I saw this interesting tidbit on Everybody Loves Your Money. According to Ben Bernanke, the chairman of the Federal Reserve, most American households are doing just fine managing their finances. Here is some of what he said:
On average, debt burdens appear to be at manageable levels and delinquency rates on consumer loans and home mortgages have been low.
He does note that lower income families have more problems without bank accounts or an emergency cash cushion. How about teaching financial savvy and money management in public schools? Bernanke says the curriculum is already overcrowded (and I agree).
I am surprised that Bernanke has said that most households manage money well. It may be true for middle and high income families, but it is not the message that the government generally tries to push. It’s beneficial to push the opposite message—that Americans are poor at managing their finances—for several reasons. This message, opposing Bernanke’s:
- Validates the existence and importance of asset managers, financial advisors, and brokers
- Encourages people to think about the management of their own finances
- Makes people feel good about being “above average”
Do you think households are generally capable money managers?
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Well, no family is composed of statistical averages. To say that, because average debt levels are acceptable, and delinquencies on average aren’t overwhelming, doesn’t mean that some families aren’t having all of those issues at once. And families should be striving for NO bad debt, NO delinquencies.
Although I disagree that saying that most people aren’t doing well is going to make individuals think they are doing better than average – I think it would have the opposite effect, where they might be looking more at their own finances to see if they are in that pool.
Well, compared to the Federal Government, most families are doing pretty well managing their personal finances… obviously, that is not saying much.
Generally, I’d say that more families are “barely hanging on” than are “managing their finances well.”