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.