Is Counseling Saving Really ‘Financial Porn?’ You Must Be Joking

By Dan Kadlec

April 20, 2017

I’ve been reading a lot lately about the value of splurging on experiences that will create lifetime memories. As a congenital saver, I find this thinking flawed. Yet there it is in The New York Times and Money magazine, among others.

Do we really need to encourage individuals to spend? Won’t they do it on their own? For way too many, spending is the natural order. That’s one reason we have attics full of junk while a retirement savings crisis looms throughout much of the world.

The decision to spend or save is at the heart of financial responsibility. Arguably, striking a smart spend-save balance is the very core of the global financial literacy effort. So it behooves financial educators, financial advisers, human resources executives and policymakers to explore the matter.

How do we get people to spend more? That just doesn’t sound like the right question. Certainly, some people are tight with their money to a fault. And, yes, certain economies—Japan, for example—have suffered from cultural penny pinching. But around the world, and especially in the U.S., saving too much is far less a problem than spending too much, if it’s a problem at all.

The last thing we need is for our institutions to instill in young people that they should cut loose with their cash. Forty years of compound returns is their best hope at ever retiring. Spending is easy. Saving is hard. That’s the key lesson.

The Times calls this thinking “financial porn.” Memories are what make a great life, the writer argues. Yet that’s only true if you can live out your days without financial fear. This is the balance individuals must find, and it isn’t easy. Social Security won’t be enough. So let’s lay the proper groundwork in school and at home.

Certainly, spending on great experiences adds incalculably to your life. Experiences create more than memories; they invigorate relationships, and good relationships are the real key to happiness. These benefits are real—and that is why they should be examined.

Here’s another reason: spenders and savers are wired different, genetically speaking. We are basically born with the spending gene or the saving gene. Yet parenting strategies and financial education can help spenders and savers correct for their predilections in plenty time to save for retirement and make some memories as well.

This is a rich topic. Neither extreme is healthy. We need to help individuals find a balance. But let’s start with the hard part: saving. That makes sensible spending possible in the first place.

More on spending and saving:

Japan’s Leap of Faith with Financial Education

Here’s How to Keep Financial Literacy Simple

An Eye-Opening Financial Literacy Quiz

Posted in Policy & Government on April, 2017