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Comment by xenocyon | Hacker News Reader

The article talks about financial literacy as it pertains to ordinary folks.

But - perhaps more relevant to the HN audience - I have noticed a surprising amount of financial illiteracy among the tech-savvy middle-to-wealthy class as well. A lunchtime conversation with my coworkers showed that most put more faith in their own instincts with picking stocks than in index or mirror funds (something that evidence shows is very unlikely, but people like to believe). Another time, I found that a majority of my coworkers were filing their stock-option taxes incorrectly.

Though no doubt wealthy folks are more literate (including financial literacy) than the poor, my suspicion is that most of the difference in financial outcomes comes to the fact that poor people simply have less capacity to save than middle/wealthy, and more severely feel the impacts of poor decision making.

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> Though no doubt wealthy folks are more literate (including financial literacy) than the poor

I’m not sure this part is true. One of the privileges of being relatively wealthy is that you don’t have to pay as much attention to your finances if you don’t want to. You don’t have to worry about budgeting if you know you have enough income to cover your expenses. You don’t have to pore over every inch of your insurance policies if you know you generally have enough money if you get hurt.

Of course, you do need enough awareness to live within your means. But generally speaking, you probably have enough financial headroom that you can make suboptimal financial decisions and still get by. Many poor people don’t have that luxury.

Not all poor are stupid, but many stupid people are poor because of their financial decisions.

For example: I have a friend who has bought at least 5 new cars in the past year despite making less than a third of my income. He has no self control and just wants the latest and greatest.

My group of friends all roll our eyes collectively whenever this person starts talking about a new car. Just on schedule, roughly 1.5 years after the last car.

But hey, at least this person has a job these days. There was a time where he was unemployed and still was pulling these shenanigans.

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On the other hand: I had a great talk with a nice old lady the other day about reducing risks by making a bond ladder. She didn't know the term was called bond ladder, but she's been using CDs and other instruments (not equities) to build up her savings while reducing interest rate risks.

I know she's poorer than me, based on how she scoffed at the amount of years I thought it'd take to save up for various purchases (car, house, etc. etc.) near the end of the discussion. (Talking exact numbers is a faux pas and I didn't mean to. But if I say something like "and I think my new $20k car will take 1 year of savings", the reaction of myself, as well as the other person, will set the expectations of income innately) But she was clearly highly financially literate, maybe a bit lower on the risk spectrum than I'd personally be, but she'd hold her side of the conversation about equities, bonds, CDs, and other instruments.

Some people struggle because they make poor financial decisions, sure, but I’d bet that’s the exception rather than the rule. There’s a post about being poor(ish) that’s shown up on HN a few times [1]. I think far more people in that situation are financially savvy, acutely aware of the pros and cons of their limited options, simply because there’s so little margin for error.

[1] https://residentcontrarian.substack.com/p/on-the-experience-...

I mean CD ladders were not a bad idea in the era of nontrivial interest rates...

Yeah, given her age and the time period she lived in, it certainly was a workable strategy. She was clearly retired at this point and was proud of her nest-egg and was willing to talk to me about it ("impart her wisdom"), which I definitely appreciated.

It really wasn't until the end of the discussion when I appreciated how different our income levels were. A lesson I'll remember later: its easy to forget income levels, as well as assume other people's income levels based off of conversation topics. Something I'll work on in the future.

the amount of people I've met that say "they can't do numbers", and are proud of it always surprises me

(and this includes people like lawyers)

then if you ask them if they would be proud to be illiterate the answer is always a forceful no

why the difference?

Can't bullshit your way around numbers.

RE: Stock-picking skills, versus trusting the market.

I think it boils down to at least the following factors:

- The belief that you are a smart and capable person, and that this intellect will translate into all other domains, especially those close to what your won domain of expertise is. i.e "I'm good with numbers, and work in tech - thus, I should be good at picking tech companies by looking at their reported numbers"

- DIY mentality, which a lot of hacker-types posses. People in tech absolutely love to roll out their own things.

- Exposure to the various industry sectors. If you work in industry [x], you're probably going to get exposed to most parts of it - including other companies. Maybe that gives you a false sense of confidence in your pickings.

> A lunchtime conversation with my coworkers showed that most put more faith in their own instincts with picking stocks than in index or mirror funds (something that evidence shows is very unlikely, but people like to believe)

Very unlikely in what circumstances? E.g. 5 year period, 20 year period, holding the same stocks the entire time, etc.

Very unlikely in all your examples, exceedingly unlikely the longer the game is played.

What resources would you suggest to help your coworkers?

I found "The Simple Path to Wealth" by JL Collins to be very approachable, and is more focused on overall Financial Literacy instead of just investment advice. It's definitely my first recommendation for people who have very little finance background.

Will check it out, thanks!

The book A Random Walk Down Wall Street is a good start.

Thanks

I know enough non-tech educated people who don't invest in anything. They have no inclination to. They have no one to guide them. Even when someone tells them to invest, it is a concept too hard for them to grasp.

Not everyone is looking to make money. Sometimes circumstances won't allow them to understand it. By the time they do, it's already too late.

> They have no inclination to.

One shtick I have is the "Young person, why don't you have a brokerage account"?

I know so many people, who are not so young any more, who are professionals and with solid salaries, who will do things like have credit cards, have cars they finance, a coinbase account, maybe a robinhood account, certainly a facebook and instagram account.... but no Schwab, Vanguard, or other basic Individual brokerage account.

They have the income and technical know-how to make complicated online accounts and make use of financial services.. but even though it takes ten minutes to make a Vanguard account, and 2 business days to credit it and buy boring index funds... so few people who can (ie have money and knowledge), actually do... or even have much interest. It's sad and fascinating at the same time.

I understand their perspective though. Some of them are very driven people. They are just not interested or oblivious to the power of wealth.

Some of them only care about career ladder. They must climb and optimize for that. Others care only about fame. Some clamor for benefit of their children.

It's true money can bring a lot of freedom. But to many people, it is not the be all end all.

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