> Financial literacy is a gift, and absolutely omitted from standard education, which is unfortunate.
With my tinfoil hat on, I feel like that is by design.
> Financial literacy is a gift, and absolutely omitted from standard education, which is unfortunate.
With my tinfoil hat on, I feel like that is by design.
I don't think you even need to wear a tinfoil hat to reach this conclusion. Knowing about the origins of the modern outcome-based education systems in the West (we borrowed from the Prussian education system which replaced the classical education system based on the Trivium and Quadrivium) I would assert that your claim is spot on.
you should know haha :)
I wear it proudly!
Probably, because everything would collapse if everyone was an "investor" and fewer people did actual work to keep the world going.
This type of investing isn't about day trading following the latest hype. It's about putting some surplus money to better use for when you need it in 10-20 years.
That's even worse, because the entire point of the stock market is supposed to be that investors choose where to put their money based on how the company is performing and what they're saying. I.e., you vote with your wallet, and the market therefore punishes bad behavior and rewards good behavior.
If everyone is passively investing, that no longer works. Then it's not even a market. We don't even know, for sure, if that works.
It's gambling and we're already there. Hardly anyone cares about what any company does when investing in it; all that matters is whether it grows and whether you can time a jump elsewhere before it drops.
Investors are obviously bad a choosing where to invest. See any widely overvalued company
Right but those wildly overvalued companies become that way because millions of passive investors just mindlessly dump their money into them.
If you use big index funds, you're the primary people contributing to Nvidia, Tesla, and openAI. You didn't start it, no, but you certainly propelled that ball forward like a bullet.
And, well, that's fine, because we cant expect anyone really to actively invest. The problem is we don't know if this works. This definitely has the potential to blow up. You have to realize that what we're doing here is undermining the stock market at a conceptual level.
There are people who don't invest? Do they just keep their retirement savings in cash? I imagine for most people either the government or their employer invests for them.
For most people it’s “what retirement savings?”
Most of my family and extended American family doesn’t really invest. I think probably 10% of us “believe” in the stock market. The rest sometimes buy houses (which I encourage because it’s better than nothing), but otherwise are planning on social security, pensions, and lump-sum savings to cover their retirement
> Most of my family and extended American family doesn’t really invest. I think probably 10% of us “believe” in the stock market.
~62% of US adults own stocks: https://news.gallup.com/poll/266807/percentage-americans-own...
Most of my family is farmers or missionaries, and I bet those groups are less likely than most to own stocks.
Also, 'owning stocks' vs 'investing' feels different to me. My brother will go all in on tesla for one year, and then pull out and just sit there until he has another somewhat-random impulse. Likewise, my dad used to put all his money into some index funds for the 30 days leading up to Christmas, because 'the government always makes the stocks go up during the holidays, to keep everybody happy'. They count as 'owning stocks' (at least sometimes), but I don't feel they count as 'investing'.
> social security, pensions, and lump-sum savings
Isn't that very little money?
In short, yes, but my family is very cheap, so it is doable with sacrifice. I think I'm middle class (or maybe upper-middle?) now, but I think I'm the first generation that can say that. And even I rented closets, garages, and spaces behind TV's until about 4 years ago, lol.
Congrats on making it!
While defined-benefit pensions are less and less common, they may not be small.
median emergency savings in the US is $500-600
1 in 5 have $0
50% have enough to cover 3 months of expenses
The math doesn't add up here?
You're saying that $500-600 (the amount you claim 50% of people have saved up, if it's the median) covers 3 months of expenses?
I mean no offense, but your understanding of a median seems flawed. The median is the number/point that separates the upper half from the lower half - it is not what 50% has.
The math does add up. There is no contradiction in your parent’s post.
I'm not sure I catch your explanation, so let's try with some simple numbers and you'll tell me where I'm wrong.
I have a family of 10 people. These people have, respectively,
$0 ; $0 ; $1 ; $5 ; $49 ; $51 ; $190 ; $8,000 ; $150,000 and $1,000,000.
What's the median amount of savings in this group?
And what amount would complete the sentence : "50% of people have ..."?
The median of those ten numbers is 50.
If the count of observations is even, it is usually the arithmetic mean of the two mid-points, so (49+51)/2 in this case.
The median does not have to be in the finite set of values.
Maybe Wikipedia can explain better than I can: https://en.wikipedia.org/wiki/Median
You didn't answer my second question. Yes the median in my example is $50. Thus it would be accurate to say "50% of people in that sample have $50 (or $51)". But not anything further than that middle point.
Back to the original post:
I'm assuming that "three months of expenses" would be roughly $6,000.
The parent post had the median at $500.
1. Given the sheer number of adult Americans (hundreds of millions of observed data points), wouldn't you say it's quite likely that the two mid-points are very close to each other (eg $499.97 and $500.02)? But definitely not (-$5,500) in debt for one mid-point individual vs $6,000 in savings for the next individual (which comes out to $500 in median and "top half has $6k")?
2. In the first scenario (almost continuous curve at the midway point), how likely do you think it is that somewhere right after that $500 mid-point, there is a huge discontinuous jump to $6,000 to accomodate the idea that the rough top half of observed savers has "3 months of expenses" saved?
3. Is there any other scenario I'm not foreseeing, that can reconcile: "the median is $500" with "the top 50% have $6,000+ in savings"?
> You didn't answer my second question
I purposely didn’t because strictly that is not a median. Stupid example: median of 1,2,3 is 2 and 67% >= 2 here. We do agree that as N grows, the difference shrinks (to the point of no meaningful difference).
My point was that mathematically there is no contradiction. Let’s say half the population has $200 monthly expenses (3mo is then $600 saved), the median is $600 and it checks out.
That is a stupid assumption though - because who has such low expenses.
> I'm assuming that "three months of expenses" would be roughly $6,000
You then assume that we must be talking about the upper half, but that isn’t given.
We have to make SOME assumptions though, since the statement is underspecified: the OP didn’t specify what 3 months expenses means. It is unlikely that 50% of the US population have the EXACT same expenses, so I assumed an “on average” was missing somewhere which further relaxes the constraints.
I objected to your statement that the math doesn’t check out. There are many ways it could check out.
We came at this with different assumptions. I don’t think we fundamentally disagree and I didn’t mean to bicker.
Thanks for your response.
I appreciate you taking the time to geek out on some statistics with me (and you even had me look up medians again because I was confused at your reply!)
Incredible HN post. I'm hoping it's because you are from a country where people are generally well taken care of.
Yes, there are people who don't invest. Where do they keep their retirement savings? 40-50% of Americans, at least, simply have no retirement savings! Most people in America aren't earning enough to put away a meaningful amount for retirement. It's going to be grim as boomers and millennials hit retirement age and have to keep working.
More than half of Americans are net debtors, with a negative net worth.
> More than half of Americans are net debtors, with a negative net worth.
Median household net worth is around $193k, not negative. Maybe this is true on an individual basis because there a bunch of, say, young debtors and elderly parents who have transferred their positive assets living in households with working adults with more positive wealth than the youngsters and elders combined have net debt, but...
And it doesn't occur to them that they will need money when they're old and can't work? Incredible.
I.... they are dealing with systemic poverty. Being poor is expensive. They absolutely know they need to save, but if the choice is "starve to death today but save for retirement OR don't die, but don't save for retirement" most people are going to choose the latter.
I just checked and McDonald's pays $15 an hour, no? That's more than enough to not starve.
McDonald’s will not let you work 40 hours a week, or any consistent schedule at all. You will show up when they tell you to and that’s that. Same with grocery stores or most retail jobs.
Also you’re neglecting the cost of transportation (almost certainly a car, with gas and insurance), rent, and medical expenses.
Median rent value in Seattle is $2300/month if you are looking for a one bedroom, a little cheaper if you are looking at a studio. Minimum wage here is $21/hr. The first quartile for rent is $1600.
Assuming you work full time, you are making $3360 a month, less taxes.
That means that even if you get the bottom 25% of rents, over half your take home pay goes to rent. Then we need health care, food, taxes, transportation, clothing, etc.
Not a lot of savings easily available there.
I rent a room. But to be fair when I first came to Canada and was told by a local "of course you won't get to have a whole apartment all to yourself" my mind was blown away.
So people's work shouldn't result in private housing? That's an acceptable outcome? I'm not clear what your insinuation is here. People should live in communal bunks but also be saving for retirement?
I am very certain it does occur to them but they simply have no financial means to do anything about it. Which must be soul-crushing to them.
Rest assured it usually isn't their choice.
> Rest assured it usually isn't their choice.
People choose to marry, have kids, and buy a house.
Your comments make me think you've never seen hardships in your life that weren't self-afflicted.
Life can be cruel even if you've made great plans and took all the precautions you could think of. Illnesses, accidents, the lack of a social net because your country was set up that way, crime, the list goes on.
Illnesses and accidents are exactly the things you need savings for, and aren't really relevant here because they don't prevent you from saving until and after they happen. The issue appears to be that 50% of Americans live paycheck-to-paycheck and have no savings? I can't imagine how this could be anything other than them just spending money on shit they don't need.
And yes, I am assuming you live in a developed country. I have Ukranian citizenship and right now the Ukrainian government is abducting men who are over 24 years old and sends them to death. If you live in a country like that, true, you shouldn't worry about investing because you don't even have basic human rights.
> The issue appears to be that 50% of Americans live paycheck-to-paycheck and have no savings? I can't imagine how this could be anything other than them just spending money on shit they don't need.
Or that there's no standard minimum wage, or income protection if something does go wrong. Student debt is crippling to people in itself never mind hospital events.
That's so many people you should think "something must be wrong with the system"
> Illnesses and accidents are exactly the things you need savings for
It shouldn't be though, if you pay taxes, the government should be there for you in an emergency when it comes to health.
> It shouldn't be though, if you pay taxes, the government should be there for you in an emergency when it comes to health.
As far as I know in the US your employer provides health insurance?
Some jobs provide healthcare, many don't.
Many people here, if they are not educated, are forced to work manual labor jobs. Those jobs will always work you under full-time, so they don't have to give you insurance. Usually that means you have to work another job.
People who haven't lived that life just don't get. It just doesn't click in your head.
You can work 60 hours a week and just barely make rent and food. Not only can you do it, I think most people are. And there's nothing you can do. There is no higher paying job waiting for you somewhere, because you don't have a college degree.
How're you gonna get a college degree when you work 60 hours a week? Hm? You're not. You're stuck. Your best shot, really, is to work up through management. That's why you'll see people working at the same restaurant for 20 years.
They must be so stupid, why don't they get a real job? No, actually, that's probably their best bet.
Oh. No. Not in most jobs. Many jobs do provide some health care.
If you are working many jobs in the US you get no health care. You have to pay for it yourself. Even jobs that provide it you still need to pay for it. The employer basically pays a portion of the insurance bill. Good employers pay a lot, bad employers pay none.
Then you have deductibles. The amount you have to pay out of pocket every year before insurance does anything. If you have a ten thousand dollar deductible, insurance only kicks in at $10,001 and beyond.
Shit you don't need like what? Rent is over 40% of pre tax income for most Americans. Health care is 30% of income for lower income Americans.
That's not leaving a lot of space for food, clothing, heating, transportation, education, entertainment, etc.
They're worried about paying for their next trip to the dentist. Not working when they're old is not in the picture.
This has to be satire at this point.
it does but they don't know how to change it
Wow, you are so out of touch
You’ll be surprised by how many people fear the term investment.
If everyone was an "investor" it means they aren't blowing all their spare cash on goods and services. Demand drops and you need fewer people to work to provide said goods and services. It kinda balances out.
How couldn't it be? If the finance industry made things clearer then more people would benefit from it.