By your age Peter Costello had become Australia's longest-serving Treasurer, Kevin Rudd had become the most-popular opposition leader since Whitlam, and Tony Blair had committed troops to Iraq.
Footballers do their best work much younger - in their 20s, mathematicians and poets peak at around age 30, chess players in their mid-30s and dictators in their early 40s.
What’s left for you?...
Getting the most out of your bank.
I mean it. The US National Bureau of Economic Research have just published a study entitled The Age of Reason: Financial Decisions over the Lifecycle.
Its finding? Americans keep getting ripped off by their banks until about the age of 53.
Examining 75,000 home loan contracts the researchers found that very young and very old borrowers paid an interest rate as much as one complete percent higher than did borrowers in their early 50s.
For car loans, the young and the old pay a rate one-quarter of a percent higher.
When switching credit cards the trick is to move across your balance to the new card with a low introductory rate and then not use it. That’s because the payments you make go first to paying off the (low interest) transferred balance, and only later to paying off any (high interest) new purchases. The best strategy is to spend with your old card. Americans in their 50s work this out quickly. Younger and older Americans take longer.
It s much the same with credit card late fees, over the limit fees and cash advance fees. Careful planning can avoid the lot. Young Americans and very old Americans don’t do it. Americans in their 50s do, and they are the least likely to pay fees.
It isn’t because Americans in their mid-50s have more time to work these things out. If that was the case, Americans in their 60's and 70's would do even better, and they do worse.
It has to be because the older we get the more wily we get about the way banks try to take our money. When we get too old we probably lose the computational ability to fight them.
So enjoy your 50’s. You are the most financially astute you’ll ever be.
Sumit Agarwal, John C. Driscoll, Xavier Gabaix, David Laibson. The Age of Reason: Financial Decisions Over the Lifecycle. MIT Department of Economics Working Paper No. 07-11, March 15, 2007
2 comments:
We have to live with the government-endorsed oligopoly of "the four majors" in Australia. If it were not for the non-bank lenders who saw the opportunity and entered the market, we'd have been in an even worse state now... and to think various governments have played with allowing the four to pair up to reduce it to TWO!
The only REAL way to beat them is to join them. If you own just $25k of bank shares (which with margin lending you could do with just $7.5k in equity) you will become a net beneficiary of high bank fees in this country.... that is why the wealthy never complain about high bank fees. And you will always be better off with even $1k to $5k of bank shares vis-a-vis keeping a similar minimum balance in a non-interest-bearing bank account in an attempt to avoid fees.
Graeme Harrison (email: prof at-symbol post.harvard.edu)
Also, it is NATURAL that people in their 50s do best in negotiating with banks as:
(a) They are at their peak earning capacity, and hence good quality borrowers, so banks fall over trying to get these people (though they do not borrow as often as young people). In comparison, the just-married 20yos are likely to have financial glitches, from starting with low equity in a home, to having kids..
(b) It is far more likely that a 50 yo person will have 'other assets' with a selected lender, whereas a 20yo is likely to not have much in the way of 'controlled financial assets' (ie they may have superannuation but not a high bank balance). Hence it is natural that people with other relationships with a bank will insist on a best possible interest rate from their bank.
(c) It is natural as the article suggests that people discover by their 50s that even the most inflexible institutions 'do deals' to get the business, so may be the 50yo also 'asks the right questions', compared to a 20yo who is just pleased to find ANYONE who will lend to them.
Graeme
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