10 financial lessons from Vox's 'Money, Explained'
The docuseries explores five personal finance topics with fun animations, engaging interviews and celebrity hosts. Each episode focuses on a different money topic, from credit cards to retirement to student loans.
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Personal finance isn’t the typical topic for a TV show, but Vox’s Explained series makes learning about money fun. The docuseries explores six different areas of personal finance, getting at the heart of what we do with our money — and why. Here are 10 key financial lessons you can learn from Money, Explained.
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This episode covers some of the common money schemes out there, from Ponzi schemes and pyramid schemes to advance fee schemes and pump and dump schemes. Here’s what you can learn:
1. Scams have been around forever. The episode follows the history of scams, which started in the early 1800s and still exist today, though their method has mostly moved online. Most fraudsters take advantage of an existing system, like Social Security or cryptocurrency investments, and market a product or service that often doesn’t exist. These schemes often capitalize on moments of change in the economy (like a recession) and create a sense of urgency to act.
2. When it comes to making money, be wary. Any investment or company promising a certain return should be eyed with suspicion. The bottom line? Scams are everywhere, and can happen to just about anyone. We have a roundup of the six common scams and tips for how to avoid them.
This episode explains the history of credit cards, dating back to 1958, and how they’ve evolved into a trillion-dollar business today. Once a simple way to front advance purchases, credit cards have become a rewards tool that offers cash back, points, and other perks. Here’s what you can learn.
3. There are credit card winners and credit card losers. The episode details four “types” of credit card users:
Those who don’t have a credit card, known as Non-Users
Those who pay their credit card in full each month, known as Transactors
Those who game the credit card system to maximize points and rewards, known as Hackers
Those who carry debt and make only the minimum payment each month, known as Revolvers
Ever wondered how the credit card company can pay you points and cash back each month? For the most part, the credit card company isn’t the one paying you at all — it’s coming from the interest payments of Revolvers and merchant fees that businesses pay to allow credit card transactions.
4. Having one too many cards makes it easy to fall into the debt trap. Credit cards are usually a better payment option for most responsible card users, but many consumers are just one emergency away from relying on credit, which can quickly spiral into debt. This episode ends with important lessons for credit card usage, including:
Find the best card that fits your lifestyle with the lowest interest rate
Pay your balance in full each month
If you do find yourself with debt, we’ve got tips to pay it off.
Many students take out loans to pay for higher education, but as tuition costs have risen, borrowing for college has become a costly investment that can take a lifetime to pay off. The average student loan debt in 2020 was $36,510, which is 67% higher than it was a decade ago. How did we get here?
5. College is the key to building wealth, and colleges often go unchecked. People with bachelor's degrees earn $1 million more over their lifetimes than people who didn’t graduate from college, making college “essential” to prosperity. Unfortunately, colleges have been able to raise tuition arbitrarily, driving up tuition inflation and making it increasingly unaffordable. What’s worse, student loan default rates are going up, which can tank your credit score and hinder you from securing a mortgage or other type of loan.
6. Debt forgiveness would help previous borrowers — but not future ones. The call for student loan debt forgiveness has increased in recent years, and our research has found that just $10,000 of student loan forgiveness would wipe out debt for a third of borrowers. However, one-time debt forgiveness would only help those who have already taken out loans, and many current students would still be on the hook.
This was one of my favorite episodes. Gambling is one of the biggest industries in the world, expected to grow to $93 billion by 2023. While the chance to win money is enticing, it’s quite rare to win (or even break even) at a casino or online gambling app. This episode delves into the psychological theories behind gambling and why many get addicted. This episode is less personal-finance heavy, but there are still many money lessons to learn:
7. Hooked on gambling? Blame your brain. There are a number of cognitive biases that keep us sitting at the slot machine or buying that lottery ticket. The most notable is the idea that we can beat the odds and have the opportunity to make “quick money,” known as the illusion of chance. In fact, most casinos are rigged in favor of the house, making it unlikely that you’ll beat the odds.
8. Don’t bet what you can’t afford to lose. Whether it’s a poker game or roulette, you shouldn’t gamble money you aren’t comfortable losing. Before buying a stock or making any kind of investment, make sure you have a solid strategy and understand your risk tolerance before buying.
Check out our interview with professional poker player Maria Konnikova, who was featured in this episode of Explained.
If you are worried you haven’t saved enough for retirement up to this point, you aren’t alone. The final episode of “Money, Explained” focuses on saving for retirement, specifically the fact that millions of Americans have no savings whatsoever. Here’s what you can learn:
9. The 401(k) wasn’t supposed to replace the pension system. The 401(k) retirement plan was established in 1978, based on a loophole in the tax code. It gained popularity in the 1980s as a do-it-yourself approach to retirement savings. However, many experts now argue 401(k)s don’t adequately prepare workers for retirement. Many 401(k)s come with administrative fees and charges, which can compound over time. And most importantly, unlike pension plans, 401(k)s don’t promise a certain amount of money at retirement — so if you retire during times of financial stress, you may see your nest egg take a hit.
10.You may not be able to rely on the government for help. The Social Security Board of Trustees projects that Social Security’s trust fund reserves will run out by 2035. This means that many of today’s workers may not have access to the system they’re currently paying into when they reach retirement age. Some experts propose working longer to pad savings, but that may not be sustainable (or desired) for everyone. We’ve got tips on how to catch up on savings if you feel like you’ve fallen behind.
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