I’d caution this one. It is in a financial institutions best interest to sell you a high load, high fee investments. For those not informed, it could be the worst decision they’ll ever make. If one does have any cash left over that they want to invest, I would suggest reading up at diehards.org, and buy or take out at the library a copy of The Bogleheads’ Guide to Investing.
It’s not rocket science. Anyone capable of posting & getting along on this message board can grasp the basics. Buy some magazines and read for a couple of months and all will be revealed.
Money magazine used to be a good starter, but I don’t know if it’s still published or not. Once you grasp the basics, it’s like baseball, the rules don’t change.
If your company doesn’t offer a 401k plan you can still get the tax benefits through an IRA. (individual retirement account)
No amount is too small. $50 per month would be a good starting plan. Consistency and patience are the keys. $50 per month put into an index fund for 10 years will be a serious amount of money, if past history is any indication.
Anyway, just do it!. Your Social Security benefits will probably pay for food, a clunker car and some of your medicine. If you want to travel, enjoy life, help your grandchildren and in general live out your “golden years” in a golden fashion you’d better learn finance. It’s not that tough, and you’ll be glad you did.
23 years ago I had to buy a tire, and needed to charge it. The thought came to me that it was fuckin’ ridiculous, being 41 years old and having to charge a tire.
So I started reading. I retired two years ago and what I have in retirement funds is providing me with an extra $1,500 per month for way past my life expectancy. That’s making all the difference between just existing and living in a most pleasurable style.
Once you start making periodic investments, some small amount from each payday, you won’t even miss it. Trust me on this one! 
It isn’t just that they don’t teach it in schools. It’s that even when they do, it doesn’t seem real.
We had two or three talks in med school and residency about the basics of investing. I listened to all of them and understood for a while, but it just wasn’t real enough to stick with me, because I didn’t have any money, and I never had. The idea of having big whacks of cash to put away was as foreign to me as the idea of living on Mars someday.
It’s just like poker–you can spend all the time you want at play money tables, but you won’t really learn to play the game until you have real money at risk.
Sharebuilder is a great option for people who want to invest outside their 401(k) without thinking much about it. They help you pick out some funds based on very simple questions about your financial goals, and then you can have a set amount taken out of your bank account each month and invested across those funds. (The choices it made for me were very good ones, or so my more knowledgeable friends tell me.)
Read up on behavioral economics. It seems we’re wired to do things not in our best interests. You might want to start with The Winner’s Curse by Richard Thaler, professor at the Graduate School of Business at the University if Chicago. There are lots of interesting experiments in there, for instance, people’s discount rates are wildly varying and way different from what you get at a bank. As Captain-C said, finances in most houses are discussed with the kids about as frequently as sex. I think if you don’t have enough, it is embarrassing, if you have plenty, you don’t want your kids to get spoiled and whine for money.
As for 401Ks, Thaler did a study showing how making them default drastically changed the enrollment in them. (ditto with investment options.) That is one of the things that caused the recent new law to require 401Ks to be opt out instead of opt in. Yeah, some people might not be able to afford to invest, but plenty of people who can don’t.
A manager at work gave one of the new girls this book. It’s a decent enough personal finance book.
Vanguard has some good no-load funds. Problem is the minimum investment can be a bit steep.
Being broke ain’t going to get you laid.
I agree - www.sharebuilder.com is indeed a very good way to invest in index funds. Everything is explained in layman’s terms and it’s a painless and easy way to invest. The trick is to not buy into too many different funds with similar index tracking, and don’t jump from one to another every time the market fluctuates - keep it diversified, and let it ride.
The only downside I have encountered is since opening my account I have been bombarded with some extremely tenacious email spam (the source of which is not Sharebuilder).
The Motley Fool website has friendly and fairly comprehensive information on a variety of financial issues. Many articles end with gentle shilling for their sundry newsletters/services, but $0 is a small price to pay for the genuinely helpful information preceding the soft sell.
Your first point has one pitfall that I’ve seen people get into…the fine print. At the end of those periods, some 0 interest financing will have a stipulation that if you owe even $1 on the account, you can be charged the interest on the WHOLE amount for the ENTIRE period. So, yes, great idea for those of us who are fairly certain that we will always have enough money to make that final payment in 18 months, but for those living hand-to-mouth, who knows how much cash they will have? And then they can get spanked…So yes, great idea if you play the game right.
Your second point reminds me of something that I’ve heard: “Those who understand interest, earn it. Those who do not understand interest, pay it.”
The most important thing for most people living on a tight budget is to get rid of their credit card debt ASAP. If you have more than one month’s (half a month?) income of credit card debt, then don’t worry about other investments. In a simple way, the interest you pay on credit cards (I think the highest card I had once was 21%) is more than the increase in most stocks will make…
Also, Sharebuilder was an easy way to get into index funds, I think the iShares are the ones from Vanguard and are pretty good. 50% in the S&P500, 15% to 20% Nasdaq, 15% to 20% Russell 3000 and 10% each in Europe or Asia will give you a diversified portfolio that you can pretty much invest in and forget about.
-Tcat
I’ve heard it said many times, that among professionals, Drs. are the worst money managers. I’d guess it’s due to the amount of time required to keep abreast of new advances, plus the odd hours many of them have to work.
Motley Fool is indeed a excellent source of investing info. for the average person, new to the game.
I’ve recommended this before and, even though it was published about thirty years ago, Sylvia Porter’s Money Book is an excellent primer for the new investor. It’s an easy read and written for people who find the subject boring and the basics haven’t changed much. I don’t know if it’s still in print, but it is surely available at your library, online, or at a used bookstore.
It wasn’t taught to us in the early '70s. I’d hope that they give kids a basic understanding of it today, with credit card debt being through the roof among the Under-21 set and all.
I wish someone would have taught me somethng about money. My parents were an example of people who managed their money well, but they never told us how to do it. I finally got the hang of it from Mr. K, but I was 32 years old before I saw the light.
Nitpick - no they aren’t. The cost of the “free financing” is built into the cost of the product. Often if you say you’ll pay cash up front if they give you a 10% discount, they’ll jump on that offer (our NPV rate at my firm is 17%). You may have to go fairly high up the ladder to get it, and if you are dealing with the 0% interest for six months from a Big Box retailer the manager probably doesn’t have the power to do flexible pricing.
Any buisness with an accountant avoids giving out free money.
Slight hijack, but related…
Its been my desire for about a year to see liberal arts majors be required to take a business class. Could be Microeconomics or intro to Accounting or Intro to Management or something else - it could even be a Small Business primer. It seems silly to me that in this day and age we make all liberal arts majors take a Science elective (or two) and a History elective and a Language and a World Culture and a Philosophy - yet people get out of college and don’t understand what we mean in business when we use worlds like “capital” or “accrue” and people don’t understand the difference between “revenue” and “profit.”
Most of us former liberal arts majors end up working with businesses in some form - either directly for the business, or for a non-profit trying to get money from businesses, or with the government - interfacing with businesses. In our personal lives we deal with business every day. Understanding what motivates a business (it isn’t making the customer happy - that’s a means, not an end). And I work with people who just don’t understand that businesses have budgets and restrictions just like individuals.
And a third post in a row…
My kids, in first and second grade, are seeing far more money math than I remember getting. You can still learn to multiple and divide, add and subtract with a in front of the numbers (and, of course - learn decimals) but the makes it meaningful. Lots of money based word problems. It will be interesting to see if this line of teaching continues, because if you do exponential equations using compounding interest, you’ve driven home a lot of the financial information you need.
Eric Tyson’s Personal Finance for Dummies is a good start - he doesn’t go into great depth on investing (he has another Dummies book for that). Stock valuation is really tough - people do it as a profession and spend years learning how to do it with any competence whatsoever (and there is still no guarentee their funds will beat the market) - and I think part of the problem is that is where most people start when they think about investing - what stock should I buy? The better place to start is “where do I want to go and what mix of risk will get me there?” Then “what funds - bonds, stocks, money market - will balance my needed return with my risk tolerance.” Once you have that sorted out, if you want a new hobby and are interested in the stock market, picking individual stocks should be seen as a hobby - its time consuming and difficult. (It can be a profitable hobby).
Counter-nitpicking? :dubious: 
You are right, though; they’re free money relative to the sticker price, which may not be the actual cash-up-front price. If you have the power to negotiate, this is all just a time-value-of-money problem, and the question really becomes “Can I beat their discount through my own investments?”
My experience (which is, admittedly, mostly with places which don’t have flexible pricing or relatively small cash discounts) is that you usually can. My guess is that the high post-free interest rates (I think my Lasik runs at 15%, for example) tend to subsidize people who get it nailed down straight off.
One thing that I’vce never understood is why so many people in a supposed first world country actually choose to live hand-to-mouth/paycheque-to-paycheque. Statements such as this:
and this:
just blow my mind away. A month and a half of income in credit card debt?! That’s normal? Maybe you should do something about that heroin habit that you’re apparently paying dfor with Visa? 
I don’t think I could ever work for a bank or credit card company, because I simply refuse to believe, against all evidence, that people would be stupid enough to put themselves into such a situation.
Here’s my tidbit of financial advice: No money for investments/emergencies? Stop spending money on useless shit you can’t afford. You’ll have more left over!. You think that will help with the credit card debt? Somehow I knew that without anyone needing to teach it to me?
My eighth grade algebra class took a break to look at some basic economics, particularly in terms of savings versus investments, and then among investments what kinds there are and how those all flow through the economy.
So we didn’t take a hard look at “this is a Mutual Fund” or whatever, more of an overall understanding of money and interest and how to visualise it all in the economy (and why savings are, in a sense, bad.)
Or that “living” habit my husband got into that I paid for with Visa. You know, prescriptions, hospitals, surgeries, those habits.
No, that’s simply not necessarily true. I buy furniture at Leon’s on various no-interest plans; absolutely without a single exception, their prices were lower than anywhere else. If they’re raising prices to account for that, what the heck are their competitors doing? It’s not possible to buy the furniture I bought any cheaper if I pay up front. I had the cash to pay for it, but why would I if they’re offering to let me pay later? There’s no savings at all in NOT paying later. You could argue that it’s possible to talk the guy down more by offering to pay up front but
A) On the iterms I bought there wasn’t that much wiggle room anyway, and
B) The salesperson doesn’t much care, he’s just trying to maximize volume, since he’s paid commission.
From Leon’s perspective, they really have little reason at this point to not offer free financing; they’ve been in business 30 years and sell furniture in the hundreds of millions. Practically speaking, in any given fiscal period they bring in as much money as they would if they were making everyone pay up front. If you were just starting out the delays would kill you, but in their position the cash flow’s already in place. They’re working on cash flow in 2009 now.
I heard a couple of disturbing facts on a BBC financial programme recently. Some people think that the higher the APR on a loan the more beneficial it is to you. And 50% of the population of the UK do not know what 50% means.
In that case they are making the margin up somewhere else. Businesses don’t give away free money. (or good businesses don’t.)