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4 Things Financial Reform Won't Do For You

Saturday, June 26, 2010 - 9:20 AM


Learn more about money. Financial illiteracy is a major problem. Many of the bad loans that boomeranged back on the banks wouldn't have happened if borrowers knew they were agreeing to a ballooning interest rate or taking on mortgage payments way beyond standard thresholds for affordability. The new law recognizes this, setting up an "Office of Financial Literacy" meant to make consumers smarter. But no government agent is going to come to your home at a convenient hour to offer a free tutorial on personal finance. People still need to do the work themselves and learn how to spot scams, manage debt, invest safely and resist foolish enticements.

Save more. In the halcyon years after World War II, Americans routinely saved 10 percent of their after-tax income. How quaint. Beginning in the mid '80s, the savings rate drifted down to the low single digits, bottoming out near a paltry 1 percent in 2005. It's rebounded since then, but is still less than 4 percent. Most families should be saving 6 to 10 percent of their income, to pay for their kids' college and prepare for retirement. More would be better. The government, however, wants people to spend money, because it will boost the economy today--allowing politicians to take credit for it during the next election. So don't expect Washington to encourage saving, even though it's what most people need to do.
MikeMike327 posts since
Feb 22, 2010
Rep Points: 876