We The Profligate People

Libby Nelson considers the failings of personal finance education:

Just 17 states require personal finance courses for students, and only six test students on what they’ve learned. But those classes don’t seem to make much difference anyway: students who took a semester-long class in personal finance fared below average on the Jump$tart survey. There is no evidence that the classes actually made students worse at managing money, the group wrote in its report. But it certainly didn’t make them any better.

Academic research backs up that conclusion. A 2008 study from two Harvard Business School professors studied the relationship between education and saving and investing behavior. They found state-required financial literacy education had no effect on graduates’ saving behavior later in life. The money spent on financial literacy education, they concluded, produced little in return.

McArdle chides Americans for spending so much and saving so little:

[W]hat we have is people spending more than they have to on the big basics. The average car loan, for example, is more than $25,000, and for people with the worst credit ratings, it’s actually higher: almost $30,000. This is not because you have to spend $27,000 to get yourself from Point A to Point B. It’s because people are pouring a big fraction of their income into driving something “nice.”

By the same token, raising your kids in a modestly sized home is not physically impossible. But we’ve come to regard as deep deprivation anything less than one bathroom and one bedroom per person. Cash-strapped people mention giving up vacations as if doing so were as great a sacrifice as giving up food or heat.