People need to be taught about investing and the time value of money from an early age. If you invest in some low-cost index funds, you share in the profits. And if you start early, it doesn't have to be a big sacrifice.
Many people barely have enough to live on, let alone invest. If wages were higher in real terms, they're lives would be better. Plus, investing is risky. Not everyone has the ability to weather business downturns without tapping into savings.
BTW, this isn't a moral argument (at least it need not be), practically people cannot invest in anything and yield an actually substantial return. Almost half(E) people in the US cannot weather a $400 emergency without going into debt, how could they possibly have enough money to invest for either themselves or their children?
This arguably would be only valuable for people in the middle class to upper middle class.
EDIT: the statistic is 46%[0]. Okay, it's not "most" people but it's a good fraction. I wouldn't be surprised that >50% can't weather a $1000 emergency.
I don't disagree with you, but the obvious counter is that you are mixing causation and correlation. You would have to show that people are not investing because they have no extra money and not that they are choosing to use their money now instead of investing. Realistically it is likely a combination of those two and therefore the comment that started this thread has a point that teaching people about investing can help motivate a shift in priorities which is better than nothing.
>You would have to show that people are not investing because they have no extra money and not that they are choosing to use their money now instead of investing.
We know they don't have enough money to invest. Average income + average cost of living < amount needed to safely invest.
We've quite literally known about if for years on a national scale. He doesn't have to show anything.
I am not victim blaming, I am pointing out a way that the "broken system" has failed to educate people about the problem. You also can't just cite the average cost of living as if that it is a standard that has no waste in it. We need to do a better job of framing things like "if you switch to a worse phone plan and save $10 per month to invest, you will probably have something around $30,000 in 30 years while only investing $3,600.".
I edited my comment to remove the statement "Stop blaming people for a system they didn't choose." I'm sorry you read it. It was unnecessary and you're right, you're not really victim blaming.
I got frustrated at face value because increasing wages would do more to alleviate a lot of American's financial woe's -- now and later -- than (rightfully) helping to educate Americans about investing money. You're right, even small bouts of investment can net large gains in the future. I jumped the gun and took it as "if you just stopped being dumb with money everything would be better!"
Wage increases are not only largely (historically) objectively justifiable, but wage increases would be more consistent and easier to "implement" than educating an entire populace in a better manner. There would also be the enormous task of changing purchasing habits. We know that even when people understand "doing X is bad for future results", that doesn't mean they'll make the more rational choice.
Neither perspective is exclusive. We can increase wages and we should also invest in educating Americans about sound financial practices. But wage increases can happen now, would be immediately beneficial to everyone, while also making it easier to invest and take on the risks associated with investing.
I sincerely appreciate this reply. Not enough people are willing to do to what you just did.
I agree with everything else you said here. More money is always going to be the quickest and simplest fix for this. I was simply pointing out that financial education should also be part of an ideal solution and that education alone is "better than nothing."
I appreciate the spirit of this comment too. I do think though that where many well-intentioned people go wrong is that they think wages are just like a dial that "we" (or gov or whomever) can easily turn. I think this essay gets at a lot of these ideas very well:
"We need to do a better job of framing things like "if you switch to a worse phone plan and save $10 per month to invest, you will probably have something around $30,000 in 30 years while only investing $3,600."."
Prove that is possible. Find an investment that will do that.
Those were back of the napkin numbers. The S&P 500 has an average annual return around 10%. With a monthly investment of $10, it would take just over 32 years to get to $30,000. So I might have been a little too generous but the numbers are still realistic and the specific numbers were not really the point of the comment anyway.
The numbers were very much a part of the comment, and thus it is quite valid to guarantee you're still operating in reality when you make claims like that. Your 32 years to get $30,000 makes a lot of assumptions. One, that in 32 years $30k is going to be a significant amount of money, still. Second, that the person investing does not have an event in their life that would drain away any investments that they have, like an illness.
Has there ever been a real precedent for a society where a majority of them provide for themselves by investing in the stock market over living off of a wage?
And I bet it is a combination of the two. Just I think it is probably 0.1% of because people don't do something they've generally never done and 99.9% that real wages haven't kept up with inflation.
No one was suggesting that a majority of society lives purely off investment income, just that investing can provide benefits for working class people too.
To be fair, the reason so many people can't afford a $400 emergency is because most people don't save anything in the bank. And this is not exclusive to working class folks. A lot of people do a terrible job budgeting/saving/investing because they weren't taught to do so. $20 in the bank every month would do plenty to give you a little bit of financial leeway.
If one has internet, one can invest in oneself through education in very tangible lucrative ways. Never before has access to so much knowledge been available from MIT courses to marketing books, much of which is free.
Never before has access to so much knowledge been available from MIT courses to marketing books
Sure, but do these mooc/online courseware platforms teach one how to apply these new tangential skills and translate them into CV language and personal development actions that will get them hired? Especially if one is not already mentally inclined to join a 21st century workforce?
I'm asking this coming from the perspective of someone born in rural South Carolina (in a portion of the United States known as 'The Bible Belt') who is an entirely self-taught programmer, versed in a couple of languages-and realized I had to go to an entirely different part of the world to even make use of what I had learned. So my mind is going out to those people who don't live in dense urban areas and are maybe looking for a relatively 'future-proof' job that may as well be asking the to learn an alien language.
It was only by circumstance alone that I got exposed to the kind of entrepreneurial thinking needed for me to realize early on: I'm not gonna do jack shit with these computer skills, there's no market here, I live in a town that used to be a booming textile center and is now an economically depressed shithole (I say that lovingly, it's my economically depressed shithole), and has been for the last 30 years-forcing me to pack up and leave.
Do you think a substantial number of people who have internet have the same circumstances I did to know "I have this skill now, thanks to an online course, and now I need to follow up on it by making this sacrifice to put myself in a position where these new skills will get me hired. I need to be having these discussions with recruiters and hiring mangers, and doing these things to stand out"? Or even have the resources to pack up and plant their butt in a different part of the country?
Personally, I don't know if all of these code camps and online training programs do more than say "Here's a wrench, here's how to use it, good luck with your future as a wrench turner".
Can anyone speak to career development as an extension of this wealth of online knowledge? I just have hesitations of what utility these programs offer beyond here's how to do x with n.
People working two or three jobs don't usually have the time to educate themselves. Moreover, the job market is generally against people without a degree.
Understand, there are people in this country who have been working since 16 to provide for themselves, they work for less than 9 dollars an hour, and still pay rent, utilities, medical bills, car payments and more. They didn't have hours during summer to sit around and play video games that they could have spent watching MIT courses instead. They today, still don't have the time to game the system and get ahead that others have.
The ability to get ahead by shear will is far beyond the will and patience most people who write medium posts about coder burnout have to contend with, the difference is instead of possibly not becoming a more well off person with higher net worth, the possibility is dying or incurring more debt.
Regardless, even if single individuals can get ahead, that's fine and commendable in some sense, but there will be many more who won't, the shear majority won't because the system itself produces these circumstances, and in fact, profits off it. What we see is the function of the way we set up companies and society in general.
Even if people don't have money to invest, they can still go into debt. And the time value of money applies to both investments and debt. People need to know how to shop around for debt and to understand the implications of different loan terms. They need to understand the impact that bad credit can have on their future.
I'm totally with you that we need to teach people financial literacy in like high school. But there's only so much financial literacy can do for the populace if the labor share of productivity gains are low, if precarity is on the rise, if student loans are so high, if k12 education quality depends on your zipcode/parent's income, if one medical or legal mishap might mean bankruptcy or a lack of access to the job market, if assortative mating means marriage is yet another driver of the great divergence between the upper and lower quintiles of income in this country.
With what money? Between student debt, stagnant wages, the 'gig' economy, and limited mobility - how is anyone supposed to save a reasonable sum to invest in even when taking into account the joys of compound interest?
If you took all the money a person on a limited income spends on Netflix, restaurants and games they could scrounge up enough money to buy a trailer home in the middle of Nebraska just before they die of old age.
The reason people don't save every penny is because pennies don't matter any more. The price of housing, medical care, and education is becoming so overwhelming that everything else pales in comparison.
This isn't like the 1960s where you could get by on a part-time minimum wage job, pay your way through college, and buy a nice house in a good part of town that you could easily own outright in twenty years.
Those days are over.
Now the best you can hope for is to pay rent, to squeak by from one week to the next, and to take the edge off the bitter, brutal reality of things you buy yourself a game or pay for Netflix.
It's a relative thing. Students back then didn't have to pay three hundred bucks for a textbook and they didn't have to go so deeply into debt they could've bought a Ferrari.
Netflix is $10 per month. I am sympathetic to the view that people are squandering money they could invest, but in many cases it's just not a meaningful amount of money. Buying a video game every couple months is what, $50 or $100? Sorry, but this just isn't meaningful compared to things like rent and transportation. If someone is paying $1000 per month in rent, a single month of rent is an entire year of saving on little things, and that's a level of rent that's relatively low even far away from the Bay Area.
Really disagree with these comments (not as much this one as the other one in this thread) being flagged and removed. IIRC the line was basically, "many people have much more to invest then they claim, but they spend it on netflix, brunch, concerts etc instead"
Sure, obv won't apply to everyone and not everyone will agree, but seems like a reasonable sentiment that should at least be allowed to exist on the thread. Deleting it makes it seem like you're going for thought monoculture here.
I strongly disagree, mainly because that line of thought has no basis in reality, and allowing it to persist like this encourages the dehumanization of the lower classes. It's not a reasonable sentiment in the least.
No one said anything about dehumanization. It's your prerogative to disagree to what extent that line of thinking is based in reality. It shouldn't be your prerogative to see comments like that deleted because you disagree with them.
This article is talking about the labor-shareholder profit split. It's absolutely relevant to point out the opportunities normal people have for becoming shareholders. stockpile.com let's you buy fractional shares (no longer need 2k to buy a share of amazon) for a 99 cent commission. You can get commission free ETF's from Schwab with a couple hundred $ account minimum.
Arguing that most workers are so strapped for cash that they literally cannot set aside a few bucks to invest -- and not only that -- that arguments even hinting at such a thing should not even be said out loud, is mind boggling.
"It shouldn't be your prerogative to see comments like that deleted because you disagree with them."
It absolutely should be everyone's prerogative here to see comments that disagree with reality deleted.
"It's absolutely relevant to point out the opportunities normal people have for becoming shareholders."
It is. The comment you're talking about did no such thing, and proceeded to blame poor people for not doing so based on a viewpoint that is completely divorced from reality.
"Arguing that most workers are so strapped for cash that they literally cannot set aside a few bucks to invest -- and not only that -- that arguments even hinting at such a thing should not even be said out loud, is mind boggling."
Arguments that have no basis in reality are not being done in good faith. Arguments like the one you're currently trying to defend exist solely to blame the poor for being poor, and to make the person feel smugly superior that they're not poor, even though the difference between them and the people they're complaining about is usually just dumb luck.
Investing is very close to being a legal ponzi scheme.
If everyone invested as much as they could, people wouldn't buy enough to drive company profits like you see today, or to be the last people holding the bags when a recession occurs.
Also stock markets don't go up forever, Japan's Nikkei topped in 1989, and as of now, has barely recovered half the value. Do you really think even index funds are risk free when you can have a 50% loss for 30 years?
Lack of surplus income to invest, and/or mid-career wipe-outs of any accumulated funds (divorce, illness, disability, natural disaster, lawsuit, legal defence, market crash) and that plan utterly fails.
Retirement isn't something to leave to chance. Social insurance applies the law of large numbers to eliminating much of that.
The US pensions crisis is going to be devastating beyond all belief.
other people have addressed the problems with your position so i would just like to add that you’re wildly insensitive if you really think that this is due to the irresponsible habits of the poor.
low-cost index funds are a parasitic investment strategy that's leading to a huge overvaluation of tech stocks.
What could go wrong with millions of people believing in a simplistic investment strategy that always works. Kinda like buy a house real estate prices always go up. Well, for all the private equity funds that picked up real estate and banks at pennies on the dollar.
What Americans need is more emphasis on creating and sticking to budgets, recognizing true needs versus wants, and how to save. Investing can come later after the budget which includes some attempt at savings.
Many people who enter a program to learn how to budget quickly learn how all the monthly bills in their life add up quickly to consume their income. Examples are spending too much on cell and internet service plans, too many subscriber entertainment services, gym memberships, eating out wastefully, and more. Even the knowledge the buying a car with a term over 42 months is too much car is important to know.
Yes there are some in society who truly are at limits but we have to follow a different means to get them back to functional levels. It still benefits them immensely to learn strict budgeting that they can take forward when their income stabilizes.
Okay, this is a post about how wages haven't gone up, not about how bad americans are at budgeting. American's haven't suddenly gotten bad at budgeting, real wages have been stagnant as the cost of many things, like college for their kids, new homes, etc, have gone up significantly.
Where is your post about how million dollar CEOs need to cut their executive pay budgets, stop paying for new yachts, and pay their workers a higher share of profits instead of taking higher pay, in order to encourage the economy?
Why is it the people who have the least who have to tighten their belts?
If you think that the source of the problem is people wasting money on other things, then you don't have a sufficient grasp on the problem to be able to issue that kind of advice.
