In a recent column Andrew Sorkin commented, “We have a financial literacy epidemic in America.” His was referring in part to some foolish fiscal Ideas being floated by elected officials. Many of these ideas are coming from the younger members of congress, those of the so-called millennial generation.
Millenials are often ridiculed by other generations for their self-centered, internet addicted lifestyles. They are mocked for acquiring massive student debt while blaming their elders for that debt. Yet, ironically the new political leaders of this much maligned age group seem to believe there exists unlimited piles of money sitting around waiting to be spent on their idealistic causes.
The current debate may lead one to believe that somehow our financial literacy problem is a new thing. Millenials are commonly maligned while the world heaps praise on the greatest generation, those depression era children, for being the wise old sages who lived frugally and responsibly. But the facts tell a different story. Among retirees today, none of whom are millennials, 38% of their retirement income comes from social security payments while only 29% comes from their personal savings. I have had the opportunity to work with many of the great savers from the greatest generation, but I am fully aware that many others in that age group were woefully unprepared for retirement. Baby Boomers may be even less prepared.
As we struggle with our national financial illiteracy problem, we must accept that it spans all generations. The problem is not limited to millennials, boomers, Gen X, Gen Y, or the greatest generation. It has been a group effort of them all. Our nation is drowning in unimaginable debt and while the Millenial leaders blame their elders for the problem, they too are showing by their words and deeds they have every intention of continuing to add to it. There is plenty of financial illiteracy to go around.
I do not need a crystal ball to see that somewhere in the future the greatest threat to our economy, and to investors, may by our out of control growing national and personal debt. Though sometimes necessary, it would seem that during these times of record economic growth, adding trillions more to that debt represents the height of financial illiteracy. Sadly, and quite unfairly, the ones who will suffer the most under all that debt have likely not even been born yet.
Current investors may dodge the bullet but future investors face a very real risk from a rising national debt if something is not done. Like a family, a nation can borrow against the future and get away with it for quite a while, but not forever. It is simple math and investors need to keep a watchful eye as the economic threat of this math grows.
The great frustration with this very real problem is that the solution for both families and governments is so very simple that even a child can understand it. Spend less than you make – Financial illiteracy problem solved.
Wyson Financial | Wealth Management in Southern Utah
Financial Planning and Investments
