Ep. 58: How good is popular financial advice?

When most Americans look for financial advice, they don't turn to academic journals for guidance. Instead, they’re likely to get information from financial personalities like Dave Ramsey or Robert Kiyosaki, whose books have sold millions of copies. But how good is that advice? In a paper in the Journal of Economic Perspectives, author James J. Choi looked through 50 of the most popular personal finance books on the market and found that they sometimes deviate from the advice of economists. However, that doesn’t necessarily mean the popular authors are wrong. Choi says that while popular finance books may occasionally give bad advice, economists may learn something deeper about how people make financial decisions and the constraints they operate under if they take the popular authors’ prescriptions more seriously. Choi recently spoke with Tyler Smith about popular financial advice on a range of issues, such as savings rules and mortgage types, and how closely this advice matches modern economic theory.