Duh! Observation - Education Smarts Does Not Equal Financial Smarts

[38Chevy454]

I know for many on here this is not earth shattering news. We see it all the time. People that have higher education levels like bachelor's, master's or PhD's can still be very financially ignorant.

I work with a lot of high education folks. Many are living paycheck to paycheck. Many carry a large amount of high interest rate revolving debt on credit cards. They spend too much on "stuff" just so they keep up with the neighbors or other co-workers. Drive new cars and switch them out every 2-3 years. Provide aid for adult children on regular basis. Lucky if they are saving anything for retirement, some not even taking advantage of the employer match for 401k

So many very intelligent people have no financial smarts and in spite of 6-figure income levels, they are not able to grasp saving toward retirement as being a feasible goal. They just seem to give up and plan to work into old age

In spite of colleges making students take general education courses in addition to the technical degree courses, they do nothing to require any financial education. I know it is not because my co-workers are unable to understand the financial aspects, they did not get high level science and technical degrees without having intelligence and ability to learn. It seems they just do not even try or maybe they are not even aware?

 

[dallas27]

Companies and the US gdp need technical knowledge that persists over decades, they dont need people with high self worth and the knowledge to exit the workforce quickly, making our labor high cost an uncompetitive.

Thank those people for working their whole lives to generate earnings for your shares, they deserve it.


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[CaliforniaMan]

I once even had one potential client tell me that they wanted to pay me well, but not enough so I would not need them anymore. I am not saying there is some kind of conspiracy here, but the sad truth is what is good for the employer is not the same as what is good for the employee. Lack of financial assets and having built up a lot of personal debt is good leverage for any employer to use. Remember the old Tennessee Ernie Ford song, Sixteen Tons, with the line, "I owe my soul to the company store." Hey they don't call us wage slaves for nothing.

 

[FIREd]

No matter what our IQ is, we are all emotional beings and money decisions are often guided by emotions (fear, greed, lack of self-esteem, etc...).


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[Mulligan]

I take a very skeptical view of more education. Most people know they should save but they crumble to the temptations of living in the moment and no self discipline. 20% plus of the population smoke, and I doubt even one of them did not know they were harmful. I have been on my best friends rear end for 10 years about saving and getting out of debt. Lot of good it's done. He has went from 20k CC debt to over 50k CC since then. Always going to make more money and earn his way out of debt. He is sticking with the plan, and now that he is 40 he sure looks like his plan is working out great. If you want the masses to save vigorously you will have to either confiscate their money or beat the crap out of them every time they make a foolish purchase.


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[Lakewood90712]

Education, Knowledge, and Wisdom , are all different, I just wish I had more Wisdom. Maybe I would have wasted less time riding dead horses over the years.

 

[38Chevy454]

Education, Knowledge, and Wisdom , are all different

I think you nailed my long original post exactly with this snippet quote. I believe wisdom is the ability to use knowledge gained from education. You need education first, then the knowledge to understand that education, and finally wisdom to be able to apply it for the best results.

 

[Rustward]

I know for many on here this is not earth shattering news. We see it all the time. People that have higher education levels like bachelor's, master's or PhD's can still be very financially ignorant.

PhD's are usually focused in a particular field. If the degree is not related to personal finance, it is likely that personal finance will be on the back burner for that particular PhD. Their primary field will be on the front burner because it is what they spent their whole life working toward.

This is not to say that some PhD's do not eventually realize they need to save for retirement, though.

People with degrees can be ignorant of other things, also. I know one "educated" person (probably bachelors degree or higher) who drove his Honda for years in the 70's-80's without changing the oil. He thought as long as the light didn't come on everything was OK.

 

[Walt34]

One of my sisters worked in an office that managed 457 plans, among other things. She was also puzzled at the number of people, some of whom had six-figure salaries, lived paycheck to paycheck. If they didn't get their paycheck before lunch they couldn't buy lunch!

That would seem an incentive to brown bag lunch but that might be heresy in some places.

 

[Cobra9777]

I try not to be too judgmental about this. People make choices and trade-off's that aren't always a result of ignorance. It's just a choice. My sister is a brilliant scientist who works 12 hours/day, 6 days/week. She loves it and works on some fascinating projects. They kick her out of the building every Friday night at 10pm. When she's not working, she's spending money on expensive things and hobbies that bring her enjoyment and satisfaction. She's 60, single, has no savings, and works at a state job with no SS. There's a mandatory savings program but she always withdraws the money, pays the penalty, and spends it. I've asked her about retirement planning. Her answer is, "Why would I want to retire? I love what I do at work and outside work. And I want to keep doing it until I die. Everything is exactly as planned."

 

[soupcxan]

She's 60, single, has no savings, and works at a state job with no SS. There's a mandatory savings program but she always withdraws the money, pays the penalty, and spends it. I've asked her about retirement planning. Her answer is, "Why would I want to retire? I love what I do at work and outside work. And I want to keep doing it until I die. Everything is exactly as planned."

Eventually she will get old enough or get sick/have an accident where she can't work. Then she has no savings, and no SS. What exactly is she going to do at that point?

 

[Cobra9777]

Eventually she will get old enough or get sick/have an accident where she can't work. Then she has no savings, and no SS. What exactly is she going to do at that point?

She has 4 kids, several grand-kids, 2 ex-husbands, and 2 siblings. Also, she actually has a lot of hard assets, just no financial assets.

 

[photoguy]

PhD's are usually focused in a particular field. If the degree is not related to personal finance, it is likely that personal finance will be on the back burner for that particular PhD. Their primary field will be on the front burner because it is what they spent their whole life working toward.

In grad school I had no time to look at personal finance. And saving money didn't register at all because you make next to nothing anyway. The best thing a PhD student can do is finish as fast as possible and trying to save a few bucks is counterproductive if it costs you time.

My only rule was don't go into debt. I didn't try to save anything of my meager stipend ($1400/month) -- compared to starting salaries there's no point.

This is not to say that some PhD's do not eventually realize they need to save for retirement, though.

Yeah once I realized I wanted out, I went into turbo saving/investing mode. Got out in 12 years.

People with degrees can be ignorant of other things, also. I know one "educated" person (probably bachelors degree or higher) who drove his Honda for years in the 70's-80's without changing the oil. He thought as long as the light didn't come on everything was OK.

I didn't realize you had to pick the lemons off your tree or it will collapse under its own weight.


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[Lucantes]

If you want the masses to save vigorously you will have to either confiscate their money or beat the crap out of them every time they make a foolish purchase.

 

[wingfooted]

One of my reports, starting to crowd age 50, has done rather well for the company and was granted an annual bonus of $90K. He makes a reasonable salary as well. I know he has almost zero savings, just a bunch of toys.

So, OK $90K bonus, not bad, at least it's a start towards a sustainable nest egg.

But, no - he uses the bonus to place a down payment on a 2014 Dodge Viper, the $120K car that has a V-10 engine and a top speed of 200 mph+.

Crazy.....but what can you say. It's just all about immediate gratification with many people.


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[jollystomper]

There is a tendency for those with advanced education to believe
1) They will never be unemployed unless they choose to be, so no need to "save for a rainy day"
2) There skills will always be in demand, so their salary/bonuses will increase and they continue to expand their lifestyle
3) They will not get sick or ill in their advanced age, or that through work they will always have coverage

I see a lot of that among my Ivy League classmates. Back around our 15th and 20th reunion, when we'd mentioned things like savings/budgeting, we got more than a few "quizzical" looks. Some of DW's friends even asked her if we were having financial difficulties - it seems they equated being frugal with being poor. Some would say "you don't need to worry about those things, folks with our degrees will always be in demand". At our 30th and 35th reunions there were a number of folks saying they "had" to keep working but a lot of it was to fund lifestyles full of "things" and some remarked on how hard it was to save.

 

[Bestwifeever]

I wonder if some of them went into debt (considerable debt, some of them) to get their degrees and think they are no longer depriving themselves by spending all their income now. A lot of people here would look long and hard at the expected economic benefits from an advanced degree vs its cost before taking on debt, but maybe the financially clueless well-educated were never concerned about personal finances and planning. Some might be classic absent-minded professor types who just forget about that part of their future--too smart for their own good.

 

[ls99]

When I w*rked in a research environment with many who had advance degrees, some having several, the joke was: they know more and more about less and less.

Case in point: when we went out for parties and dinners, it was always the secretaries who figured up the tip. The good doctors of philosophy would quip: we do mathematics, don't do arithmetic.

 

[Andre1969]

People with degrees can be ignorant of other things, also. I know one "educated" person (probably bachelors degree or higher) who drove his Honda for years in the 70's-80's without changing the oil. He thought as long as the light didn't come on everything was OK.

I've known a couple people like that. Back in high school and college, I had a friend whose Dad had a '72 Dodge Dart that he bought new, and never changed the oil, only added when it got low. He also tried that stunt with an '83 Datsun Stanza, but that car wasn't nearly as tolerant of that kind of abuse, and was pretty much dead by the 1989 model year. As for the Dart, they just let it sit around too long and it got hard to start. They offered to give it to me if I wanted it. I was able to get it started, but then it started leaking fuel, but just from a rubber hose, which was an easy fix. Still, they didn't want to give me something so "dangerous", so they took the tags off of it and eventually the county towed it away.

Now, this guy wasn't a rocket scientist, but he did work for NASA! So you'd think he'd be somewhat educated!

Back in the 1990's, the lead of our IT group had a Toyota Tercel, and its engine seized up around the 30,000 mile mark. Why? Dumb@ss never changed the oil, and never added, either, so it rand dry and killed the engine! Needless to say, once that guy moved on and was replaced, our computers did seem to crash a bit less often...

Even my Granddad, who worked for the Pennsylvania Railroad for about 35 years, doing maintenance/upkeep type work, wasn't so hot about maintaining his cars! My other Granddad, who had grown up around farm equipment, been a mechanic in the Marines during WWII, did shadetree mechanic work on the side, etc, was always getting on him about it.

Now, Granddad never seized any engines. However, one of the trains that he used to work on was the one that crashed into Union Station in DC just before Eisenhower's inauguration back in 1953. And, IIRC, Granddad's specialty was brake work!

 

[JoeWras]

My BIL is well educated and very smart. We just approach life differently.

He makes three times as much as me, and has three times less saved. This is intentional. He expects to work until 65 or more.

He thinks I'm the idiot because I'm not "enjoying life" now like he is. He spends his dough on a large house with pool, expensive cars, alcohol, and crucially, a very high class country club membership.

His perspective is that saving money for retirement is foolish, since he'll be too sick or disabled to enjoy it. (Wouldn't doubt it, his liver may not last.) Right now, he plays golf all the time while "doing business", enjoys wine that is minimum $50 per bottle, etc.

I'm an idiot for thinking I enjoy "Simple pleasures" (see other thread) because I'm not golfing at the country club, etc.

Just a different perspective from a smart and well educated individual. He really does understand money management. Just chooses to manage it in the here and now.

 

[serie1926]

"He thinks I'm the idiot because I'm not "enjoying life" now like he is. He spends his dough on a large house with pool, expensive cars, alcohol, and crucially, a very high class country club membership."

Can we have both?

 

[HFWR]

"He thinks I'm the idiot because I'm not "enjoying life" now like he is. He spends his dough on a large house with pool, expensive cars, alcohol, and crucially, a very high class country club membership."

Can we have both?

Not on my salary...

 

[daylatedollarshort]

I think many people here are just wired differently. I don't get the income but not balance sheet affluent either. I would rather use my money to buy leisure time and financial security than depreciating consumer goods.

I quite enjoy lately not working full time and having the free time to buy luxury good cast offs at charity thrift shops in affluent cities for pennies on the dollar.

Yesterday I stockpiled overstocked meat in the chest freezer for almost half price, bought $400 worth of furniture and appliances for one of the kids' new digs for $50 at a charity thrift shop and saw a play with free tickets from the public library ($110 value). I get my jollies from not having to work full time and yet still live the same basic lifestyle as our former coworkers, just by having time for more price shopping, looking for bargains and DIY instead of working and commuting 7 am to 7 pm.

 

[Walt34]

Can we have both?

That's a direct quote from my ex!