough. Social Security isn't in trouble because social progams are inherently bad or didn't anticipate boomer retirement -- as a matter of fact, Sosec worked so well it built up a very nice surplus -- which several presidents subsequently borrowed and borrowed against until all that remaines in it is a great big IOU. What a royal scam it is that those who sucked it dry now advocate for privatizing it because 'it isn't working
What harm would it be to have Social Security guarantee at least a subsistence level of income for workers who have worked throughout their lives?
The problem is, who defines "subsistence level", and who determines at what age one can begin receiving such ?
The system as it currently exists primarily guarantees that the U.S. Federal gov't will be borrowing trillions from the future. It's not optimal, but it may be the best that we can do politically.
What a royal scam it is that those who sucked [SS] dry now advocate for privatizing it because 'it isn't working'
The main benefit of privatizing SS is that then it wouldn't be possible for Congress to suck more money from the system.
Reepicheep
The main benefit of privatizing SS is that then it wouldn't be possible for Congress to suck more money from the system.
You are far more trusting of our government then I. Laws can be changed with a pen stroke, and that large of a pool of money would more then likely be tapped for some scam such a home land security or some nonsense like global warming all the while making Wall Street or whoever was in control one of the most powerful political organization seen to date. The losers would be the same as always the American people. The political system is rotten to the core and until that is fixed J6P is nothing more then the happy hosts of a blood sucking tick
Reepicheep, I agree that privatizing won't work -- all we had to do was not permit the govt to borrow against it. Period. It worked well for decades until Reagan, Clinton, Bush and Bush dipped their paws into it.
And it's naive to think that privatizing sosec into the hands that take would not have much more serious social costs later, when these private companies (who can go bust, who can rob, who can overcharge and manipulate customers into poor investments to profit themselves) and these not-always-wise customers join forces to create generations of even poorer people, that we all have to support with even more tax dollars.
It was the influence of "free market" business management that allowed for the emptying of the sosec coffers to begin with.
The best strategy (as should have been the strategy with mortgage lenders) is not to create an unholy mess by allowing greedy, corrupt hands into a system that worked well to begin with.
Kevin:
It's J6P who has to "fix" the political system - but nothing indicates to me that J6P is ready to do anything more than a bit of window-dressing.
Alo:
At the end of the day, there has to be a publicly-funded safety net, but your objections to privatized SS could also apply to IRAs and 401(k)s. Some people make poor decisions and would have to be rescued, but most people do alright.
It's not so much that SS was "a system that worked well to begin with", as it was that as long as the number of workers increased each generation, any problems weren't impossible to solve, as evidenced by the SS reform in '83.
But the bitter truth now is simple: Two workers for every retiree by 2030. That's what's stressing the system.
But at least America's better off than France, Germany, Italy, Japan, Poland, Russia, Spain, and probably a half-dozen others. They have the same basic demographic trends, but are projected to have even fewer workers per retiree in the coming decades than will the U.S.
Reep, I wish 'most people do alright' was true -- actually the average 401k savings is fairly meager for retirement (about 50-60k as of latest estimate - and that is heavily weighted up because wealthier folks have a lot more socked away). Most people are not financially educated and there's no good empirical evidence that they will do well. And even less empirical evidence that any private company will have an overriding interest to see that their customers will do well.
If we've learned anything from the housing bust, it's that the theme of all the private fee-collectors was 'hose the consumer at every turn, and damn the long-term consequences to them and us.' This is no more or less of the attitude I'd expect private firms to have upon receiving the windfall of fee-paying customers for 401ks-Iras etc.
Reepicheep
"It's J6P who has to "fix" the political system - but nothing indicates to me that J6P is ready to do anything more than a bit of window-dressing."
Socalism will be the next step for our banana republic and a flight of money by the wealthy out of the US. Haliburton is ahead of the curve.
Tanta,
I have found that some toys I already have are useful.
Take Silly Putty for example. If I press it up against a document that has stated income on it I can then stretch the Silly Putty. The stated income's copy actually grows!
You can also use it to show it how housing market problems are barely visible unless you timelapse them.
Silly Putty Timelapse
Lenders Misusing Student Database
Improper Searches Raise Privacy Fears
Lenders Misusing Student Database
Duh! What did they think they would do.
Socalism will be the next step for our banana republic and a flight of money by the wealthy out of the US. Haliburton is ahead of the curve.
We are not anywhere near socialism. I don't know of any presidential candidate from either political party (no, not even any of the Democrats) that is calling for nationalizing the means of production or transportation.
And if the wealthy leave the country with their wealth, where are they going to go? Besides, why would they leave? Where are they going to move that is going to provide them better protection?
Re the comments on Social Security:
To say that the solution would be to not allow Congress to borrow the money makes no sense. The money has to be invested. Investing money means loaning it to someone by buying bonds or stocks. US Treasury Bonds are the safest investment.
Ever since a committee led by Greenspan back in 1983 recommended that the baby boomers' retirement burden be prefunded by raising FICA withholding above the rate needed to fund current SS expenditures, about a quarter of the SS taxs paid have been used to buy the US Treasury Bonds that have been placed in the Trust Fund.
As an investment, those bonds are just as sound as the US Treasuries you'll find in private pension plan and personal retirement accounts -- and a lot more sound than corporate bonds and common stocks.
For reliable information on Social Security, see:
Social Security - Reports - CEPR
If the condition for allowing the wealthy to stay is to let them cheat and steal every which way - then we'd be fools to regret their departure.
I think there are a lot of good business people out there taking the long view -- a big part of which includes not robbing and raping your customer base.
The trick is how to incentivize and reward good, long-term view behavior. When we reward corrupt behavior (sometimes simply by denying it exists) -- it's too much of a temptation for decent businesspeople to follow suit in the name of staying 'competitive.'
I think some for of captialism can work-but you have to have real referees in this game, and real, sharp-toothed penalties for cheaters--you know, like making sure they never prosper.
jm
"about a quarter of the SS taxs paid have been used to buy the US Treasury Bonds that have been placed in the Trust Fund."
President Roosevelt sold Social Security as a retirement plan simply because it could not be politically sold as a welfare program, even though that is what it is: old people didnt/dont want to admit that they take welfare from their children, but rather want to believe that they are getting a return on what they paid in.
Thus, Social Security taxes are commonly called contributions and people many who should know better! talk about various scenarios of the rate of return on those contributions. This is the essence of current talk about how young people would be better off, getting a higher return on the Social Security taxes if they were allowed to keep those contributions and invest them themselves.
Uncle Sam spends Social Security contributions the moment that they hit his bank account, just like he does all other tax revenues. Indeed, Uncle Sam has to float debt securities like $100s of billions of them every year so as to have sufficient cold, hard cash to pay his bills. The Social Security Trust Funds are nothing but an accounting apparatus, to which a credit is given in real-time for current payroll tax receipts in excess of current Social Security payouts.
Uncle Sam doesnt invest the present positive difference, but spends it on other things. And even that excess is not enough, of course, which is why the Treasury has to borrow additional money. There are no Trust Funds. Uncle Sam runs a cash business, spending every bit of cash that comes in, plus that which he borrows.
There is no theoretical need for Uncle Sam to pre-fund future Social Security payments. They are not legal claims of Americas individual citizens, but rather a moral commitment made through the political process. Indeed, the Supreme Court has explicitly ruled that to engraft upon Social Security a concept of accrued property rights would deprive it of the flexibility and boldness in adjustment to ever changing conditions which it demands. (Flemming v. Nestor).
Accordingly, logic implies that there is no a priori reason that Uncle Sam should put aside cold, hard cash to make sure that he can pay my expected future benefits. The collateral, backing my future benefits is nothing more than a bet that the democratic political process will decide to pay them. There is no particular reason that a younger generation should vote to send a check as current law says Uncle Sam will.
Paul McCulley PIMCO
Kevin:
Before you start spouting "logic implies" your line of reasoning, you need to be aware that the Supreme Court case you cite has been criticized thus:
Charles Reich, in The New Property, 73 YALE L.J. 733 (1964), argued that Social Security benefits should be considered to be "property" for the purposes of the Fifth Amendment. Social Security, he argued, is a compulsory substitute for private property, is heavily relied on, and is important to beneficiaries. The beneficiarys right to Social Security, he argued, should not be subject to public policy considerations (especially not something resembling a loyalty oath, as was the case in Flemming). According to this argument, allowing government benefits to be revoked in this way too extensively threatens the system of private property. Protecting private property is an important goal, he argued; the Framers thought that protecting private property would be one way of protecting individual liberty.
I find a lot of logic in this argument too. In fact, I find it quite compelling. It may not be the way we do things now, but I think it is a good justification for a modification of the current law.
OkieLawyer
When you have that fixed could you jump on Medicare and Medicaid whose un-funded liabilities dwarf Social Security all without raising my taxes or causing a massive loss in my purchasing power of my retirement account? TIA
Why should we hamstring the government by not allowing taxes to be raised to fix the Medicare/Medicaid problem?
Especially when we started a war (and all its increased costs) while lowering taxes rather than calling for a shared sacrifice to pay for it. Remember that before the Republicans took power in 2000, we had a federal budget surplus. You can't pin the deficit pin on the Donkey party.