# Basic Financial Literacy - why is it SO uncommon? **URL:** \ **Category:** Miscellaneous and Personal Stuff I Must Share\ **Created:** [March 29, 2023, 3:10pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841 "2023-03-29T15:10:24Z")\ **Posts on this page:** 20\ **Page:** 11
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [April 5, 2023, 5:25pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/201 "2023-04-05T17:25:26Z")
Quite right. Private LTC will also pay something for a part-time in-home aide to assist with the 5 "ADL"s = Activities of Daily Living (bathing, dressing, feeding, toileting, transferring between bed/chair/toilet). Whether the customer is living in an ordinary home or in an “indepedent living” facility as you describe. But they won’t cover as much per day for that as they would for the more full-time care of an assisted living place wherein they’re also paying towards room and board and the customer is much more dependent on more full-time hands-on care. In the case of my MIL she had unwisely chosen to forego the inflation increments on the private LTC policy I got for her decades previously. So towards the end of her life the home-care daily benefit was enough for about 2 hours of a cheap worker or 90 minutes of a good one. Too bad the caregivers & their employers all had a 4-hour daily minimum. And by design the insurance scheme and AFAIK Medicaid as well pay out only on a per-day basis, not per-week or other term. So you could not “save up” a week’s worth of benefits and get one 4-hour stint fully paid for. OTOH, had she switched from independent living to assisted, insurance would have paid enough more per day times all 30 days in a month that her net monthly OOP for room, board, and assistance would have gone down while the insurance company’s outlays would have gone way up and the care home would have gotten a bunch more money though they’d have had to provide a bunch more services too. Perverse incentives abound. ---
**Author:** ![Railer13](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/railer13/32/9742_2.png) [@Railer13](https://boards.straightdope.com/u/Railer13)\ **Post date:** [April 5, 2023, 5:50pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/202 "2023-04-05T17:50:17Z")
> [@bump](#): > > What’s long-term care though? There’s a lot of situations that could be described that way, and not all of them are equally expensive. Right or wrong, I always use LTC as a synonym for skilled nursing care. In the course of three years, in the same facility, my Mom went from independent (apartment) living, to assisted living (like the apartment, but no cooking), to skilled nursing. The cost jumped dramatically from assisted living to skilled nursing. I confess, however, that I don’t actually know exactly what an LTC policy would cover. ---
**Author:** ![doreen](https://avatars.discourse-cdn.com/v4/letter/d/858c86/32.png) [@doreen](https://boards.straightdope.com/u/doreen)\ **Post date:** [April 5, 2023, 6:01pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/203 "2023-04-05T18:01:54Z")
> [@Railer13](#): > > I confess, however, that I don’t actually know exactly what an LTC policy would cover. My father’s covered assisted living , skilled nursing facility (nursing home) and home care - including informal home care, which basically means they paid my mother to take care of him. Of course, he started with that policy in the '80s - I’m not sure what would be covered if I bought a policy now. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [April 5, 2023, 6:44pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/204 "2023-04-05T18:44:51Z")
> [@Railer13](#): > > Right or wrong, I always use LTC as a synonym for skilled nursing care. That’s definitely contrary to standard industry usage. Skilled nursing care is SNC delivered in an SNF. LTC refers to all levels from in-home part-time visting caregiver, to independent living, to assisted living, to skilled nursing care/facility. ---
**Author:** ![Tired\_and\_Cranky](https://avatars.discourse-cdn.com/v4/letter/t/a87d85/32.png) [@Tired\_and\_Cranky](https://boards.straightdope.com/u/Tired_and_Cranky)\ **Post date:** [April 5, 2023, 7:10pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/205 "2023-04-05T19:10:17Z")
OP, people have already mentioned the failures of schools and parents, and the active conflict from financial services firms who profit from ignorance. Another reason is that it takes a long time to learn basic financial literacy from personal experience and the lessons may come too late to matter. I can experiment and learn how to make good cookies in a weekend. Not so much with financial decisions. People are also understandably reluctant to talk about money. Esteem and self worth is often tied to wealth and income in America, so having less of either makes you ashamed to talk about it. If you have more, people may: ask you for secrets you don’t want to share about how you did it, judge you for doing it wrong, ask you for money, or judge you for spending it wrong. You can’t really win when talking about money in America. > [@Mighty\_Mouse](#): > > I’ve never had a an ESPP like this, not in the 1990s, nor the 2000s, nor the 2010s. It’s always been buy stock by payroll deduction, then sell a day later and get the money _available_ in your bank account 3-5 days later. In one case 10 days later unless you paid for a wire. And back in the 1990s there was a $30 transaction fee to sell shares (plus a percentage after the first few thousand). If I was literally flipping each week, I’d lose money. And my tax return would be 40 pages long. In the early 2000s, I was a investment adviser representative who worked with mostly high net worth individuals, including many corporate executives. This is exactly how ESPPs worked then. There was no holding the stock for mere seconds and getting instant access to the money. Frankly, I’ll bet not much has changed with them and @DavidNRockies is overstating his case. > [@filmore](#): > > My company has limits on how quickly you can sell stock purchased through the ESPP. If you’re flipping stocks too quickly, you’re not allowed to continue participating. Minimum holding periods were quite common features of ESPPs. > [@ASL\_v2.0](#): > > That upper management _does_ get to take full advantage of the scheme, because wages are so uneven that they can max out 401K contributions and still have plenty to spare while also getting full of advantage of matching contributions, only highlights the extent to which such schemes contribute to inequality under the guise of “choice” and “personal responsibility.” I worked for an employer where the take rate was so skewed for high-income workers to low income workers that high income workers (including me) got something like a 50% match for contributing the first 3% of their salary and 25% of the next 4% whereas lower income workers just got something like a flat 8% of their salary shoveled into their plan just for signing up. Not a match. Just 8% stuck in their accounts. They also got a match if they chose to contribute more, but I forget the details. (As an aside, I’m betting with auto enrollment in 401(k)s and high turnover among the lower income workers there, that firm probably auto-enrolls everyone now and lowered the automatic contribution and match levels over time. I’d love to see the DOL do a study on the effect of 401(k) matching contribution rates after the implementation of auto-enrollment.) > [@DavidNRockies](#): > > ETA: and I would, again, point that person toward the kind of **[article](https://www.morganstanley.com/atwork/themes/equity-compensation/how-does-espp-work-your-guide)** that I posted above. The kind of article you are quoting is a description by a personal finance writer trying to get clicks describing the Platonic ideal of an ESPP rather than the actual disclosure documents that come with any particular ESPP. The details of a particular plan matter. > [@Hari\_Seldon](#): > > The one financial fact that I have hardly ever convinced anyone of is that apartment renters are subsidizing home owners. You are correct. One way this sentiment can be expressed is that the imputed rent of your home isn’t taxable income. But most people don’t understand that either. Your example is the perfect illustration of this fact. And I see someone below mentioned how Switzerland does tax imputed rent. > [@peedin](#): > > [My father] opened a Vanguard Wellington fund with $3k when I was 21. Over the years I contributed _maybe_ 5K. It was worth $240k when I retired 6 months ago. Your father chose wisely. > [@Voyager](#): > > Ever try the retirement income planners from these companies? They are designed to scare you. Increase your income and savings and they increase the amount you need to retire so you’re always behind. > [@F.U.Shakespeare](#): > > Yes. They base ‘need’ on income, as opposed to expenses. > > Imagine two people earning $100,000/yr. One of them spends it all; the other saves half of it. But the planners will tell them both they’re behind… Yup. > [@Sam\_Stone](#): > > I’ve seen that '2 million to retire" number, and it’s nuts for a person near the median income. Even at zero interest, 2 million would let you pull out $100,000 per year for 20 years. At 5% interest, you could withdraw $100,000 per year indefinitely. Except, with inflation, your standard of living would be continually dropping. But, it turns out, for many people, retirement expenses are higher in the early years. People travel more, buy more new cars, invest in their homes (where they are spending more time). Then, spending tapers off for a while when these things slow down. Then, for many, spending skyrockets due to high health care and, often, assisted living and long term care expenses. The things make figuring out your magic number really complicated. > [@Sam\_Stone](#): > > Bottom line: retirement managemnet is complex and not amenable to generic savings advice or simple rules. Indeed. ---
**Author:** ![carrps](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/carrps/32/2957_2.png) [@carrps](https://boards.straightdope.com/u/carrps)\ **Post date:** [April 5, 2023, 8:22pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/206 "2023-04-05T20:22:23Z")
> [@Tired\_and\_Cranky](#): > > I worked for an employer where the take rate was so skewed for high-income workers to low income workers that high income workers (including me) got something like a 50% match for contributing the first 3% of their salary and 25% of the next 4% whereas lower income workers just got something like a flat 8% of their salary shoveled into their plan just for signing up. Not a match. Just 8% stuck in their accounts. Wow, that’s really crappy for the lower wage earners. The job I retired from matched 100% up to 6% (lower match for 7% to 12% but I can’t remember what it was). We used to call it an IQ test. You flunked if you didn’t contribute _something_. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [April 5, 2023, 8:36pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/207 "2023-04-05T20:36:39Z")
> [@carrps](#): > > Wow, that’s really crappy for the lower wage earners. I read that as low-wage workers put in as little as $1 per paycheck and the company puts in 8% of their gross wages per paycheck. Assuming I’m reading that right, it sounds like a truly outstanding deal to me. Meanwhile high wage workers could put in e.g. 3% of salary and have the company put in 1.5% of salary as a 50% match or the high wage workers could put in up to 7% wherein the company would put in 1.5% + 1% = 2.5% of gross salary. In terms of percentages this is major-league progressive. In germs of dollars it may not be, since we have no idea how low is low-wage nor how high is high-wage. But at least management is leaning in the greater equality direction. ---
**Author:** ![carrps](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/carrps/32/2957_2.png) [@carrps](https://boards.straightdope.com/u/carrps)\ **Post date:** [April 5, 2023, 8:38pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/208 "2023-04-05T20:38:19Z")
Ah, guess I misunderstood. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [April 5, 2023, 8:41pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/209 "2023-04-05T20:41:23Z")
Well, one of us did. Like ChatGPT, my confident-sounding pronouncements do not come with any guarantee of correctness. 🙂 ---
**Author:** ![carrps](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/carrps/32/2957_2.png) [@carrps](https://boards.straightdope.com/u/carrps)\ **Post date:** [April 5, 2023, 8:47pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/210 "2023-04-05T20:47:43Z")
Ha, seeing your response I was thinking it over. I was originally thinking “poor workers not getting any matching,” but I guess it was “lucky workers getting a free 8% ‘bump’ that goes into savings.” Maybe? ---
**Author:** ![Tired\_and\_Cranky](https://avatars.discourse-cdn.com/v4/letter/t/a87d85/32.png) [@Tired\_and\_Cranky](https://boards.straightdope.com/u/Tired_and_Cranky)\ **Post date:** [April 6, 2023, 12:27am UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/211 "2023-04-06T00:27:47Z")
> [@LSLGuy](#): > > > [@carrps](#): > > > > Wow, that’s really crappy for the lower wage earners. > > I read that as low-wage workers put in as little as $1 per paycheck and the company puts in 8% of their gross wages per paycheck. LSLGuy has it, except they didn’t even have to put in the dollar. I think they got a 50% match on the first 4% of their salary that they chose to defer but I don’t recall. And most of the low income workers I am mentioning were making comfortably over $40,000 to start with some earning probably in the $75,000 range annually 15 years ago. So at the low end, someone making $40,000 per year would get an automatic contribution to their 401(k) of $3200 plus, if they chose to defer more, they would get a 50% match on the first 4%, or another $800 for contributing $1600 of their own salary (if I remember the numbers right, and I may not). The firm had a small number of truly low wage workers to empty garbage cans and such but those were all outsourced to contractors and so weren’t in the 401(k). > [@LSLGuy](#): > > In terms of percentages this is major-league progressive. In germs of dollars it may not be, since we have no idea how low is low-wage nor how high is high-wage. But at least management is leaning in the greater equality direction. It certainly was progressive and the low wage workers did very well. But managers were just motivated to balance the plan under the IRS regs so they could continue to offer a meaningful match to high wage workers, without which, they would have had trouble recruiting. Most of the high-wage workers would have hit or exceeded the IRS 401(k) contribution limit if they contributed 7% of their salary and most were financially savvy enough to cap out their 401(k) contributions. The match wasn’t particularly necessary to get high wage employees to contribute but it was necessary to match the benefits offered by their competitors. ---
**Author:** ![carrps](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/carrps/32/2957_2.png) [@carrps](https://boards.straightdope.com/u/carrps)\ **Post date:** [April 6, 2023, 12:33am UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/212 "2023-04-06T00:33:10Z")
I feel so much better know I was wrong! ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [April 6, 2023, 1:22am UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/213 "2023-04-06T01:22:44Z")
> [@Tired\_and\_Cranky](#): > > But managers were just motivated to balance the plan under the IRS regs so they could continue to offer a meaningful match to high wage workers, without which, they would have had trouble recruiting. Yeah. The “top-heavy” regs can really hurt if the structure of your company’s wages is pretty lopsided due to the specialties involved. I know medical practices get into this a bunch. The doc’s making $400K, the nurses making $60K, and the clerical staff makes $30K. The nurses aren’t poor, but if they choose not to contribute (much) to the 401K it gets top-heavy and sanctions kick in. Much less the clerical folks who are often young to boot, where saving seems pretty remote to their daily interests. I filled my 401K for the year a month ago. My employer will be filling their part over the next few months. ---
**Author:** ![Tired\_and\_Cranky](https://avatars.discourse-cdn.com/v4/letter/t/a87d85/32.png) [@Tired\_and\_Cranky](https://boards.straightdope.com/u/Tired_and_Cranky)\ **Post date:** [April 6, 2023, 1:45am UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/214 "2023-04-06T01:45:41Z")
That was pretty much the situation at that employer. I will spend the rest of the year filling my 401(k) because if I don’t contribute in each paycheck, I will get no match in that paycheck, potentially leaving a bunch on the table. In truth though, I’m a big fan of dollar cost averaging and I would probably prefer to spread investments over the whole year in any event. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [April 6, 2023, 2:53am UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/215 "2023-04-06T02:53:06Z")
I understand about needing to manage your fill-rate to max-perform the match, which may drive you to taking most or all of the year to fill. Depends entirely on how your employer has structured the deal. For my case there’s no downside to filling early. > [@Tired\_and\_Cranky](#): > > I’m a big fan of dollar cost averaging and I would probably prefer to spread investments over the whole year in any event. If the market is on an upward tear as it was in e.g. 2021, then sooner is always better than later. The ideal dollar-cost-averaging result would be to invest the entire year’s lump sum on Jan 1st. When the market is in free fall as it was in early 2022, then _later_ is always better than _sooner_. The ideal dollar-cost-averaging result in 2022 would be to invest the entire year’s lump sum in about Jun 2022 at the bottom. Given that I’ve been a market optimist and a successful market optimist the last ~15 years, 2022 excepted, I lean towards filling as fast as possible. Which bit me in the a$$ in 2022. ---
**Author:** ![Tired\_and\_Cranky](https://avatars.discourse-cdn.com/v4/letter/t/a87d85/32.png) [@Tired\_and\_Cranky](https://boards.straightdope.com/u/Tired_and_Cranky)\ **Post date:** [April 6, 2023, 12:40pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/216 "2023-04-06T12:40:37Z")
> [@LSLGuy](#): > > If the market is on an upward tear as it was in e.g. 2021, then sooner is always better than later. The ideal dollar-cost-averaging result would be to invest the entire year’s lump sum on Jan 1st. You are absolutely right. Intentional dollar cost averaging does not maximize returns. The likelihood is that the cash you are holding to dollar cost average with will underperform the riskier assets in your portfolio. Overwhelmingly, if you have money available, the best time to invest is today. Still, dollar cost averaging reduces the volatility of your portfolio slightly and gives you a reason to stick with equities in falling markets. It reduces regret and gives you an upside when the market drops. At this point in my savings journey (and I suspect for you too) one year’s 401(k) contribution is barely measurable in the portfolio. But, drops are simply easier to swallow when I know that at least I’m buying a few more shares a little more cheaply. ---
**Author:** ![tofor](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tofor/32/13727_2.png) [@tofor](https://boards.straightdope.com/u/tofor)\ **Post date:** [April 6, 2023, 1:05pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/217 "2023-04-06T13:05:39Z")
Just in case anybody didn’t notice, we are no longer talking about basic financial literacy when it you need phrases like: > [@Tired\_and\_Cranky](#): > > Intentional dollar cost averaging does not maximize returns. The likelihood is that the cash you are holding to dollar cost average with will underperform the riskier assets in your portfolio. in the conversation. ---
**Author:** ![Tired\_and\_Cranky](https://avatars.discourse-cdn.com/v4/letter/t/a87d85/32.png) [@Tired\_and\_Cranky](https://boards.straightdope.com/u/Tired_and_Cranky)\ **Post date:** [April 6, 2023, 1:14pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/218 "2023-04-06T13:14:08Z")
Fair enough. Financial literacy is also hurt when knowledgeable people devolve into talking in jargon and leave interested but less knowledgeable people behind. Clearly I’m doing my part to promote rather than reduce ignorance. I’ll step out. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [April 6, 2023, 2:14pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/219 "2023-04-06T14:14:50Z")
I suppose @tofor has a point. But what _is_ basic financial literacy? To me it’s 1. Know that saving money from your pay is not an optional luxury; it’s a painful necessity. 2. Know that how you deploy your savings is _almost_ more important than the fact you are saving. 3. Know to avoid entering rip-off deals and how to recognize them. 4. Know that many decisions made in your late teens and 20s are nearly irreversible in terms of their impact on your later life. A life you will be forced to experience, whether 20yo you quite believes that or not. ---
**Author:** ![filmore](https://avatars.discourse-cdn.com/v4/letter/f/7993a0/32.png) [@filmore](https://boards.straightdope.com/u/filmore)\ **Post date:** [April 6, 2023, 2:25pm UTC](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841/220 "2023-04-06T14:25:34Z")
Something like dollar cost averaging may be sub-optimal from an investment perspective, but it is a method which will allow many people to maximize their savings compared to other strategies. A person only has to make a one time decision to invest $X/mo and they’re done. As long as they invest in something which typically goes up in the long run, they will likely do well. It may not be as much as an investment whiz can make, but for many average people, it will be the best real-world strategy that ends up with them having the highest amount saved. From a academic perspective a different strategy might be better, but if a specific person isn’t going to do the research and make the proper decisions at the proper time, it’s not a good strategy for that specific person. One reason I think 401k’s are perfect for most people is that the employee doesn’t have to make any further decisions after that initial selection. With things like IRA’s and savings accounts, it’s up to the person to make the contributions. Even if they have periodic bank withdrawals to their IRA, they may deactivate those occasionally for temporary financial reasons and then never turn it back on. Like I mentioned above, I think it would be a good idea if there was a government or annuity-like payroll investment option. It could be something in a 401k plan or even an extra withholding you can chose on your W-2. For many people, having X% taken out of every paycheck that goes to something similar to Social Security would mean a much better retirement for them compared to them having to make their own continual investment and saving decisions. [Previous page](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841.md?page=10) [Next page](https://boards.straightdope.com/t/basic-financial-literacy-why-is-it-so-uncommon/981841.md?page=12)