Wednesday, January 07, 2009

Americans finally start saving their money

The Wall Street Journal has an article about how Americans are finally saving their money instead of spending their speculative investment returns before they've hatched. Apparently 2008 is the first time that average Americans have ever saved more money than they spend on credit since the Federal Reserve began tracking the data in 1952.

On a related note, my company has recently begun offering free (employer-sponsored) courses by Dave Ramsey on how to save money.

Dave Ramsey certainly offers a popular and much-needed service of educating our pathetic country on how to use money.

However to charge people for money management education is equally pathetic, and borderline predatory. With one face Ramsey tells his audience to cut expenses and be frugal and in the same breath and with snake-oil-salesman charm shouts, "Buy my DVD, for only $59.95! Join my online Money University(tm) for only $99.95!" I've actually been to a Dave Ramsey "Total Money Makeover LIVE event" that was held at the Freeman Coliseum here in San Antonio, so I'm speaking from personal experience (the ticket was a gift).

Obviously he is presenting his products as investments -- that his customers will see a return on their investments in his talks, course material, and literature. Sort of like installing solar panels on your house -- there's an initial cost up front, but eventually you recoup your investment in electricity savings.

Unfortunately, this is really not the case with Ramsey. You aren't actually getting anything tangible at all. You aren't improving your house or anything. You're not buying a savings bond. You're not buying groceries with that money. All you're getting sold is common sense that you should have had in the first place in a glossy packaging of typical American marketing.

I suggest that Ramsey actually targets people with poor valuation skills to whom to peddle his wares. In other words, the people he is supposedly "helping" are the very people who wouldn't be able to discern the true value of his product relative to its cost.

As seen on TV.

[ via Boing Boing ]


N. Seth said...

Good points. I agree that it violates common sense to pay $$ for what Dave Ramsey admits is only common sense. But the fact that so many people do pay and change their financial lives as a result of his "product" shows that there is a lack of supply and abundance of demand for what should be common sense. I think this only reinforces the need to teach this information (not necessarily Dave's version), maybe even making it part of a core educational curriculum.

However, I don't think it is fair to call him predatory. He offers all of his teaching and advice for free almost daily on his radio show (which can be downloaded online), and his books are available for free at most libraries (even his Live Events are free for those willing to volunteer help with set-up). Some people prefer the structure of his FPU or Live Events, and others are just fans and get inspiration from his presentations, and some even pay for personal attention, and so they are paying for a product they value apart from the common sense they should already know. There is nothing wrong with charging for the teaching and motivational service he offers; in fact, I think the better he is at his job, the more money he deserves to make.

Nels said...

"there is a lack of supply and abundance of demand for what should be common sense."

Exactly. No market is truly free without maximal distribution of information to all its participants.

This means education on monetary policy in the United States and on how to use money. This means a better civic environment. How this is accomplished is irrelevant. If it is really such a desired thing, then it must first be understood that a free market can never exist in an uneducated, information-deprived society.

Ramsey has identified a deficiency in America's culture and is exploiting and profiting from it, like any red-white-and-blue-blooded American. Plain and simple.

Nels said...

Furthermore, to suggest that common sense is a commodity that can be purchased and sold in a market is a hallmark of polarized capitalist thought and an example of ideological hubris and extremism.

The mercantile-above-all-else mentality in this country is a heart-hardening compassion-suppressing disease and it is steadily spreading through its people.

By the way, I am unsurprised by Seth's comment on this particular post -- he gave me the ticket to the Ramsey event mentioned in this post.