Interesting post today in the Picking up Nickels blog about American kids lacking basic money management skills. Should we be surprised then that these same kids becoming like the college students at Wharton and Harvard about whom I recently wrote who can’t pick the lowest cost index fund. These same kids who grow up to be participants in 401(k) plans who don’t save enough and can’t manage their accounts well.
The education system is starting to pay more attention to teaching the necessary life skill of personal finance. In the meantime I guess we’ll have to be satisfied with the three prong emphasis on savings and investing in the new Pension Protection Act of 2006 which:
- Boosts enrollment through automatic 401(k) enrollment
- Allows default investment choices beyond money market and stable value funds that plan sponsors can use for employees who don’t make investment elections
- Encourages plan sponsor to make investment advice available to 401(k participants
Are we returning to the old paternalistic ways of providing benefits?