Chapter 8 Summary

Chapter Eight

This chapter starts out by mentioning how well formed public policy is a good tool for increasing savings along with well-designed retirement plans. Our goal is to reposition thrift just like GM tried to reposition the sales of the Oldsmobile to the younger generation but sadly failed. Unfortunately, men are not the targets. Women due to their genetic make-up of being ones who want to learn by listening to advice and in a study demonstrated on a man and a woman who traded stocks, men traded the stocks for the ones that would be hot and women traded based on the fees and long term effects of the stock. A woman’s “emotional tool-kit” is better adapted to decision making in financial markets thus making the women the target for future thrift instruction. Minorities will also be targeted because of the notion of overspending and consuming the good things now and leaving little for the future. This idea of consumption takes on a deeper meaning when the person feels powerless in society. In order to compensate, minorities engage in this notion of conspicuous consumption. Therefore, thrift education will center on eradicating the conspicuous consumption of the minorities. Good techniques for reproducing thrift are creating good contribution plans. The first goal is to choose a pension provider with low fees. Low fees indicate higher investment returns in the long run. The second goal is to limit the number of mutual funds in your plan. Pension plans contain a large amount of investment choices. Too many choices will overwhelm and confuse the person. The next goals are to resist Payment-and-Product-Exchange Agreements and to set the default asset allocation in thirds. The fifth goal is to set automatic enroll defaults on a 401(k) plan. These are good for those who are financially ignorant. The sixth goal is to give detailed, personalized financial advice. Then the last goals are to implement forward contracts for savings, limiting conspicuous consumption, and lastly focusing on employee savings. By living and achieving these goals, one can successfully regenerate thrift into their life and society will follow closely behind them.

Chapter 7 Summary

Chapter Seven

This chapter begins by expressing the need to center thrift into our lives again. We need to save good amounts of money first in order to build our wealth. Unfortunately, those who earn less have less willpower and general ability to save every dollar and thus are not able to save well. There are several policies to encourage thrift among Americans. The first one is to create a universal “American Investment Plan”(AIP). Even though the government has already created a Thrift Savings Plan, the ideas need to be well marketed, advertised, and taught to Americans for any progress to be made. The second program would be to create a public education program to promote thrift. The practice of thrift would have to start at the very bottom of the chain and with a program that would promote thrift to young people; America would be back on track in a very short time. The final plan would be to create a Save to Win bond to compete with lotteries. The average person spends $184 a year on lotto tickets. A Save to Win (S2W) bond would at root be a government interest savings bond. In order to play, the person, over the age of seventeen, would first have to have and AIP. Then at a location that offers S2W bonds, one could invest any amount and then they would receive a receipt with a number on it. Twice a month, winning number would be called out, and there would be both small and large cash prizes. The money used would be from outstanding bonds. However, even if one does not win, they still have an account for savings and thus, everyone playing benefits unlike a lottery where only the winner benefits. These are few of the challenges facing those who want to renew America’s financial health.

Chapter 6 Summary

Chapter Six

The chapter starts out relating the familiarity of thrift in society by alluding to the 1946 film It’s a Wonderful Life. Institutions such as building and loan, and savings and loan were not alien to people of those times and they recognized them as places for the “small saver.” Luckily, in contrast with the businesses today, these places limited the amount of debt the consumer had. In order to take out a loan, people had to accumulate savings, go to a bank, and demonstrate credit worthiness. Any form of thriftlessness was outlawed entirely. Nowadays, credit can be both good and bad. It can be used to buy a house, start a business, and boost job prospects. However, without proper knowledge or responsibility of credit, credit can be a disaster. In 2004, the typical family spent more than 18 percent of its income on debt payments. Debt in small amounts is fine for families who have children and who purchase “big-ticket” items like houses or cars. However, some rely on credit to make ends meet. Many are not as lucky and experience serious debt problems such as missed payments and late fees. In 2006, late fees accounted for $17.1 billion dollars from Americans. Blame for these kinds of debt in general are pointed to not only personal individual selfishness and greed but also the greed of corporate America. Even though credit cards are convenient and easy to use, their debt makes up the majority of the debt in America today. It is shown that 56 percent of final year college students own four or more credit cards. In 2007 alone, credit card debt reached a whopping $937.5 billion dollars. Another source of debt is the payday lender. They promote the idea of “fast cash” to consumers who generally live from paycheck to paycheck. They also target the elderly or disabled. Unfortunately, they are structured to make it almost impossible to repay to requisite amount in the allotted two weeks. About 56 percent of payday lending revenue is generated by those who take out thirteen or more loans per year. Payday lending is able to thrive for many reasons including the fact that there are few states with laws regarding how high the interest rates have to be. An alarming statistic states that the annual percentage rates increased from 36 percent in 1965 to 521 percent in 2007. Another antithrift establishment is the lotteries. Based on commission, lotteries target lower income households and statistics show that lower income households spend more on tickets per year than those with high income. The Tax Foundation estimates that if a household invested that money in stocks every year for forty years, they could expect to accumulate $87,191. New goals that we should live by include creating a thrift savings plan for all Americans to live by, build new thrift institutions, and re-purpose the lottery. We should get America back on track and live the motto's that our forefathers lived by to build their wealth tremendously.

Chapter 5 Summary

Chapter Five

The credit union movement started in the first decade of the twentieth century. The key figure in the movement was Edward Filene, a capitalist and philanthropist who introduced the idea of cooperative finance upon returning from his trip to India. Instead of letting his workers leave work with their pay in hand, he thought that there had to be a better way. He conceptualized the idea of credit unions and with the help of Roy F. Bergengren, a law was passed and signed in 1934 that provided a means for establishing credit unions. However, it took the help of credit union field workers to instruct people about the benefits of pooling their funds. In 1970, credits unions took a massive change. With the institution of National Credit Union Association, credit unions were required to have federal deposit insurance. The pros were that their money and shares were insured but complete ownership and accountability was compromised. Some felt government supervision and regulation would burden the unions. However, once members received assurance of the safety of their money, the credit union movement expanded dramatically. Luckily, the concept of thrift was ingrained early in the movement. The slogan, “Pay yourself first”, taught that members should set aside personal savings in an account. Even to the poor did credit unions target with their ideas and felt that they were doing to community a service. Places known as the community development credit unions (CDCUs) solely operated to serve low-income communities. As of 2007, there were 8,410 separately chartered credit unions with a total membership of 88,251,444 and profits of over $757 billion.  The largest is the Navy Federal Credit Union more than 3 million members and $35 billion. In conclusion, the credit union served as a means of incorporating thrift into savings and dealing with money. Nowadays, credit unions make up about 7% of the nations savings.

Chapter 4 Summary

Chapter Four

The chapter starts out by noting that thrift stores have been around now for a little more than a century. According to those who had immigrated to America, the noticed that Americans relied mostly on buying retail and not thrift like they had experienced in their home countries. Thrift shops were started by charities when the need to provide men with jobs increased greatly. Their main goals were to offer goods to the poor at prices reasonable to them. The creator of Goodwill Industries, Edgar James Helms, developed an idea in 1902 of a business that collected donations of clothes and household goods to help struggling parishioners of his Methodist parish. His ambitions were to eliminate poverty and by collecting secondhand goods, repairing them, and selling them for a low price, his dreams became a reality. In 2005 alone, Goodwill grossed $1.63 billion in retail sales. Like Helms, other charity thrift stores were developed and inspired by religious teachings to strive to eliminate poverty. Women played a huge role in the fight to advance thrift in society. Many accepted the idea and felt that their influence on the domestic scene would promote thrift greatly. The ideas of secondhand clothing and goods were not the original goals of many thrift stores. Many goods were still made at home for stores to sell rather than donated. Even though thrift stores were a great service to the poor, the chairpersons of the stores still felt that their businesses could be profit centers. Supplied by funds and internal donations, stores such as The Red Cross and Salvation Army put extra care into making their stores more appealing by hanging and organizing clothes, putting goods on shelves, and inviting prominent figures to sell their goods. Before the Second World War, thrift stores were just a kind service for the poor. But after World War II, the middle class were “regulars” in a sense of thrift stores and the shops became places to acquire quantity of clothing and see items that have been overlooked. Buying secondhand was now popular. The ideas of owners originated from helping the poor and changed to offering jobs and helping raise money for their missions. The only problems facing thrift shoppers were just continually buying more stuff that they did not need. In conclusion, thrift stores originated to help the poor and those struggling but quickly became places to find good bargains and make good money.