There’s an annoying catch here. I think financial education can help if it comes with really actionable suggestions. Instead of just talking about general principles, the vast majority of people would do better by following some super simple guidelines like:
Don’t take credit card debt unless it’s to save a life.
If you have debt at >5%, pay it right away before doing anything else. Devote at least 20% of your income to paying off the debt, regardless of how much you make.
After debt is taken care of, put 20% of your income in a global stock index fund 401k each month on autopilot.
Whenever you think “I’ll buy this thing so that people think I’m cool” consider whether when you see people on the street with the thing you actually think they’re cool.
But whenever you write something like that, people will flood you with nitpicks about some convoluted case where the specific advice doesn’t apply. In this way, people who understand the math and only need the general principles prevent everyone else from taking the simple and useful advice that would benefit them.
I think your second and third bullet points would make great laws. That might not be what most people have in mind when they talk about “finance regulation”, but it’s an area where the government could force people to act in their own long-term interest instead of responding to shorter-term incentives. (And if people want to nitpick exceptions, many exceptions could be written into the law.)
People’s spending (bullet points #1 and #4) might respond to laws that limit advertising, but I don’t know what else. I think your #4 is one of those suggestions that doesn’t intuitively grasp the scope or nature of the problem, like people who suggest that exhausted parents of newborns sleep when the baby sleeps. People who buy things so that others think they’re cool are rarely consciously aware that that’s a significant motivation for them, and they aren’t going to stop and perform mental gymnastics before purchases. I have a friend who is in debt because shopping makes her feel better when she’s stressed. Most purchasing incentives like these are deeply rooted and not easily solved, even with education.
it’s an area where the government could force people to act in their own long-term interest instead of responding to shorter-term incentives
When governments are actively complicit in damaging the financial interests of citizens, it is perverse to legislate fixes before ending the active harm.
And if people want to nitpick exceptions, many exceptions could be written into the law.
In the event legislation like you suggest ever becomes even remotely plausible, please find me, I’d be happy to wager that it’ll pass with exceptions for the purchase of government-sponsored lottery tickets.
It could be libertarian bias, but I think almost all financial advice would turn into a horrible grotesque if someone turned it into binding law. Politicians are financial idiots, and they will legislate based on what their financial idiot constituents will approve of, not what will make people financially secure in the long term. What politician ever has even the incentive, let alone the knowledge, to do the latter?
Take Social Security for example. It’s basically a Ponzi scheme that can only be sustained long-term by doing things that harm everybody, like excess inflation or excluding the people who paid for it (high earners) from receiving it. How is that different from an average financial idiot person taking on credit card debt and then making suboptimal life choices to keep the interest payments at bay? The difference is only in the national scale of the stupidity.
People make bad choices all the time when it comes to money, food and romance. But when politicians jump into those areas they make terrible laws, and those are much worse than mere bad choices.
I don’t think everything politicians touch turns to crap. Some, but not all.
“Mandating 401k donations” would probably look a lot like replacing automatic Social Security paycheck withdrawals with automatic 401k paycheck withdrawals. A phase-over plan could include sucking it up and using taxes to pay premiums for people who are already withdrawing SS and people within, say, 10 years of being able to do so, while younger people get the amount that they have already paid into Social Security simply deposited into their 401k for them.
Mandating paying off debt would be trickier to enact, because we don’t have the kind of intermediaries who currently handle that. But it might be worth a trial run.
There’s an annoying catch here. I think financial education can help if it comes with really actionable suggestions. Instead of just talking about general principles, the vast majority of people would do better by following some super simple guidelines like:
Don’t take credit card debt unless it’s to save a life.
If you have debt at >5%, pay it right away before doing anything else. Devote at least 20% of your income to paying off the debt, regardless of how much you make.
After debt is taken care of, put 20% of your income in a global stock index fund 401k each month on autopilot.
Whenever you think “I’ll buy this thing so that people think I’m cool” consider whether when you see people on the street with the thing you actually think they’re cool.
But whenever you write something like that, people will flood you with nitpicks about some convoluted case where the specific advice doesn’t apply. In this way, people who understand the math and only need the general principles prevent everyone else from taking the simple and useful advice that would benefit them.
I think your second and third bullet points would make great laws. That might not be what most people have in mind when they talk about “finance regulation”, but it’s an area where the government could force people to act in their own long-term interest instead of responding to shorter-term incentives. (And if people want to nitpick exceptions, many exceptions could be written into the law.)
People’s spending (bullet points #1 and #4) might respond to laws that limit advertising, but I don’t know what else. I think your #4 is one of those suggestions that doesn’t intuitively grasp the scope or nature of the problem, like people who suggest that exhausted parents of newborns sleep when the baby sleeps. People who buy things so that others think they’re cool are rarely consciously aware that that’s a significant motivation for them, and they aren’t going to stop and perform mental gymnastics before purchases. I have a friend who is in debt because shopping makes her feel better when she’s stressed. Most purchasing incentives like these are deeply rooted and not easily solved, even with education.
When governments are actively complicit in damaging the financial interests of citizens, it is perverse to legislate fixes before ending the active harm.
https://www.fool.com/retirement/2017/01/07/heres-what-americans-are-spending-on-lottery-ticke.aspx
In the event legislation like you suggest ever becomes even remotely plausible, please find me, I’d be happy to wager that it’ll pass with exceptions for the purchase of government-sponsored lottery tickets.
It could be libertarian bias, but I think almost all financial advice would turn into a horrible grotesque if someone turned it into binding law. Politicians are financial idiots, and they will legislate based on what their financial idiot constituents will approve of, not what will make people financially secure in the long term. What politician ever has even the incentive, let alone the knowledge, to do the latter?
Take Social Security for example. It’s basically a Ponzi scheme that can only be sustained long-term by doing things that harm everybody, like excess inflation or excluding the people who paid for it (high earners) from receiving it. How is that different from an average financial idiot person taking on credit card debt and then making suboptimal life choices to keep the interest payments at bay? The difference is only in the national scale of the stupidity.
People make bad choices all the time when it comes to money, food and romance. But when politicians jump into those areas they make terrible laws, and those are much worse than mere bad choices.
I don’t think everything politicians touch turns to crap. Some, but not all.
“Mandating 401k donations” would probably look a lot like replacing automatic Social Security paycheck withdrawals with automatic 401k paycheck withdrawals. A phase-over plan could include sucking it up and using taxes to pay premiums for people who are already withdrawing SS and people within, say, 10 years of being able to do so, while younger people get the amount that they have already paid into Social Security simply deposited into their 401k for them.
Mandating paying off debt would be trickier to enact, because we don’t have the kind of intermediaries who currently handle that. But it might be worth a trial run.