[AussieWog93]

People in this thread are massively underestimating the level of financial illiteracy in the general population.

We've had multiple people try to convince us to set up bank accounts for our kids, so that they could accumulate interest over 18 years.

More that tried to convince me to gamble on random pump and dump shitcoins.

More still that talked about "investing" in random collectables like Funko Pops or Pokemon cards - they're not a bubble, Logan Paul told me so!

You could replace the AI with a piece of paper that says "set aside 10% of your income and invest it in an ETF" and it would outperform the financial "advice" that people receive on a daily basis.

[throw0101a]

> You could replace the AI with a piece of paper […]

This is actually the 'schtick' of a book that was written ten years ago:

> Emails and comments on his blog asked for a real index card with financial advice, so Pollack jotted down nine rules in two minutes, took a picture of it, and posted it online.[1][4] The image went viral, and was covered on many internet news sites.[4][5][6] Pollack and Olen wrote The Index Card three years later, which Pollack compares with the original index card as commentary to the Ten Commandments.[1][7]

* https://en.wikipedia.org/wiki/The_Index_Card

"""

The original index card, pictured above, has:[9]

    1. Max your 401(k) or equivalent employee contribution.
    2. Buy inexpensive, well-diversified mutual funds such as Vanguard Target 20xx funds.
    3. Never buy or sell an individual security. The person on the other side of the table knows more than you do about this stuff.
    4. Save 20% of your money.
    5. Pay your credit card balance in full every month.
    6. Maximize tax-advantaged savings vehicles like Roth, SEP, and 529 accounts.
    7. Pay attention to fees. Avoid actively managed funds.
    8. Make financial advisors commit to the fiduciary standard.
    9. Promote social insurance programs to help people when things go wrong.

"""

All-in-all, not terribly bad advice; one could do a lot worse.

[rustfreeforme]

Are you kidding? lol, let's take this one at a time:

> 1. Max your 401(k) or equivalent employee contribution.

> 2. Buy inexpensive, well-diversified mutual funds such as Vanguard Target 20xx funds.

> 6. Maximize tax-advantaged savings vehicles like Roth, SEP, and 529 accounts.

What if I told you that the people who own BlackRock, Vanguard, State Street, Fidelity, Northern Trust, and Geode -- six companies who own practically all of the S&P 500 -- have decided they will be emptying out every nickel from your pockets in the near future?

Yes, citizen, put all your money into the index funds especially, and just forget about it. Let the Experts in the casino handle it. You both agree: they know exactly what to do with your money, way better than you.

Thanks to the Experts, your retirement (and life) is now dependent on the performance of Quality Companies like the SpaceX pump and dump scheme, plus other dogs like OpenAI when they join the fray. I'm sure you have nothing to worry about.

By the way, the next giant market crash (1929 style) is imminent as the Everything Bubble has found its needle, so enjoy your window seat on the spaceship to Hell. You buys the ticket, you takes the ride.

> 3. Never buy or sell an individual security. The person on the other side of the table knows more than you do about this stuff.

This is the type of nonsense specialists always tell each other. Generalists have long experience having to deal with this strange mindset that it is only possible for a person to understand one narrow category of things, so everything else must be outsourced to Other Competent Specialists In That Field. Sharks in the financial markets are well aware of this mental weakness and love to introduce things like mutual funds, ETFs, index funds, etc to assure the marks their money is being handled by Competent Specialists who really have their best interest at heart.

Here is what better advice looks like: don't buy/sell any securities unless you, personally, know exactly how and why you're going to profit from it. Anything less is gambling. In this time of economic malaise, war, extreme uncertainty, if you haven't spent decades figuring out what's going on, then you shouldn't be touching any securities at all.

Yes, that means most market participants right now are nothing but gamblers, and the casino always wins.

There's a saying in poker: if you haven't figured out who the mark is in the first five minutes, it's you.

> 4. Save 20% of your money.

Finally, some decent advice. But save it for what? That part is left unanswered. And why only 20%? Saved money is always losing value due to being eaten away by inflation, so like a game of hot potato, you need to figure out a plan to deploy it profitably in a time of increasing uncertainty. In a high inflation environment, if you're not growing, you're going broke.

The correct answer at this moment in time (and good advice in general) is, save your money and invest in one or more proven, profitable, Great Depression-proof businesses that pay you a dividend.

> 5. Pay your credit card balance in full every month.

Better advice: stop borrowing money from sharks, live inside your means, and stop being tracked and owned by whoever owns the credit card companies.

[...]

> 9. Promote social insurance programs to help people when things go wrong.

If you follow all of this bad advice, you're going to be the one needing those 'social insurance programs.'

By the way, insurance is a scam.

Hope this helps.

[thunderbird120]

This is a near perfect encapsulation of the exact type of person you should not take financial advice from.

[rustfreeforme]

OK buddy, then my advice is Go All In. You deserve it.

[JKCalhoun]

"Here is what better advice looks like: don't buy/sell any securities unless you, personally, know exactly how and why you're going to profit from it."

For people like Warren Buffett, that's his full-time job—figuring out how and why he is going to profit.

Me? I'm not going to know shit, so I will "3. Never buy or sell an individual security."

"…save your money and invest in one or more proven, profitable, Great Depression-proof businesses that pay you a dividend"

Besides the obvious (that this is not really saving money if you are in fact investing it) I'm curious where the safe harbors were during the Great Depression. I've asked before and have not received an answer.

[rustfreeforme]

You'll be bankrupt and homeless soon.

[cm2012]

AI advice is better than yours, friend

[jghn]

It's easy to see why it works though. I know people like this who have made bank with these stupid schemes. Far higher returns than doing things the "right" way.

The problem is you usually only hear from folks like this who are up a gajillion percent on some dumb crypto play, and not from the people who just wasted their life savings.

[Eji1700]

“Pay your bills on time and fully”

“Do what you can to eliminate addictive vices or never get them”

“Max your Roth and 401k contributions before even thinking about anything else”

“Try to budget”

“Don’t live beyond your means. Monthly payment need to be considered carefully”

If you can even TRY to do these things it puts you SO far ahead of the average person.

It sucks because I get it, if you’re behind waiting years for things to stabilize sucks, if you even can. So these get rich quick by just doing X scams are enticing but only set you farther behind.

God I still remember when a friend showed up on his 18th birthday with a pack of cigarettes to show how “mature” he was. I always think about how much that one decision cost him over the years.

[scrapcode]

I never personally liked the blanket advice to "Max your 401k." For most, if achievable at all, that would be the most they can invest at all. Even though it is often recommended alongside a proper "emergency fund," that advice leaves little liquidity without major penalties.

[throw0101a]

> I never personally liked the blanket advice to "Max your 401k."

I think the general advice is max out employer contributions to your 401(k)

* https://old.reddit.com/r/personalfinance/wiki/commontopics

* https://old.reddit.com/r/PersonalFinanceCanada/wiki/money-st...

[prasadjoglekar]

For enough income, maxing out 401K is the one way to reduce taxes and keep your money.

[jeffreyrogers]

Roth contributions are withdrawable without penalty. Also most employers offer a match of some amount, which is essentially free money.

[sumeno]

Not Roth 401ks, only IRAs

[jeffreyrogers]

Yes, although some plans let you roll contributions into an IRA.

[what]

Most people here are probably paid too much to contribute to a Roth IRA.

[pinkyboy]

I have considerable Roth assets because my employer's 401k allows for the Mega-backdoor, which means I can put $30k+ per year of after-tax income into 401k (beyond the normal pre-tax contributions) perform a Roth-in-plan-conversion on the after-tax assets, and then roll it out into a Roth IRA.

[ptmcc]

That's what the https://www.investopedia.com/terms/b/backdoor-roth-ira.asp is for, assuming you don't have any existing traditional IRA balances

[jeffreyrogers]

You can also roll your traditional IRA into an employers 401k (if the plan allows this) to zero out your traditional IRA balance.

[jeffreyrogers]

You can convert your 401k to an IRA when you leave an employer. Some employers also offer in service rollovers (I think these mostly have minimum age restrictions on them though)

[dripdry45]

The five-year clock is for the original contribution. It’s important not to get that mixed up.

[BeetleB]

I believe the general idea is to max it if you can. If you can't, put whatever you can, and forego luxuries like vacations until you can.

[throw0101a]

> If you can even TRY to do these things it puts you SO far ahead of the average person.

This is basically the advice of this 2016 post (later book):

* https://en.wikipedia.org/wiki/The_Index_Card

The basics are really basic/simple.

[mohamedkoubaa]

The writer of one punch man was on to something

[sudo_cowsay]

He knew the way

[prophesi]

> God I still remember when a friend showed up on his 18th birthday with a pack of cigarettes to show how “mature” he was. I always think about how much that one decision cost him over the years.

The irony of taxing vices. I imagine most of it's paid by people who didn't know better at a young age, and helps encourage the downward spiral of poverty.

And if you say it discourages young people from starting on the addiction, I think we're barking up the wrong tree. Disposable vapes have the highest amount of nicotine they can put in their nicotine salts. Nicotine pouches like zyns sell the most at 6mg and above. Dispensaries and street weed have enough THC that would put a hippie in the 70's in a psychotic break.

God bless that Gen Z doesn't drink or smoke cigarettes. But they vape nicotine and marijuana. Or use pouches / edibles.

If we don't prevent first time users from getting an intense nicotine head high or accustomed to weed 5 to 10 times stronger than what their parents were used to, then I really don't see the point of excise taxes. It should be about preventing first-time use, and giving off-ramps to these potent products.

[kristianp]

We have bank accounts for our kids, currently earning 1.75% because we aren't depositing money every month. If money is deposited it's another 3.3%.

I really need to get around to setting up Vanguard for them. Thanks for the reminder!

[nsvd2]

1.75 is less than the money is losing value from inflation. If that savings is in USD it's quite a bit less than inflation over the past five years.

[kumarvvr]

The last bit of the last bit of what you said is what Warren Buffett has been saying for decades.

[hn_throwaway_99]

While I agree with you about the level of financial illiteracy in the general population, I don't really see what AI has to add for the vast majority of the population is simple. Basic financial advice is not hard (save regularly, invest in low cost index funds, don't take on CC debt, etc.), but a lot of it goes against most human nature, especially around delayed gratification. People have known for decades that "diet and exercise" are very important for good health, yet we still have an obesity epidemic.

It reminds me of that Saturday Night Live skit from decades ago, "Don't Buy Stuff You Cannot Afford": https://youtu.be/R3ZJKN_5M44

[Aachen]

> I don't really see what AI has to add for the vast majority of the population

What it does best: sound plausible and never tire of a personal (sounding) conversation

An early study (with one of the early versions of ChatGPT) showed that people also come away less convicted about extreme political notions whereas chatting with a human had no or a slight solidifying effect. It's apparently an amazing tool to convince people of reasonable stuff (and probably also unreasonable stuff, if you'd make it, but I guess those proposals didn't pass the ethics committee!). There's loads of Financial cooks out there that'll convince you of golden mountains for anything that gives them a cut, kickback, or straight-out all of your money, so I could even see the reasoning in encouraging people to chat with just about any chatbot about their financial decisions

My main concern is the reliability: while it may be feel-good to say that it can prevent, say, 95% of scams and 80% of bad ideas, any time it fails at its job will actively steer someone towards ruining their life. Effort might be better spent on something that reliably works. So I'm not convinced either way yet, just that I could see how this is more convincing (and thus effective, at least in aggregate) than a napkin with legit useful commandments (at least for the USA; idk if we have such a thing as 402(K) here)

[bradfa]

What’s wrong with bank accounts for your kids? Sorry, this one doesn’t seem to fit with your other examples.

[wavemode]

If all you're doing with a bunch of cash over 18 years (!) is holding it in a bank account to collect interest, you're just losing money to inflation. Bank interest is almost nothing. Better to hold stocks, or at the very least bonds if you're extremely risk-averse.

Though this needs to be put in context - maybe you actually intend for the child to be permitted to spend the cash, in which case a bank account makes plenty of sense.

[CliffyA]

As the OP has "Aussie" in their name I think they'd be referring to the Commonwealth Bank of Australia Dollarmites accounts. They were shutdown recently after a watchdog investigation. It was locking kids into using the bank that would continue into adulthood and schools were getting paid to sign kids up.

https://www.morningstar.com.au/personal-finance/the-lessons-...

"They found that it provided little value for children and the largest outcome was that children were being exposed to ‘sophisticated’ marketing tactics."

[AussieWog93]

Funnily enough the two people we heard that "advice" from were Brits and Saffas. It's just bad interest yields compounding over decades.

[AussieWog93]

The banks might pay 3% interest, whereas even non-volatile conservative investments like cap notes or bonds would pay something like 7%.

Plugging it into a calculator:

1.03 ^ 18 = 1.70

1.07 ^ 18 = 3.37

Example numbers, but you're effectively taking half of the money that your kid would have had on their 18th birthday, and giving it to a banker.

[MBCook]

3% is amazingly good. It’s not hard to beat that, but a savings account at a common bank can easily be below 0.05%.

I looked up BoA. 0.04%.

[eks391]

3% is becoming more common as of the last few years, at least in the US. I know several banks off the top of my head that offer 3.5% or higher (and more if you are a new customer) for their savings accounts. I would persuade people who use banks that haven't moved on from near-zero APY to move on themselves.

[MBCook]

Yeah just off the top of my head I’d expect Discover and AmEx to be around 3.5%. Apple is at 3.4%.

I moved away from near 0% savings accounts more than 20 years ago, it’s amazing to me it’s still so common.

You don’t have to try very hard or go wrong to someone you’ve never heard of to get a good rate.

[JKCalhoun]

FWIW, savings rates have been coming down.

[Danox]

I’ve been thinking about moving some money over by selling some shares and opening up a savings account with enough money to make a difference.

[ghaff]

I'm definitely at the point where, if not sticking money in my mattress, I'm keeping a lot in pretty safe investments. Did sort of an equity housecleaning a couple years back and consolidated some investments, in part to make them easier to track and manage.

[nsvd2]

3% is typical for a HYSA (Ally, for example)

[ghaff]

Truly conservative investments are more in the 3-4% range these days; money markets were running around 5% a few years back but they've come down. I have some bonds (including treasuries) that are higher than that but I bought them quite a while back. For long time horizons I'd be more weighted on equity indexes and maybe dividend-heavy stocks.

[groundzeros2015]

Yes… I also wouldn’t park money in a savings account for 18 years.

But 7% is not the risk free rate! The S&P and these other things have risk!

But show me a bond I can buy that’s paying 7% and I’ll show you below investment grade.

[AussieWog93]

LFSPA.

Not risk free, but not volatile either. Although even that underperforms compared to an index fund.

[groundzeros2015]

Index funds are not risk free! We have had a solid 15 years and everyone forgot that there are decades of declines or stagnation.

[AussieWog93]

LFSPA is a cap note, not an index fund. Hence the lower returns, haha.

Not saying it's necessarily the ideal vehicle but anything beats the banks.

[SideQuark]

You’re not giving it to a banker, you’re trading risk for return and flexibility. One can access savings at any time, any amount. Not true with bonds, maybe if you fiddle with indices.

Also bond returns have averaged 5% over decades, not 7.

Not taking all this into account, and simply claiming bogey men took your money, is misleading.

[HWR_14]

While true, funds for retirement, college or to give as a gift when your kids move out do not need liquidity. Therefore, those should not be in savings.

[GuB-42]

From a return on investment perspective, it is not great.

Bank accounts are convenient and safe, but you pay the price with low interest rates. But if you don't intend to touch that money for 18 years, you don't need the ability to withdraw at any time without losing money that a bank account offers, so why pay the price for it?

However, it has symbolic and educative value, teaches the value of saving, how interest works without going into the complexities of the financial system, and making it clear to your kids that it is their money, even if they can't touch it yet. So it may be a good thing for that reason, when the sums are reasonable.

[zarzavat]

You should invest in different things depending on your age.

An old person might want to have more of their money in yielding assets. They are withdrawing from the account so the certainty of having predictable value might outweigh the inflation risk.

Savings intended for a young child should be allocated almost entirely into equities. They are not affected by drawdowns since they won't be withdrawing from the account for a decade or two, but inflation is a primary concern.

A bank account is a particularly bad place to put savings intended for a child long-term. A good high yielding account might barely keep pace with inflation, but it's unlikely to grow much in real terms. The average bank account will lose money in real terms in that 10-20 years.

[dagenix]

Bank account interest is pretty much always less than inflation. So, money sitting in a bank account for 18 years is just losing value.

[Danox]

The object of the game is to live within your means, save and invest. More than half the population does not do that. When you’re 18 the treadmill starts turning if you don’t use your time wisely, you’re going to be in trouble at the end of life. When you are young, simple compounding is your friend because you have time.

https://www.thewealthminded.com/finance-basics/how-compound-...

People have won the lottery and blown it all, some people who have extremely high paying professions in their youth, have over the course of time have also blown it all.

[lostaccount]

Not OP, but I think they are referring to the fact that you can get tax advantaged accounts instead of a standard savings account. Not to mention the interest rate on those accounts is basically a rounding error.

[what]

A child can not get a tax advantaged account. You need earned income to contribute to those.

[theptip]

The interest rate is very low.

[MBCook]

My checking account isn’t the best out there at 1%. Same with my savings account at 3.4%.

Neither of those is anywhere near inflation. You are effectively losing money by parking it there.

Most checking accounts don’t pay interest at all. I looked up Bank of America's savings account: 0.04%.

You read that right. Effectively zero. And it’s a flat rate. Whether you have $10 or $10 million in there.

[hibikir]

Yes, and that's from supposed professionals too, not just crazy youtubers or tiktok channels. My neighborhood has enough old people that Edward Jones reps come over to try to manage your money. So I get to ask them questions, and see they are basically offering to rip me off. And that's in the US: You should see the investment recommendations people in Spain get when they talk to supposed advisors in real banks. Search for the Preferential shares scandal, where banks had scripts teaching how to lie to people to sell a product that would prop up the bank while having great chances of wiping out the buyer's savings.

[Danox]

Careful just recently two old guys in Chino Hills, California. Brothers 66 and 67 years old were involved in some sort of apartment deal for 20 million dollars which went south.

They were so extremely dissatisfied with something and went to the house of the financial advisor or grifter depending upon your point of view and took it took on him. What is going to start happening with AI data centers?

[b8]

Pokemon is a good investment IMO. My mom even bought me some as an investment in 2008.

[fhe]

came here to say some version of this. for the average joe, good financial advice is simple and boring (low cost ETF tracking broad based index), and AI is definitely able to give that. the question has always been getting people to listen though, and I am not sure how effective AI will be at that. I continue to be amazed at the confidence that people place in hot stock tips from tiktok (yes, tiktok!). little has changed since the 1920s i guess.

[what]

> We've had multiple people try to convince us to set up bank accounts for our kids, so that they could accumulate interest over 18 years.

I don’t really see the problem here? Why wouldn’t you want to set up financial accounts for your children and invest in them?

[HWR_14]

Those accounts should be in something that pays more interest because you give up the liquidity. You pay (in reduced interest rates) for the ability to withdraw at any time. You can instead be completely risk free and make more money* by promising not to need it for another 10, 14 or 18 years.

* However many of those methods involve locking in the interest rate, so you might miss out if banks start paying 10% like they did decades ago.