Thoughts on Big Three Question #1 used to assess financial literacy: Savings account interest

Regarding assessment of financial literacy, in both the United States and abroad, the “Big Three” multiple-choice questions written by Lusardi and Mitchell are typically used. Findings show that somewhere around 50% or even more people do not answer all three questions correctly, which is evidence of a widespread lack of financial literacy. This varies by sub-groups—for example, those with more education tend to do better. Overall, all groups of people do much worse than we would expect or hope, however.

The Big Three questions balance accuracy of interpretation and conciseness, but nevertheless, and not unexpectedly, there may be issues of understanding related to wording, choices, and arithmetic, rather than substance. Furthermore, as a construct, financial literacy is interrelated with and difficult to disentangle from basic mathematical skills in manipulating numbers and percentages, which might be called arithmetic skills, numeracy, or quantitative literacy. In fact, recent research (e.g., Cole, Paulson, & Shastry, 2016) is showing that taking mathematics courses may improve financial literacy more than taking personal finance courses!

Here, I will discuss the first of the Big Three questions. There are several similar questions that have appeared in the recent S&P Global FinLit Survey and elsewhere that I might also discuss in a future article, after I discuss the Big Three Questions 2 and 3 in other future articles.


Big Three Questions

1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow?
More than $102
Exactly $102
Less than $102
Do not know
Refuse to answer

With this question, we are talking about nominal future dollars rather than real future dollars, although it is not explicitly stated. The major world currencies are fiat money, meaning they are not redeemable with the government or banks for land, precious metals, or other commodities. Central banks that issue currencies, such as the U.S. Federal Reserve and European Central Bank, aim to achieve a gradual devaluation in the purchasing power of the issued currency over time, which is termed “inflation.” The Federal Reserve adjusts monetary policy while presently aiming for about 2% inflation per year, through measures such as adjusting the federal funds rate (“interest rate”) via market actions and paying banks that amount of interest for keeping reserves on deposit with the Fed, and quantitative easing (QE) by which the Fed uses the fiat money and credit it creates to purchase public and private debt. In response to the 2008 financial crisis, the Fed dropped interest rates to 0%, and only began increasing rates about 1.00% in mid-2017.

In considering this question, historical context is relevant. Prior to 2008, there were times when it would be common for U.S. savings accounts to pay much more interest per year than 2%; sometimes even 5% or higher. During 2009–2017, receiving 2% interest on a savings account would have been absurdly high. Given the Fed’s low interest rates, checking and savings accounts that paid 2% during this timeframe likely did so as part of promotional gimmicks with special requirements, such as using a debit card 10 times per month or only receiving the interest rate on balances of up to $5,000. In 2018, the Fed has finally started substantially increasing rates, so as of November 2018 it is now common to find savings accounts offering 2% interest per year.

The United States still uses paper money and coin extensively. One can withdraw cash from their bank account easily, and many banks will allow customers to order $100 boxes of nickels or $500 boxes of quarters with no fee (nickels have the highest metal value of circulating U.S. coinage, besides copper cents from 1982 and prior). Therefore, it is not advisable for the Fed to reduce interest rates below 0%, because it would result in individuals and firms stuffing cash and coin into vaults or mattresses to avoid loss of principal. QE is an additional lever to stimulate the economy when the interest rate lever is already fully depressed (rates at 0%).

Returning to the question at hand, assuming (and this is an important assumption) that the reader knows we are talking about nominal rather than real dollars, the question is absurdly easy. Even if the interest was only compounded once, at the end of the five year period, the nominal account balance would be $110, which is far above $102. The correct answer is “more than $102.”

Given that the question indicates the “interest rate was 2% per year,” this implies that interest is compounded at least once per year (annually). If compounded annually, the balances at the end of each year would be as follows:
Year 0: $100.00
Year 1: $102.00
Year 2: $104.04 (note here that we pick up 4¢ thanks to compounding of the $2.00 of interest earned in the prior year; compounding continues in future years)
Year 3: $106.12
Year 4: $108.24
Year 5: $110.41

As we see above, the effect of compounding five times (once each year) instead of only one time at the end of the five-year period is an additional 41¢ in nominal interest earnings. Therefore, one could change $102 to $110 in the answer choices and “more than $110” would still be correct like “more than $102” is. As it stands, assuming the reader knows we are discussing nominal dollars, the question does not even require an understanding of compounding returns.

When we discuss “interest rate” on a “per year” basis, this infers annual percentage yield (APY) rather than annual percentage rate (APR). Although interest can be compounded once per year, it can also be compounded each quarter (four times per year), each month (12 times per year), each day (365 times per year), or hypothetically it can even be compounded “continuously,” at every instant down to infinitesimal durations (i.e., even more frequently than each nanosecond). As we approach continuous compounding we approach the Pert equation, Pe^(rt) where P is principal (i.e., $100.00), e is the transcendental mathematical constant of approximately 2.718, r is the interest rate (i.e., 2%), and t is time (i.e., 5 years). If we were to continuously compound $100.00 at a rate of 2.00% for 5 years, the result would be $110.52, which is 11¢ higher than annual compounding, as shown below (computation thanks to www.meta-financial.com):

Pert equation

Therefore, depending on frequency of compounding, ranging from one calculation at the end of five years to infinite compounding throughout the duration of five years, at a rate of 2.00%, the account winds up with a minimum of $110.00 after five years and a maximum of $110.52.

Savings accounts typically compound monthly or quarterly and advertise APY, which is slightly higher than APR. Credit cards typically compound daily and advertise APR, which is significantly lower than APY. On my financial education website I have put forth an APR to APY calculator that shows the difference; a credit card that has a 24.99% APR compounded daily actually earns 28.38% APY in interest for the credit card issuer. Naturally, financial institutions advertise APR or APY depending on what looks better to the consumer, unless compelled otherwise, and they compound likewise. Therefore, although credit cards could compound interest once each statement, they compound each day to make more money for the issuer, and although savings accounts could compound each day, banks like to compound monthly or even quarterly to reduce the amount of money they pay out in interest.

It is safe to say that most people do not have a good understanding of the difference between APR and APY, because they do not even understand basic percentage arithmetic involving only two calculations. A majority of people likely do not even understand the difference between “percent more” and “percent off.” For instance, if a coupon takes $5 off a $15 purchase resulting in paying $10 instead of $15, both of these statements are correct:
You saved 33.3% (one-third)
You got 50% more for your money

Moreover, questions frequently appear on standardized tests such as: “If a tree grows 5% per year, how much has it grown after 2 years?” The answer due to compounding is 10.25%, but many erroneously answer 10.00%, showing a lack of understanding of compounding, or potentially a mis-reading of the question.

Regarding the “do not know” and “refuse to answer” choices: Because there are only three legitimate choices, including “do not know” helps prevent guessing, but some respondents may select it when they actually have an inkling of the correct answer—particularly females, who tend to have less confidence in their ability to accurately answer the question. Not many people select “refuse to answer,” and I do not see the rationale to include this choice at all, besides consistency as compared with other questions on a financial questionnaire (such as the National Financial Capability Study) that ask participants personal questions about their finances that they may not want to answer.


I will discuss the other two Big Three questions in future articles:

2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, how much would you be able to buy with the money in this account?
More than today
Exactly the same
Less than today
Do not know
Refuse to answer

3. Please tell me whether this statement is true or false. “Buying a single company’s stock usually provides a safer return than a stock mutual fund.”
True
False
Do not know
Refuse to answer

My April 2018 Deposition Against Amazon.com for Gift Card Balance Theft

The following is an expert witness deposition I wrote in April 2018 in response to a subpoena in a small claims lawsuit against Amazon by an individual in California who Amazon had stolen $3,400 in gift card balances from. In this deposition, I lay out several potential rationales for having a large Amazon gift card balance, detail why Amazon acts in bad faith when blacklisting customers and seizing their gift card balances, and explain how their practices are in violation of state and federal laws.

Regarding the case at hand, I have not heard from the plaintiff since May 2018, so I believe they were successful in recovering funds from Amazon.com, but stopped responding because they signed one of Amazon’s many non-disclosure agreements.

In November 2018, the author of the Miles Per Day blog was banned by Amazon. Amazon proceeded to cancel her outstanding orders and steal over $1,500 in gift card balance, even though she purchased her gift cards from first-party sources to earn credit card rewards miles and points. This prompted me to publish my April 2018 deposition, shown below.


IN THE TURLOCK DIVISION OF THE SUPERIOR COURT
OF CALIFORNIA, COUNTY OF STANISLAUS

[Redacted],

vs.

Amazon.com, Inc.,
Defendant.

SMALL CLAIMS CASE NO. [Redacted]
___________________________________

DEPOSITION FROM EXPERT WITNESS RICHARD THRIPP

Mr. [Redacted], having read articles on my website about my experience of being blacklisted by Amazon.com, Inc. (“Amazon”) and having my gift card balance stolen, has reached out to me and subpoenaed my testimony as an expert witness in her California small claims case. I am a non-lawyer and this is my first time being deposed in this capacity, which I am doing for free to shed light on practices by Amazon that I believe to be unlawful.

Amazon sells gift cards for its merchandise and services, both through its website and nationwide at most grocery stores, drugstores, gas stations, and other retailers through its subsidiary, ACI Gift Cards, LLC, a Washington limited liability company. These gift cards come as “redemption codes” that are loaded onto one’s Amazon customer account. They function differently than gift cards for many other retailers (e.g., Walmart or Target), because once they are loaded to a customer account, they are permanently bound to that account and can be redeemed against future orders only on that Amazon account.

Since 2008, many customers have complained online about having their Amazon accounts blacklisted and being stonewalled when requesting an explanation from the company. I experienced this in August 2015, on my Amazon account which had a gift card balance of $451.20.

The first signs of being blacklisted are receiving an error message about your password being incorrect when attempting to log in. The error message persists after resetting your password, and representatives at Amazon’s customer support call center will say there is a problem with your account that requires a specialist to call you back within 24–48 business hours. These statements are false, because no specialist ever calls back.

Because you are locked out of your Amazon account, you are unable to view your gift card balance, gift card activity, orders, and other customer data. Amazon will not accept returns from a blacklisted customer, even for items defective or damaged in shipment. They remove access to purchased digital materials (e.g., Kindle e-books), do not honor textbook rental return-shipping agreements, and if you have purchased an Amazon Prime membership, they refuse to offer a pro-rated refund. Most importantly, they outright refuse to return your gift card balance, in violation of the U.S. federal and state laws.

On 9/04/2015, I filed a complaint with the Attorney General of Washington against Amazon. The following is an actual response received 9/19/2015:

Dear Andrew,

I’m Suresh Potnuru of Amazon.com. I’m responding to Mr. Richard Thripp’s subject matter complaint, and copying him for his reference.

I’m sorry for the trouble Mr. Thripp’s had in accessing his account.

I’d like to confirm the information Mr. Thripp’s received from our Account Specialist team is correct. As noted in our Conditions of Use, in the section, “Your Account”: “Amazon reserves the right to refuse service, terminate accounts, remove or edit content, or cancel orders in its sole discretion.”

Mr. Thripp can review our Conditions of Use here: www.amazon.com/conditionsofuse

Due to the proprietary nature of our business, we’re unable to discuss with Mr. Thripp, and the decision to close his account is a final one.

Regarding gift card balance: At this time we may not be able to issue a refund to Mr. Thripp for his gift card balance. [Emphasis added.]

Please contact me directly by replying to this email if I can be of further assistance.

Best regards,
Suresh P.
Amazon.com

Additional complaints against Amazon resulted in them making these statements:

Please note this isn’t a decision we can reconsider, and we won’t be able to issue a refund for the gift card balance. [Emphasis added]

I realize you’re upset, and I regret we’ve been unable to address your concerns to your satisfaction. However, we’ll not be able to offer any additional insight or action on these matters, and any further inquiries on this matter won’t receive a response.

You must return your rental prior to the scheduled due date in order to avoid any additional charges. You can return the rental using the carrier of your choice. Since you’re not using a pre-paid mailing label provided by Amazon, you’ll be responsible for any return shipping fees. [The textbook rental agreement that I agreed to when renting from Amazon Warehouse Deals stated that Amazon would provide a pre-paid mailing label for return of the textbook. Obviously, I could not print the pre-paid mailing label due to being unable to log in.]

Eventually, I sued Amazon in Volusia County, FL small claims court and reached a confidential settlement agreement. However, due to my blog posts, I receive 2–3 emails per month from blacklisted Amazon customers who are receiving similar treatment from Amazon.

Amazon’s Conditions of Use state that they can terminate a customer account at any time. Amazon’s terms on gift cards state:

We reserve the right, without notice to you, to void Gift Cards (including as a component of your Amazon.com Balance) without a refund, suspend or terminate customer accounts, suspend or terminate the ability to use our services, cancel or limit orders, and bill alternative forms of payment if we suspect that a Gift Card is obtained, used, or applied to an Amazon.com account (or your Amazon.com Balance is applied to a purchase) fraudulently, unlawfully, or otherwise in violation of these terms and conditions. [Emphasis added.]

Just because customers agree to these terms by using Amazon gift cards does not mean the terms are lawful. In fact, the above terms are void according to California Civil Code, Section 1749.51. As we have seen, Amazon blacklists customers without explanation “due to the proprietary nature of their business.” Amazon is incentivized to blacklist customers with high gift card balances, and they act opaquely and without oversight in reaching these decisions.

A customer’s violation of Amazon’s terms does not automatically entitle Amazon to seize their gift card balance. When Amazon blacklists a customer, they make no attempt to refund all or part of the gift card balance, even if they suspect only a portion was obtained unlawfully or in violation of their terms.

Amazon customers can add multiple gift cards to their account balance, and a natural characteristic of gift cards is that they may come as gifts from third parties. An Amazon customer may not know the gift card they have received was, for example, purchased with a stolen bank card. If a bank customer were to deposit a bad check, the bank would not be entitled to seize the entire balance of their checking account.

Amazon acts as a bully toward blacklisted customers. Per their terms, binding arbitration and small claims court are the only avenues available for blacklisted customers to petition for redress (besides attorneys general, the Better Business Bureau, etc.).

In Mr. [Redacted]’s case, he has informed me that Amazon banned several of her customer accounts with gift card balances aggregating to approximately $3,400. It is not necessarily unlawful for an Amazon customer to have multiple accounts, and there are many legitimate reasons to accumulate gift card balances in the thousands of dollars. For example, a customer might purchase Amazon gift cards at an authorized seller, such as a grocery store, to avoid the possibility of debit or credit card fraud when shopping online. Another possibility is that a customer may purchase Amazon gift cards at a grocery store using a credit card such as Chase Freedom or Discover It, which frequently offer 5% in cashback rewards on purchases at grocery stores. If, during such a promotional period, a customer was to use their Chase Freedom or Discover It credit card directly on Amazon’s website, they would only earn 1% in cashback rewards, rather than 5% cashback rewards earned by first purchasing an Amazon gift card at a grocery store.

In addition, customers not familiar with Amazon’s practice of blacklisting customers may believe they are safeguarding their gift card by loading it to their account long before using it, to prevent others from illegitimately guessing or hacking the redemption code to fraudulently add it to their account.

Moreover, Amazon’s practices may be in violation of these federal and state laws:

  1. The CREDIT CARD ACCOUNTABILITY RESPONSIBILITY AND DISCLOSURE ACT OF 2009 (Public Law 111–24), Title IV, states that it is unlawful to sell a gift card that is subject to an expiration date. When Amazon blacklists a customer and refuses to honor their gift card balance, it may be construed as unlawfully causing the accountholder’s gift card balance to expire.
  2. Chapter 19.240 of the Revised Code of Washington additionally prohibits merchants from issuing gift cards subject to expiration dates, unless the gift card is issued as a donation to a charitable organization or several other exclusions that are not relevant to the Amazon gift cards in question.
  3. California Civil Code, Section 1749.6(a) states: A gift certificate constitutes value held in trust by the issuer of the gift certificate on behalf of the beneficiary of the gift certificate. The value represented by the gift certificate belongs to the beneficiary, or to the legal representative of the beneficiary to the extent provided by law, and not to the issuer. [Emphasis added]
  4. California Civil Code, Section 1749.51 states: Any waiver of the provisions of this title is contrary to public policy, and is void and unenforceable. Therefore, Amazon’s Conditions of Use and aforementioned gift card terms are void and unenforceable according to California law.

Given the above facts, I believe Amazon acts in bad faith, and should pay the gift card balance owed to Mr. [Redacted], or explain their position to the court. Based on my understanding, although pretrial discovery is not permitted in California small claims court, the court “can also order a defendant to do something, as long as [the plaintiff is] also asking for money in [their] claim” (http://www.scscourt.org/self_help/small_claims/small_claims_overview.shtml).

DECLARATION OF CUSTODIAN OF RECORDS
(California Evidence Code, Section 1561)

I, the undersigned, declare:

  1. I am the duly authorized custodian of records for the above information and statements received from AMAZON.COM, INC. and have the authority to certify the records.
  2. The quotations included hereto are true excerpts of records on file with RICHARD THRIPP described in the subpoena. Emphasis (bold text) is added where indicated in brackets. In certain places, explanatory text has also been added in brackets. (Additionally: Quotations are also on file with the Consumer Protection Division of the Washington State Office of the Attorney General; the Florida Department of Agriculture & Consumer Services File # 1509-37467 / MLH; and/or the Better Business Bureau of Alaska, Oregon, & Western Washington Complaint # 10830673.)
  3. The records were prepared by RICHARD THRIPP in the ordinary course of business at or near the time of the act, condition, or event.

I declare, under penalty of perjury, that the foregoing is true and correct.

Executed on April 24, 2018, in Ormond Beach, Florida.

___________________________________

RICHARD THRIPP

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that the above deposition is a truthful accounting of the facts. I have furnished copies by U.S. Mail to the Stanislaus County Superior Court and Amazon.com, Inc., this 24th day of April, 2018.

By: __________________________________________
RICHARD THRIPP, M.A.

Expert witness in regards to Amazon.com, Inc. customer blacklisting and theft of gift card balances.

Before Adjusting Capital Gains for Inflation, Try Interest on Savings Accounts

Recently, a proposal has been discussed by U.S. Treasury Secretary Mnuchin and President Trump of adjusting capital gains for inflation when it comes to taxation of those gains. This has rightly been criticized as a tax break for the rich, but what has not been widely discussed is the hypocrisy and inequity of not including savings accounts, certificates of deposits (CDs), Treasury bills and bonds, and corporate bonds, which yield “interest” instead of “capital gains,” in the inflation-adjustment proposal.

Although there are no legal restrictions preventing most Americans from investing in stocks (equities), about half do not. Reasons include more pressing financial concerns, fear of loss, and a lack of understanding of how stocks work. Therefore, adjusting capital gains for inflation will mainly be helpful to wealthier Americans.

Capital gains already have numerous tax advantages over earned income, such as:

  • No 15.3% payroll taxes (7.65% employee and 7.65% employer share)
  • If older than one year (long-term), the tax rate is much lower or even 0%
  • Long-term tax rate tops out much lower (20% instead of 37%) for high earners
  • You can choose when to incur capital gains taxes (when to sell)
  • Capital gains tend to be received by high-earners, who gain the most from these advantages because they are in high tax brackets

Presently, interest on savings accounts, CDs, T-bills/bonds, and corporate bonds is taxed at the same rate as earned income and short-term capital gains. Except certain corporate bonds, these types of investments do not yield any capital gains, but rather yield interest only. Thus, none of the above benefits of capitals gains apply. Americans, especially those with lower incomes and net worths, are more likely to put their money in savings accounts, CDs, and Treasury securities rather than stocks. Therefore, they miss out not only on the capital appreciation power of stocks, which is much greater than low-risk assets over the long term; they also miss out on preferential tax treatment that already exists. To add an inflation adjustment on top of this is ridiculous.

Some may quip that stocks do pay something similar to interest, in the form of dividends, which are taxed like earned income and short-term capital gains. This is false; for most “buy and hold” investors in index funds and many individual stocks, the vast majority of dividends are treated as “qualified” dividends which are treated not like interest, but as long-term capital gains. Again, investors in stocks get preferential treatment.

Each year, banks, the U.S. Treasury, and other firms must issue Form 1099-INT to report how much interest income you received in the prior tax year on savings accounts, CDs, T-bills/bonds, et cetera. However, we should not forget that savings accounts typically pay low interest rates—sometimes as little as 0.03% annual percentage yield (APY), with the best accounts paying no more than about 2.0% APY. If we were to adjust savings interest for inflation, which is around 2.4% presently (or 2.9% including food and energy), this would be a loss rather than income! If we adjust capital gains for inflation, shouldn’t we adjust interest too?

Logisitcal challenges aside, if we were to go a step further, offering an above-the-line deduction (like we do with student loan interest) for lost purchasing power on Americans’ savings, capital gains would still be far too advantaged.

Due to the unfairness of how interest is treated, with no consideration of inflation, some have dubbed saving money a suckers’ game. Although a majority of Americans do not understand this, investing, on the other hand, is a winners’ game. The prudent step would be for the government to begin adjusting interest income for inflation but not capital gains. Even then, investors would still be receiving highly preferential treatment as compared with savers.

The Manifesto of the Financial Educator

As a financial researcher and aspiring financial educator, I’ve been thinking at length about the principles behind good financial teaching. These five ideas are by no means new or original. However, they are research-supported and not yet mainstream.

1. Behavior Under Management

Know when the student is not ready.

This is straight from Andy Hart’s podcast and conference, with support from a wealth of research in behavioral psychology, economics, and personal finance. Emotion, perception, knowledge, and experience all play an important role in why people make bad financial decisions.

It is widely accepted that younger people should be fully invested in stocks, because their time horizon is long. As they get older, volatility and profits should both be suppressed by divesting stocks into safer, less profitable assets such as bonds. However, young people commonly freak out when there is a bear market, selling their investments and even losing part of their principal. This is traumatic and may result in them never investing in stocks again, which is a worse outcome than if they had invested later in life with greater knowledge, experience, and resilience.

It is not fair to a student to advise an objectively superior course of action when it will lead to financial ruin because the student is not ready.

2. Educate in Arithmetic and Statistics

When the odds are in your favor, it’s only “gambling” if the consequences are disastrous.

Recent evidence suggests that mathematical education may be more important than financial education. The ability to perform mental computations is important, as well as skill with picturing compound interest and percentages. Understanding risk and reward over time is critical. Anyone with a complete understanding of gambling mathematics should know that as you gamble more, you get closer and closer to a guaranteed loss of money.

Investing in the whole global stock market, on the other hand, is neither speculation nor gambling because the odds are in your favor and the consequences of loss are temporary. Although the market declines in about 25% of given calendar years, over longer spans it almost surely increases from the starting point.

Insurance companies make money because they pay out less money than they take in. On average, the odds are in their favor. For any one individual or family, however, the consequences of losing the bet are disastrous. This is why it is wise to purchase health insurance, term life insurance, auto insurance, et cetera. You are insuring against uncommon yet disastrous events. Nonetheless, these disastrous events are much more likely to occur than winning a large lottery jackpot. On the other hand, purchasing insurance against minor losses, like a SquareTrade warranty or collision insurance on a car, is only necessary if these items are critical to you and you do not have the funds to replace them.

3. Make Choices Simpler

Don’t do business with businesses that put bad choices on the table. (Unless you are beating them at their own game.)

People often ask why one should pick Vanguard over Fidelity, Charles Schwab, or another firm for directing their investments. Although Fidelity and Schwab do offer low-cost index funds and arguably offer superior customer service, they are also determined to sell you on products and services that are very bad for your financial health, such as actively managed investments with high management fees.

It is an unpleasant and cognitively taxing experience to be required to repeatedly decline detrimental options. The extended warranties that are sold at the checkout counter at Best Buy are an awful deal. Likewise for trip “insurance” from your airline and GoDaddy’s upsells of inferior hosting services and over-priced options when all you want to purchase is a simple Internet domain name. It is bad enough when a business puts bad choices on the table; aggressive sales tactics are the coup de grâce.

This is why a hard rule of using cash instead of plastic is effective and beneficial for most consumers. The exception is if you are a “travel hacker” beating the credit card issuers at their own game. If you have to ask, you’re not a travel hacker. Simplifying the equation by avoiding the potential for making bad choices is worth losing a few benefits that are, by comparison, small. In some industries, all the major players violate this rule. However, when there an alternate option is available, it should usually be preferred (e.g., Vanguard, cash or debit cards instead of credit cards, etc.).

4. Inculcate a Habit of Inquiry

The squeaky wheel gets the grease.

There is plenty of information available easily via web search. For example, you can easily learn about investing, retirement accounts, or strategies for convincing your bank to waive an overdraft fee by searching Google. However, many people are not in the habit of seeking information nor asking for special consideration from a lender, bank, et cetera. There are differences between how subject-matter experts and novices seek information; novices may not know where to begin, and are typically unfamiliar with the jargon of personal finance, insurance, taxes, credit cards, mortgages, student loans, credit-reporting bureaus, and more. Therefore, it is unfair to blame them for failing to seek out information. Instead, we should educate them in the basics and encourage them to build a habit of inquiry, so they less likely to be shortchanged in their financial dealings.

In addition to educating others, we should lobby for laws and regulations that compel employers and financial institutions to conduct business in ways that do not unfairly disadvantage the non-wealthy (e.g., comprehension rules), and advocate for prosocial behaviors among employers, financial institutions, corporations, and governments that benefit the poor. For instance, it is unfair that many government benefits are not received by the most needy, due to being difficult to claim.

5. Focus on Long-Term Lifestyle Strategy

But, give tactical advice when appropriate.

Reducing bills, increasing income, and changing one’s habits is important. There are many forums and other websites about living frugally. In some ways this overlaps with Item 4; for example, one can save quite a bit on a car, phone or cable bill, rent, or terms of debt service by inquiring with sellers, service providers, landlords, and lenders. Responsible financial educators should encourage learners to (a) reduce expenses as a way of life (e.g., smaller living space, more roommates, no dining out, etc.), (b) focus on significantly increasing income by leveraging education, skills, et cetera, and (c) eliminate debts, save, and invest.

Financial education appears to be more effective when it either focuses on norms and general principles or is given tactically (i.e., “just-in-time“). The best time to tell someone how to write a check is immediately before they need to write a check. Financial advisers can serve as financial educators by offering key information and advice soon before significant financial events such as shopping for a house and mortgage. On the other hand, if this advice is offered many months or years in advance, it is neither remembered nor followed.

Optionally/additionally as a grammatical alternative to and/or when the prior item(s) are essential

The grammatical construct “and/or” is frequently criticized for being unnecessary and/or ambiguous.

As a logical operator, when used in a list of two things (e.g., rice and/or beans), it implies that it is acceptable to have:

  • Item 1
  • Item 2
  • Items 1 and 2

However, having no items is unacceptable.

When used in a list of three things (e.g., rice, beans, and/or salsa), it implies that it is acceptable to have:

  • Item 1
  • Item 2
  • Item 3
  • Items 1 and 2
  • Items 1 and 3
  • Items 2 and 3
  • Items 1, 2, and 3

However, having no items is unacceptable.

This, obviously, is quite vague. Some have suggested just using “or” instead of and/or. However, “or” is also ambiguous in common language. This may be why APA style tolerates and/or, neither endorsing nor forbidding it.

Due to its vagueness and a lack of viable alternatives, and/or is used in many situations where it does not apply. One common instance is using and/or when you really mean to say “this item can be added, but the prior items are essential.” To address this, I propose a new grammatical construct: optionally/additionally.

Optionally/additionally has all the slashy goodness of and/or, but an air of sophistication. Sure, you could just say “and optionally,” but this isn’t strong enough at conveying that the subsequent item or items are optional add-ons, while simultaneously conveying that the prior item or items was/were essential.

For instance, when suggesting how to invest in equities, I would advise investing in a mutual fund of the whole U.S. stock market and optionally/additionally the whole international stock market (encompassing the whole world except the United States—the US is about 50% of the global market by market capitalization and all other countries sum to about 50%).

I would not want to say “the whole U.S. stock market and/or the whole international stock market” because the first item is essential, while the second item is not (depending on how bullish you are on the United States).

Of course, there are index funds that combine both the U.S. and international markets. For the equities portion of a portfolio, it would be fine to suggest investing in the whole U.S. stock market or the whole world stock market, but if we replace “whole world” with “international” (all other countries except the US), neither “or” nor “and/or” are acceptable, because both imply the first item is optional rather than mandatory. This is an example of when the optionally/additionally construct is useful.

I did not do extensive research into whether someone else has addressed this conundrum of grammar and logic. Please reply if you know of such sources. A Google search shows that optionally/additionally has been used three times before, but without elaboration on the grammatical or logical implications:

  1. On 2010-03-14, “GrapefruiTgirl” made this statement on the LinuxQuestions.org forum: Optionally/additionally, as your regular user, enter your ~/.fonts folder (or create it of there is none) and repeat the above three commands as regular user.
  2. On 2010-04-25, Michael S. from Vienna, Austria made this statement on TripAdvisor: Take the first train to Innsbruck which is a nice little city surrounded by majestic mountains. The city has a small but fine city center and you can easily and quickly go up to 2.300m above sea level by ropeway. Ex Innsbruck you could optionally/additionally visit the Karwendel Area with places like Seefeld and Mittenwald. The Karwendel Railway is known for spectacular views. Prepare for a long day but it is feasible!
  3. On 2016-11-15, “horst” made this statement on the application programming interface (API) discussion board in the ProcessWire content management system (CMS) forum: Optionally / additionally interesting in this regard maybe the weighten option of Pia here.

From these examples it appears optionally/additionally is most relevant to fastidious Austrians and computer programmers, but its slashy goodness remains undiscovered by the rest of Googleable humanity. A search of additionally/optionally reveals more than 20 uses, but I prefer emphasizing the optionality before communicating the supplementary nature of the subsequent items (and, consequently and implicity, the necessity of the preceding items), so additionally/optionally is of less interest to me.

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