If you want to invest profitably and safely, what you don’t do with your money could be more important than what you do...
17-Aug-2012 •Research Desk
The lament that people, by and large, do not know what to do with money is extremely common. Government regulators, the media, including this website frequently point out that the lack of financial literacy is widespread, and that few people manage to make optimum use of their savings and investments. It is generally assumed that that this financial literacy must take the form of knowing what to do with money. That much seems obvious. However, this may not be true. When we observe the actual ways in which a good proportion of people are actually mismanaging their savings, then it seems that the problem lies elsewhere. It's not so much that they don't know what to do with their money, but that they don't know what not to do with it. We are not just playing with words here. Knowing what not to do with money is not just the inverse of knowing what to do with it. It's an entirely different type of financial literacy and we think it's far more important than the other kind.
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