tag:blogger.com,1999:blog-7736446773245191504.post5634958453751821369..comments2024-03-27T08:57:40.926-04:00Comments on Financial Literacy and Ignorance: Where does illiteracy hurt?Annamaria Lusardihttp://www.blogger.com/profile/05956062460452648142noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-7736446773245191504.post-54947520020375742872008-06-23T10:07:00.000-04:002008-06-23T10:07:00.000-04:00"You have made an important comment about the link..."You have made an important comment about the linkage between financial literacy and long-term planning. I find that those who dig a deep financial hole for themselves, whatever their level of income, education, family background, or social standing, make a number of mistakes which all relate to failure to think through the longer-term consequences of their actions. I have found that those who try to get rich quick invariably fail to understand that schemes that produce a high and quick return also produce a high risk, which means that the investor can lose everything.<BR/><BR/>I have also found that people do not understand that, even when they do not realize a total return on longer-term actions, there is almost always some compensating short-term benefit. For example, some of our less successful sales professionals at my company are always trying for the quick victory, but neglect the longer-term relationship-building that promises big payback because it is perceived to take too long. Those who invest in longer-term relationship building not only get the big long-term order, but, as time goes on, they capture smaller unanticipated opportunities, and they learn about other big opportunities that would never have fallen in their lap had they just gone for the quick, big order.<BR/><BR/>The other attribute of financial literacy is the recognition that, almost always, if there is a big opportunity in a well-publicized space, everyone will compete for that opportunity, and, in effect, build up the cost. For example, a "hot" stock recommended by a well-known broker will draw many buyers into the stock and cause everyone to pay more than they would have otherwise paid. <BR/><BR/>I believe that we should have a class in all of our schools to teach our children some basic life skills on how to budget, how to spend money intelligently, and how to invest. Thank you again for a thoughtful post."Mike Critellihttps://www.blogger.com/profile/09744397754026281069noreply@blogger.com