Learning about money
Our Grandparents Learned Personal Finance in School. Why Can’t Our Children? Years ago, people learned more in school about personal finance than those in school do now. What they needed to know about the nation’s financial system was included in math class. (Wealth Management)
Does a lump investment outperform dollar cost averaging?
Recently, I mentioned that a lump investment may trump a periodic, dollar-cost-averaging approach. It might seem counter-intuitive that this would be the case. After all, none of us have a crystal ball — well, a fully functioning crystal ball, able to predict the future — so why would investing money all at once, in one lump, be better than spreading it out and making periodic investments.
Research from Vanguard Investments has shown that roughly 68% of the time, the lump sum investment outperformed the periodic investment. The simplistic rational would be that more often the markets are rising so investing early would get you a better price more often than not. The most surprising thing here is that the differential is sizable at a 2.39% advantage in the U.S. stock market. Think that 2.39% isn’t all that significant? A $10,000 annual investment returning 9.39% would be worth $4.1 million 40 years later, whereas the same $10,000 annual investment returning 7.00% after 40 years would only be worth $2.1 million. (Vanguard)
The Secret Shame of Middle-Class Americans
Recently, the Federal Reserve Bank asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars!
Another survey found that nearly one-quarter of households making $100,000 to $150,000 a year claim not to be able to come up with $2,000 in the event of an emergency.
Economists have long theorized that people smooth their consumption over their lifetime, offsetting bad years with good ones—borrowing in the bad, saving in the good. But recent research indicates that when people get some money—a bonus, a tax refund, a small inheritance—they are, in fact, more likely to spend it than to save it. (The Atlantic)
Paying just $5,000 to your daughter for her wedding
Tradition suggests that the parents of the bride pay for the wedding. If your daughter was getting married, how much would you be willing to shell out for her special day? I know several people who have spent $40,000 or more on their children’s weddings. Jonathon Clements of Humble Dollar intends to only offer his daughter $5K for her wedding. Do you think less of him? I don’t; I applaud him. (Humble Dollar)
Video of the Day
How to clean your smartphone – That smartphone in your hand? Oh, it just has 10 times more germs per square inch than a public toilet seat.
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