I just noticed an article by Andrew G. Biggs On MarketWatch regarding whether poor people should even bother putting away money for their retirement. Biggs contends it isn’t really important because statistically retired people are in better financial shape than the working poor due to Social Security. I think he’s probably right about the statistics. I think Biggs is missing the bigger picture.

Biggs also note the “auto-IRA” programs being introduced by states such as California, Oregon, Illinois and Connecticut wherein 3%-5% of earnings would be invested in an IRA for the worker. Workers could opt-out of the program. The opt-out disclaimer makes this an inoffensive idea from which the worker would benefit. Should it become mandatory, the idea would lose all merit in a free market society.

The area of contention I have with Biggs’ assertion that the poor’s saving for retirement lies in what I believe are the main reasons many people remain in poverty and those reasons don’t really have much to do with wages earned. They have to do with ignorance of how money works and how to budget money.

The poor are directly in the crosshairs of some businesses and the economy in general. Borrowing money in the form of credit card debt is far more expensive for the poor. Interest rates are far higher. The same is true for any other borrowed monies. This could be rectified via more compassionate business practices and is no fault of the poor. Their shortcoming lies in the ways in which they spend the money they do have.

Some of the problem lies in where they chose to shop and what they chose to buy. It has been my observation that poor people are much more likely to do their grocery shopping at convenience stores and other outlets which charge more for the convenience of purchasing smaller quantities at a time. They may purchase what is needed for the evening’s meal rather than shopping on a weekly or biweekly basis at a discount supermarket. Their choice of items may include more sugary and fatty snacks, candies and soft drinks than more affluent buyers may choose. I note the obesity problem among the poor as being more prominent than among their middle class and more affluent counterparts. My guess is those issues go hand-in-hand, as do the needs and costs of associated medical care.

Budgeting for retirement is a good start in learning how money works. Guidance on budgeting, whether derived from a governmental source or charitable organizations, would go a long way in allowing the poor to raise their standard of living. I know many people whose paychecks are humble, yet their lifestyles are very comfortable. There are always the people who strike it rich by winning some lottery, just to find themselves in the poorhouse months later due to poor money management.

As to those folks who see themselves as victims of the rich, no amount of instruction or charity or taxation of the rich or middle class will solve their poverty. Unfortunately, their numbers rise as politicians promote the unworkable idea that the poor have little or no personal responsibility for their own circumstances. Some of the folks we elect are those  who truly promote poverty.