MONEY Aging

Why It’s Never Too Late to Fix Your Finances

Those over 50 may become less sharp, but a little personal finance instruction can make a huge difference in their financial security.

When we speak of financial education today, in most cases we are referring to the broad, global effort to teach students how to stay out of debt and begin to save for retirement. But what about those who already have debts and may already be retired?

Clearly, we should teach them too. It’s never too late to improve your financial standing—and unlike financial education among the young, elders exposed to basic planning strategies adopt them readily, new research shows. This underscores the sweeping need for programs that address financial understanding at all ages and why even folks well past their saving years may still have time to get it right.

Last year, AARP Foundation and Charles Schwab Foundation completed a 15-month trial of financial instruction designed specifically for low-income people past the age of 50. After just six months of training, the subjects exhibited significant improvement in things like budgeting, saving, investing, managing debt and goal setting.

For example, only 42% of participants had at least one financial goal at the start of the program and 63% had set at least one financial goal after six months in the program. The rate of those spending more than they earned fell by a third and 35% had paid down debt. Many had begun to track spending and stop overdrawing accounts and paying late fees.

Participants saying they were “very worried” about money dropped to 14% from 22%; those saying they were “not very/not at all worried” jumped to 42% from 34%. These are remarkable gains in such a short period and among such a generally disadvantaged group. Half in the group had saved less than $10,000 and average income was about $35,000.

The research suggests that the 50-plus set can make big strides toward a secure financial life with some instruction. It jibes with other reports illustrating the value of financial inclusion for the unbanked millions and how a higher degree of personal financial ability might even save our way of life for everyone.

But let’s be clear: this isn’t just a way for low-income households to improve their lot. Plenty middle-class and even affluent households have a savings problem. And as we age we tend to make poorer money decisions regardless of our net worth. So it’s nice to see the financial education effort move beyond the classroom—increasingly to places of employment as part of benefits counseling and now, maybe, to community centers and retirement villages where willing adults can find it’s never too late to learn something new and feel good about their finances.

MONEY Personal Finance

Money Know-How? American Teens Are, Well, Just Average

Students taking test in classroom
Roy Mehta—Getty Images

A major study shows that American 15-year-olds are barely average when it comes to knowledge of personal finance—and way behind the kids in Shanghai.

For a country whose grandest export might be capitalism, we don’t do very well with our own kids. American teens land smack in the middle of the pack when it comes to simple personal financial know-how, according to a groundbreaking new global study.

Topping the list are kids in Shanghai, Belgium, Estonia, Australia and New Zealand. Bringing up the bottom are teens in Colombia, Italy, Slovak Republic, and Israel. The U.S. rates just below Latvia and ahead of France.

These findings come in the newly released 2012 Program for International Student Assessment (PISA), a widely recognized comparative measure of student proficiency in 65 countries. In the past, PISA has focused on math, science, and reading. For the first time, in 2012 it added testing on personal financial concepts.

Only 18 countries opted into the financial literacy component, which is a statement all by itself. This is a relatively new field of education and most countries have little more than a fledgling effort. Some who take it seriously and have broad financial education programs, like Australia and New Zealand, scored relatively well. But Shanghai, which is not regarded as a leader, produced the best results of all.

The assessment looked specifically at 15-year-olds. Those in Shanghai had a mean score of 603—well ahead of second-place Belgium (541) and 9th-place U.S. (492). In last place was Colombia’s mean score of 379. PISA is part of the Organization for Economic Co-operation and Development (OECD).

The 2012 results, eagerly awaited in education circles (and especially in financial education circles), were a bust in at least one big way. The goal is to figure out how to raise the financial I.Q. of people around the world by starting early and teaching in classrooms about budgets, credit cards, saving and investing. Asked what seems to work best, Michael Davidson, head of schools at the OECD, said, “The easy answer is we don’t know.”

The strong scores in Shanghai correlate with strong math scores there, he noted. But in other countries, the highest scores correlated with simply having a bank account. In general, strong financial literacy scores were also highly correlated with students demonstrating problem-solving skills and perseverance. So it may be that the best approach is a focus on math, offering kids some exposure to real world financial decisions and cultivating their will to ask questions and not give up so quickly in all spheres of life.

Among U.S. students, the OECD found that:

  • A worse-than-average 17.8% do not reach even a baseline level of understanding about money concepts, meaning that at best such students will understand an invoice or the difference between a want and a need. They have little aptitude for even simple things like a basic budget or loan.
  • A nearly average 9.4% is a top performer, meaning they understand things like fees and transactions costs and can make financial decisions with no immediate benefit but which will be good for them in the long run.

These are discouraging numbers, especially when weighed against the results in Shanghai, where just 2% of 15-year-olds do not reach the baseline and 43% are top performers—and efforts at formal financial education there are way behind those in the U.S.. With numbers like these, it’s the Chinese in Shanghai that soon may be exporting capitalism.

MONEY Kids & Money

8 Ways to Teach Your Kids to Be Financially Independent

Kid learning to use abacus
When it comes to money management, your child can't do this alone. Laurence Dutton—Getty Images

Want your children to develop good money habits for life? Then teach them well from the start. Use these tips from parents and top personal finance experts as your lesson plan.

To help your kids master essential money skills—and some day break free from you—devote time to financial home schooling. Parents are the biggest influence on their children’s financial habits, more so than work experience or financial literacy courses, according to the National Endowment for Financial Education. For ideas on how to do this, see how personal finance and parenting bloggers and authors teach their kids.

1. Tie a “No” Today to a “Yes” Tomorrow

“My wife and I have three children, ages 6, 4, and 2. While they are still a little young for in-depth money lessons, we make a point to involve them in family finances and try to make talking about financial responsibility and independence a part of our daily life. This usually happens in a thousand little, ordinary ways. An instance that comes to mind is when my four-year-old son asked if we could go to a local pizza and games restaurant that he loves. I said no, but went on to explain to him that it costs a lot of money for our family to enjoy an evening there. I reminded him of our vacation in a few months and said we were saving up so that we can have a lot of fun on our trip. It was a good way to teach him about the important principle of delayed gratification and the lesson that sometimes you have to say ‘no’ to things you want now, to enjoy better things in the future.” —John Schmoll, Jr., Frugal Rules

2. Let Them Make Spending Mistakes

“From the time our children were three or four years old, we’ve given them opportunities to earn money by doing chores and projects. When we’re out shopping, they can bring their own money and spend it however they’d like (within reason!). Not only do they learn money management skills, but this helps prevent the ‘gimme’ attitude. If a child sees something they want and asks if we can buy it, I always respond, ‘Do you have enough money for it?’ It also gives them the chance to make money mistakes. They’ve learned valuable lessons when they’ve purchased cheap items that broke almost immediately, and we’ve had great discussions on how to make wise purchases. We’d much rather they made $3 mistakes when they are little to hopefully prevent some $3,000 and $30,000 mistakes down the road.” — Crystal Paine, MoneySavingMom, author of Say Goodbye to Survival Mode?

3. Show Them That Work is Rewarding

“’I get an M&M mama?’ my talkative toddler asks. I reply, ‘Yes, if you complete the job.’ Even at 2 1/2 years old, I’m attempting to lay financial foundations in my son’s life. At this age, he doesn’t care a thing in the world about real money, but when I break out the M&Ms he knows I mean business. That’s because chocolate is a special treat reserved for a reward. At this stage, candy talks, and I can teach my son about finances with food. He is learning that when he uses the potty, picks up after himself, or helps me with a chore, he is paid for his work in delicious, color-coated chocolate candies. He’s beginning to understand that hard work is rewarded. That’s a trait my parents instilled in me, and I desire to pass along. Cash and chore charts will eventually replace sweets, but until then, candy paychecks are perfectly fine by him. Coins just don’t taste as good.” — Kim Anderson, Thrifty Little Mom

4. Break Out the 24-Hour Rule

“I’m blown away that my teenage daughter still remembers going to the flea market together years ago and learning a cool buying lesson from her mom. (As all us moms know, this is a rare and exotic occurrence!) Though I liked a pair of earrings, I waited a day to think it over, knowing that they would likely still be there if I changed my mind. Sure enough, after a day of thinking about it, I realized they weren’t all that special and that I’d rather wait to get something that I loved. To this day, whenever my daughter and I are out shopping and can’t make a decision, we invoke the ’24 Hour Rule.’” —Beth Kobliner, author of the forthcoming book Make Your Kid a Money Genius (Even If You’re Not) and a member of the President’s Advisory Council on Financial Capability for Young Americans.

5. Connect Saving, Spending, and Giving From the Outset

“My wife and I have a four-year-old son, and we’re just now beginning to teach him the true value of money and how it is a tool to be used for different purposes. We’re doing that through the use of three money jars. When he earns money through little jobs we have given him, depending on the day he will put the money in one of three jars. One day for giving, one for saving, and one for spending. On the last day of the week he can choose which jar to put his money in. He can never buy anything unless he has the money available in the spending jar. He also sees importance of saving for the future, and the joy of giving to others. It’s truly a joy to see when the ideas of giving and saving start to register, and it’s so fun to see the smile on his little face when he’s giving to our church, or to a friend through his giving jar. — Peter Anderson, Bible Money Matters

“Our kids are still very young, but at ages 3, 5, and 6 we’re doing our best to teach them the importance of spending, saving, and giving. Last summer, we made piggy banks as a family, and each child has three in their bedroom. One for saving, one for spending, and one for donating. Anytime they make money at a lemonade stand or receive birthday money, they split it up equally among their three jars. It’s not a huge act, but it does start the process at a young age that it’s okay to spend some of your money, as long as you’re giving back to others and saving as well.” — Anna Luther, My Life and Kids

6. Show Them the Price—and the Path

“We have young kids, but we’ve started occasionally working with our five-year-old daughter, Kate. One day while shopping with us she discovered My Little Ponies and asked if she could have one. We explained that we were planning on using our money for other things right now (a phrase we prefer to ‘we can’t afford it’). We shared with her that we would love to help her earn the money to buy it herself. We told her to write down the price and start saving money for it. Over the next couple of weeks we gave her little odd jobs to do around the house to earn the money, quarters and dimes at a time. She worked hard until she’d saved enough. Then we went to the store, and she got to buy her pony. She was so proud. It was a great lesson in money math, delayed gratification, and the power of saving.” — Philip Taylor, PT Money

7. Talk About Debt, Too

“My two boys aren’t quite old enough for serious money lessons yet, but one thing I’m excited to teach them early on is the importance of smartly managing debt. If they want to buy something on their own, like a toy, they’ll have three choices: 1) Buy it now, 2) Save to buy it later, or 3) Borrow money from us. If they choose to borrow, they’ll have payment terms and interest just like a regular loan. My hope is that they can learn the consequences of debt, both good and bad, before it has any real-world implications for them and without the lectures and scare tactics. Then they’ll have the skills and experience to make smarter choices once they’re out on their own.” — Matt Becker, Mom and Dad Money

8. Make Them Work for Wants

“A key factor in reaching financial independence is what you spend. Some spending is needed and necessary. But it’s the ‘wants’ that can get people in trouble. Therefore, when our kids ask for a non-essential item, we reply with a two-step plan: 1. First, wait a week. If you still want it, we’ll get it then (most times the ‘want’ goes away by the end of the first day); 2. If you still want it after the week passes, you have to work around the house to earn half of the purchase price—even if you have enough in savings to pay for it. The second step forces them to think if the amount of work required to purchase the item is worth it to them. If they follow through with the required work, then we know that they’re serious about the purchase, rather than just expressing a fleeting, short-term desire.Several times the “acquiring of money to pay for the thing” becomes almost exciting as the actual purchase.” — Kevin McKinley, On Your Money

More on helping your kids become financially independent:

 

 

MONEY Careers & Workplace

Why ‘Millennial Bashing’ In the Workplace Needs to Stop

This is the year we stop shaming Millennials at the office or, uh, wherever it is they work.

The volume of research on Millennials grows by the day, and we’re gradually learning that this much-maligned generation of 80 million is finding its footing on some important fronts—especially the workplace, where they overwhelmingly see their job as a means for doing good in the world.

Nine in 10 young adults believe they are actively contributing to an organization that is having a positive impact, according to the 2014 Millennial Impact Report from Achieve, a research and branding firm, and the Case Foundation, which promotes positive change. An employer’s position on giving back plays a big role at every stage of a Millennial worker’s career. The report found that:

  • What a company makes and sells is the top consideration for Millennials when applying for a job.
  • A company’s support for a cause is one of the most important factors in deciding whether to apply there.
  • Nearly half of Millennials had volunteered for a cause or nonprofit through their workplace in the past month.

Surpassing even baby boomers in number, Millennials are making their mark in a lot ways. They have different dreams. They are changing banking, and in some ways they are ahead of the game in terms of saving for retirement. But the workplace is where they are having the biggest impact.

A Hartford trend report called The End of Millennial Shaming notes that these young adults “are not kids anymore” and that this is the year “we end the Millennial bashing once and for all.” This generation is now invading the workforce and “taking on more and more leadership roles in business, government, communities and culture.” The Hartford found that 41% of Millennials already have four or more people reporting to them and that 78% consider themselves leaders in some part of their life.

The message to employers is clear: It is time to adapt to the next generation’s style of work. That means more collaboration, teamwork, flexibility and use of go-anywhere technology. It also means that companies that really are trying to solve the world’s problems will attract the best talent. Fulfilling passions and fully utilizing their abilities are among the top reasons Millennials cite for staying with a company, the research shows. From the Achieve/Case report:

Today’s forward-thinking companies are looking at the future of corporate social responsibility and how employee cause-work, company-branded volunteering and pro bono programs based on skills can play a role. For a company desiring to build a culture that resonates with this growing demographic of current and future employees, leveraging their passions is crucial.

The good news for employers is that the best talent is ripe for picking. Millennials have little sense of employer loyalty. More than half expect to have between two and five employers in their lifetime and a quarter expect to have six or more, PwC found.

And right now Millennials are feeling more burned out from work than any other generation. Among Millennials looking to switch jobs, 86% say they feel exhausted by their jobs. That compares to 76% of more experienced workers looking for a change, according to a Monster.com workforce talent survey.

The workforce will bend to this generation’s will, just as it largely equalized opportunity for women, made the office a home away from home, and adopted casual Fridays for 78 million baby boomers. What’s exciting about this next generation is that it really does want to make the world a more sustainable and peaceful place, and is calling on the resources of capitalism to deliver.

 

 

MONEY retirement planning

Forget About Saving. Just Go on Vacation.

Mickey Mouse posing with the Gaither quintuplets
You budgeted for your Disney World trip, but did you count the hit to your retirement savings? Gene Duncan—AP

Americans get retirement saving backwards: We think about it more when there's less time to do it. Millennials, now's the time to fix on the problem.

More people plan for their next vacation than plan for their retirement, new research shows. This won’t shock anyone who has followed the retirement savings crisis in America—or scraped together $12,000 for a family trip to Disney World. What’s striking, though, is how totally upside down our thinking is on this issue.

The amount of time we spend thinking about retirement increases with age across every cohort, the financial services firm Edward Jones found. That makes sense until you think about it. By the time you are in your 60s it may be too late to make much of a difference in your nest egg. A little more thinking in your 30s would go a long way.

Yet Jones found that time spent thinking ahead about retirement rises dramatically with age. Among those 18 to 34, only 9% say retirement planning is top of mind. The share rises to 31% among those 35 to 44, to 37% among those 45 to 54, and to 40% among those 55 to 64. Overall, Jones found that 28% of Americans have the next vacation top of mind while 25% have retirement planning and 22% have paying for college top of mind.

Once upon a time, retirement planning could wait. More workers had pensions and retiree health benefits. Planning was more about when to take Social Security, who to designate as beneficiaries, and how to trigger pension payments. Today, if you don’t start thinking about retirement before 55 you are either wealthy or out of luck. Yes, important adjustments can be made at any age—like taking advantage of catch-up tax-deferred savings rules, working longer and delaying Social Security benefits. But the real juice is in saving early and often.

Compound growth for an extra 20 years, or even just 10, can more than double your savings over 35 years. Investing $2,000 a month and earning an 8% return would provide $399,082 over 35 years, according to data from T. Rowe Price. Savings after 25 years would total $165,457; over 15 years, just $60,203.

So when only 9% of young adults say that retirement planning is top of mind, it means that 91% are at extra risk of falling short in the long term—and doomed to think about retirement finances much more often when there is much less they can do about it.

MONEY Kids and Money

The Secret To Raising Financially Independent Kids

What parents can do from the get-go to help their children prosper later in life.

It’s the secret fear of every American parent: failure to launch.

What if, despite your best efforts, your adult kids just aren’t able to sustain themselves financially?

The idea used to give Andy Byron the cold sweats. With a whopping five kids, the 57-year-old financial planner from Pleasanton, Calif. wanted no part of “delayed adults” hanging out in his basement well into their thirties.

So he and his wife turned their household into a virtual factory for churning out financially independent kids. The eldest girl, 29, is an English language teacher. The 26-year-old twin boys work for Apple and PricewaterhouseCoopers, respectively. Their 22-year-old son scored a paid summer internship with medical device manufacturer Stryker Corp, with an eye toward a career in medical sales.

The 19-year-old daughter, a college sophomore in the fall, is combining her studies with a paid summer internship and a part-time accounting job during the school year.

So what’s their secret sauce?

“Start early, be consistent, and make sure they know what their responsibilities are,” Byron says.

As soon as they were 16 or 17, the parents told their kids that they had to get jobs, and would be on their own after graduation. As a result, the three oldest are out of the house and get no more monthly cash from the bank of Mom and Dad; the younger two will follow suit soon.

While the Byron clan appears to have figured it all out, it’s no easy task to nudge kids from the nest. Among people in their 40s and 50s who have adult kids, a stunning 73% report lending financial help over the previous year, according to Pew Research Center, a Washington-based think tank.

Are the successful launches of the 27% due to thoughtful, years-long projects to educate kids about handling finances? Or are they product of tough love, throwing adult kids into the deep end of the pool in order to force them to swim?

“They are more the result of financial education, and talking about money, which ranks right up there with sex as a taboo subject,” says Sally Koslow, author of the book Slouching Toward Adulthood.

For those with children who have yet to launch, there is plenty of time left on the clock. Here is how to prep kids for true financial independence, during college and the critical years that follow:

Do Your Part

If you don’t want your kids financially hanging on, do whatever you can to help them graduate from college debt-free. Seven out of 10 college grads last year had outstanding loans, at an average debt of $29,400, according to the advocacy group Project On Student Debt. To help them avoid indentured servitude, start saving as soon as they’re in swaddling clothes.

Andy Byron and his wife contributed at least $50 a month, and often much more, into 529 college-savings plans for each one of their five kids—”as soon as each child had a Social Security number,” he says.

Byron supplemented that aggressive strategy by “strongly suggesting” the kids go to public, in-state universities. The payoff: All the Byron grads have emerged from their college years free of student debt.

Related: How Much Do I Have to Save for College?

Draft a Wingman

The popular HBO series Girls was premised on a key event: Lena Dunham’s character getting financially cut off by her parents.

That can be excruciating for everyone involved, but necessary nonetheless. “Parents get so emotionally involved,” says Matt Curfman, a vice president with financial advisers Richmond Brothers in Jackson, Mich. “That’s why I tell them, ‘If you need me to jump in and help, even if I end up being the bad guy, I’m happy to do so.'”

It doesn’t have to be done in one fell swoop, Curfman notes. If your adult kid runs into financial trouble, write down a concrete plan to help with a certain amount of dollars for a certain number of months—”but that’s it.”

Become a Part-Time Professor

Kids get plenty of calculus and chemistry in high school and college, but personal finance? Not so much.

That’s where parents can make themselves a critical resource. For 24-year-old Annie-Rose Strasser, home instruction was what set her on the path to become the financially independent young adult she is now. Strasser has a full-time job as a journalist in Washington and lives in her own apartment. “I never learned personal finance when I was in school—401(k)s, saving, balancing a budget: I learned it all from my parents,” she says.

Paired with that informal home-study was the early expectation that Strasser would put herself to work as soon as she was able. A constant stream of it—at summer camps, at office jobs, at paid internships—helped set the table for her successful launch.

“My parents aren’t the kind of people who would say, ‘Go off and explore yourself,'” she laughs. “Instead, they put a lot of stock in the idea of finding a career, saving money—and being extremely financially responsible.”

TIME Financial Education

How We Can Fix the Economy and Save Capitalism

Bringing the underprivileged into the financial mainstream would do no less than save our way of life, argues the activist John Hope Bryant.

The civil rights battles of the 1960s changed the course of American history. But the fight isn’t over. It just has a new front: economic empowerment.

Vast segments of the population “never got the memo” on how to save, invest, find a great job, start a business, and otherwise operate in the realm of free enterprise, John Hope Bryant asserts in How the Poor Can Save Capitalism. An activist for bringing the poor into the financial mainstream, Bryant argues that those who fail to “understand the global language of money” are nothing more than “economic slaves.” So financial education “is a new civil rights issue.”

This isn’t an entirely new thought. After the civil war, President Lincoln established the Freedman’s Savings and Trust with the mission to teach newly freed black Americans about money. Even then, it was apparent that some ability for the poor to borrow at reasonable rates, save and earn a return was in their and the nation’s best interest.

But the Freedman Bank quickly failed through the mismanagement of politicians, and broad-based financial education is only now really beginning to catch on. Bryant describes how his own father missed the money memo. A concrete contractor, he would bid $1.50 for $1 of work and “ended his amazing career dead broke.” He knew about hard work; he just didn’t know how to translate that hard work into economic gain.

When we talk about financial education today we mostly think of teaching young people how and why to budget, manage their credit, shop wisely, live within their means, and begin saving immediately for retirement. They will come of age in a world without safety nets and must take saving seriously at an early age. It’s the surest way to get to financial security and it’s a simple point that I try to make as often as makes sense.

Bryant is on board for all that. It’s why he and his book are even on my radar. But he makes a point not often made: to the underprivileged, basic concepts like saving for retirement and managing credit wisely are of another world; this group just needs a bank account to avoid predatory check-cashing services, role models from the neighborhood to show them how to start and build a small enterprise, and a few modest money successes to build their confidence. This is financial education at a very basic level.

Globally, half of adults totaling some 2.5 billion do not have a formal bank account. This shuts them off from credit and savings opportunities that you may take for granted; it hinders their rise to a better life and squanders the potential to convert hundreds of millions of people from economic drains into economic contributors. Some 40 million of these unbanked are in the U.S., and by reaching them Bryant believes we can lift them out of poverty and resuscitate our moribund economy. His plan includes a variety of near-term tax and other incentives that, naturally, have a cost. But Bryant would ask: what’s it worth to save the economy?

Financial inclusion for the poor is not the same issue as financial education for all kids. But the two are closely linked. All young people should be exposed to money basics like, budgets, credit cards, college loans, compound growth and inflation. Over the past decade, a global movement has emerged pushing for just that. But before any of these lessons will make any sense to the very important underprivileged among us, these people must first be brought into the mainstream where they can secure micro loans at a reasonable rate and stop giving away what little they have to payday lenders. It’s the right thing to do, and if Bryant is right it will do nothing less than save capitalism.

 

 

MONEY Retirement

Eco Disaster: Lessons from Greenpeace’s Currency Bet Gone Bad

The global peace and sustainability nonprofit lost a bundle betting on currencies. Here's what you can learn from the mistake.

Superstars from Tiger Woods to Warren Buffett tell us the secret to their success is keeping it simple. So why would a donor-dependent, globally recognized nonprofit take a macro-economic flyer on which way currencies will move?

More important: What can the disastrous Greenpeace International bet on the direction of the euro tell us about how we handle our own financial matters? Greenpeace, which is quite good at promoting peace and sustainability, is really bad at macro analysis. Sometime last year the organization lost $5.2 million—more than 6% of its annual budget—when it bet wrongly against a rising euro.

This large loss came to light only this week, and it’s too soon to know its full effect. The organization says a financial pro on its staff overstepped and has been fired, and that the loss will not lead to a penny being cut from its causes. Still, it’s hard to believe that at least some donors won’t bristle and hold back donations. The consequences promise to go beyond simple embarrassment.

One lesson here is that currency speculation is a tricky business and best left to hedge fund managers like George Soros. If you must engage in currency bets alone, do so with only a small fraction of your savings and through straightforward international government bond funds. These pay interest in local currency and thus represent a foreign exchange bet. You might also consider a currency ETF from leaders CurrencyShares and WisdomTree.

The bigger lesson, though, is that it really does pay to keep things simple when investing. As Buffett writes in this year’s annual letter to shareholders:

You don’t need to be an expert in order to achieve satisfactory investment returns. But if you aren’t, you must recognize your limitations and follow a course certain to work reasonably well. Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick “no.”

Complexity is all around us. Exotic mortgages sunk millions of homeowners in the Great Recession. Unimaginably arcane financial derivatives contributed to the demise of Lehman Bros. and downfall of Bear Stearns, among other investment banks, during the financial collapse. Even bankers didn’t know quite what they were doing—not unlike the hapless, rogue finance staffer making a wrong-way bet on the euro for Greenpeace.

Individuals can make things as difficult or as easy as they want when they save and invest. Annuities are especially hot right now. Many people shy away from them because they believe all of them to be complex, and many others end up in the wrong type of annuity (and many other insurance products) because so many truly are complex. Yet for most people just looking to lock up guaranteed lifetime income, the venerable immediate or deferred immediate annuity are a sound and simple option.

Likewise, you can prospect for the hottest stock funds, only to be disappointed once you plunk down your dollars and see them eaten away by lackluster returns and high expenses—or you can choose low-fee diversified stock index funds, or maybe a target-date mutual fund, sleep well, and check back in just once a year to rebalance. Why layer chance on top of investment risk? You are good at something else, not macroeconomic analysis.

Reports suggest that the wayward Greenpeace employee was not nest feathering but trying to do the right thing for the future of the organization. Still, it went bad—even for someone in finance. As with many endeavors, when it comes to money, better to do as Buffett says and just keep it simple.

TIME Careers & Workplace

Here We Go Again: Is College Worth it?

140530_Money101_SavCollege_1
Acilo/Don Farrall—Getty Images

As an advocate for skipping college blesses 20 new fellows with seed money, new data shows pay advantage for graduates is growing.

The debate over whether college is worth the money may have taken a decisive turn. Unquestionably, it is—even if you must go into debt to get the degree—new data suggests. Still, there is no convincing folks at the Thiel Foundation, which just blessed a fourth class of dropouts with money to start their own business.

First, the new data: Americans with four-year college degrees made 98% more an hour, on average, in 2013 than people without a degree. That’s up from 89% five years earlier, 85% a decade earlier and 64% in the early 1980s. These figures are based on an analysis of Labor Department statistics by the Economic Policy Institute and first reported in The New York Times.

Researchers conclude that over the long run not going to college will cost you about $500,000. That’s double the penalty for not getting a degree three decades ago. “The decision not to attend college for fear that it’s a bad deal is among the most economically irrational decisions anybody could make in 2014,” says The Times.

But the Thiel Foundation isn’t drinking that Kool-Aid and, in fact, hopes to eventually refute the assertion with data it collects through its “20 under 20” fellowship. The foundation just selected its fellows for the coming year and Mike Gibson, vice president for grants, says both the number and quality of applicants has risen each year. “High school students are now anticipating this is something they want to do,” Gibson says. “They start working on a business long before they apply for the grant.”

The incoming class of 19-year-olds includes several with a running business, like Vitalik Buterin who is about to release the first version of a platform and coding language enabling broader application of the technology underlying bitcoin. The fellows tend to be tech geeks from the west coast. But the program has welcomed fellows from more than 40 countries including China, Canada, India, the U.K. and Germany.

PayPal co-founder Peter Thiel stirred up a hornet’s nest when he announced his peculiar fellowship four years ago. Calling higher education a bubble, he offered 24 high school students $100,000 each to skip college and start a business. That first class would be entering its senior year now. Gibson says five have given up and gone back to college. But 19 are either working at their own business or have sold it and gone to work for someone else in a related area. “A handful sold for seven figures,” he says. “These kids have more money than me.”

Gibson, by the way, has a four-year college degree. The last part of his statement is one reason the foundation is keen to stay with its program for the long run and generate its own data. Studies that examine the value of college look at all students. The Thiel fellows are a special group. If they were not starting their own business they would be going to college, Gibson says.

They are bright and college-ready but have chosen a different path. They have been handed the funding and they enjoy the mentorship needed to pursue their dream. Among high school students with that kind of choice, he believes the ones who skip college and just get to work on their idea, on average, will have greater lifetime income—especially when you back out the cost of tuition, fees and loans.

The point is that college is not for everyone and some people would be better off skipping it, Gibson says. The 20-under-20 program is creating role models to make the case. Ultimately, it hopes to generate the data to prove it as well.

 

 

 

 

TIME giving

This Is How You Give Away a Massive Fortune

Elite universities are offering workshops in philanthropy. Is it a nod to future fortunes? Or just the new normal?

As a young reporter in the 1980s learning the personal finance beat my editor kept things simple: just write about money—how people earn it, spend it and save it. Tellingly, how they might one day give it away wasn’t on his radar.

Those were different times. Boomers were still decades from retiring. The stock and housing markets were on a tear. Most folks were getting ahead. The whole game was about building a large nest egg. Readers could deal much later with how to disburse their kitty. After all, how tough can it be to choose a benefactor and write a check?

But today charity is on the minds of even young people who may have seen unusual hardship and need up close during the Great Recession. Many have also seen their career opportunities narrowed in a slow growing economy and come to view nonprofits as not just a decent, but laudable, alternative path.

So it is that a string of elite universities have begun to offer students a workshop in philanthropy, a development that not a few observers find jarring. Who do these kids at Harvard, Princeton, Stanford and Yale think they are studying to give away fortunes not yet made? Do the sons and daughters of the elite believe riches are their birthright? The underlying presumption further stirs the unrest many feel about income inequality and the methodical, disproportionate gains of the top 1%.

It doesn’t help matters that the phenomenally rich hedge fund manager, Geoffrey Raynor, provides most of the funds for these workshops—and that in return for financial backing he demands time in front of the enrolled so he can spread his peculiar gospel on giving back. Raynor does not believe in good for good’s sake. He says all giving is selfish. “There is no moral high ground,” he told a group at Stanford, as reported in The New York Times.

This is hardly a novel thought. Tocqueville famously regarded helping others as “self-interest, properly understood.” How could it be charity to help a neighbor build a barn when you expected the same in return? In A New Purpose, I and co-author Ken Dychtwald explore the many ways that giving promotes one’s own missions and passions, and brings selfish rewards that range from tax breaks to public adulation to simply feeling good about yourself. But we also leave room for altruism—the high moral ground; the Mother Teresa’s of the world.

The notion that we’re all crack dealers giving away samples as an investment doesn’t fly. Even before the Great Recession changed the way many of us think about charity, plenty people were doing good for good’s sake. And now the new normal is stirring such activity among the very young. Popular allowance management websites like Famzoo.com and Threejars.com promote kids as young as five divvying their income into piles for saving, spending and sharing. The sharing part is relatively new. Certainly, it wasn’t on my former editor’s screen.

Giving has emerged as a family activity in many cases. Nine in 10 clients who have set aside charitable dollars in a donor-advised fund say they are teaching their kids about giving, Fidelity finds in its just released Giving Report 2014. Nearly one in five discuss the topic with kids more than five times a year. Eight in 10 say the cause they support reflects input from family; and family involvement is most acute among donors under the age of 50 and thus most likely to involve young people.

So maybe universities that offer philanthropy workshops aren’t so tone deaf. The economic recovery turned five this month, making it one of the longest U.S. expansions on record. But many continue to struggle and young people appear fully engaged. There’s a lot more here than kids at Harvard and Yale pondering the disbursement of their future estate.

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