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Home > Personal Finance > Governments Offer The Worst Financial Advice

Governments Offer The Worst Financial Advice

January 31st, 2012 Leave a comment Go to comments

When you research personal finance, it becomes evident that this topic is not exactly a black/white science but more of a grey art. For example, typical financial advice would recommend that you don’t, say, use a credit card to start a business. But, I know a few people who did use a credit card as a tool to start a business successfully. It comes down to your personality, it can work for some people. The important point is that the person was trying to ‘learn how to fish’ so it isn’t necessarily a bad idea to take such a risk. Perhaps,though, this is not for the average person.

I can argue that some things are bad advice, say, using a home equity loan to fund consumer purchases that might be open to legitimate question to others. But, I think there are some things that really are bad advice, no matter how you look at it. Here are a few things that I found from governments, no less, that are truly bad advice…

Lottery As A Retirement Plan

Lotteries are run by state governments. There are a few really big games which are multi state lotteries, MegaMillions and Powerball. The jackpots on these two games can get quite large because the odds of winning are so low. It’s because of these low odds that they frequently rollover creating the opportunity for a better than odds bet. I previously wrote about why you should take this bet when it occurs because it’s one of the few cases in legalized betting where you can get a better than odds bet (the payout is larger than the odds).

However, when you go to the MegaMillions website,  you see what I have copied here below. They offer up the lottery as a means to Save For Retirement or Buy a Dream Home, among other things! Are they kidding, does anyone actually think that the lottery is a means to achieve these goals?

I wonder if anyone actually believes this. I hope not. This is truly bad advice.

Social Security Is A Piggy Bank

You have to be a kid to get this advice, but no matter it’s still not only bad advice it’s an outright untruth. On the ‘KidsPlace’  at the Social Security website, they offer simple information to explain to kids what Social Security does, I’ve copied a sample of it below here.

This sounds great. It makes you think that when you send your FICA taxes to the Federal Government, they save the money in a ‘piggy bank’ with your name on it. This is a misrepresentation of how the program actually works. There is no piggy bank, nor is there even any kind of contract or asset backing up any future benefit. It’s a crap shoot, there is no ownership of any ‘piggy bank’, or the money in the piggy bank by the taxpayer.

So, don’t believe it when they tell you that there is an account with your name on it, there isn’t. Don’t plan your financial future on this benefit, it is prudent to reduce or eliminate it from your retirement planning because of inevitable changes (read lower benefits) that will be made in the future.

Even the personal finance site available from the Department Of Labor at, which a good site on personal finance otherwise, doesn’t mention anything about Social Security in the retirement section. That says it all.

A Home Builds Wealth

At the Housing and Urban Development website, they offer the advice that buying a home is the ‘American Dream’ and that you will create wealth by making such a purchase. There are reasons to buy a home, but building wealth isn’t typically one that you should use. Most people buy homes that cost more than equivalent rent, which means that they are spending extra money that could be used to buy other assets that actually create wealth.

The quasi-government website has good information, including a Rent/Buy calculator that can help you determine if your home purchase is better than renting (this is a case where buying can help to create excess cash to create wealth). And of course, this strategy will only work if you stay in the home long enough to get the benefits of the long term cost savings.

Some Good Sites

On the other side, there are some good websites and information available online. Personal finance is one area where there isn’t agreement about how to setup your own finances. There are some equally bad personal blogs and other private market sites that offer advice that either is bad or maybe should be qualified about who it applies to.

There are also good financial information sites available by various government agencies. These are a good source of general information in different areas. For the most part these offer specific details about each topic, but are lean in best practices or real world advice. Here are a few examples:

The best advice is to read information from many different sources and draw your own conclusions about what will work best for you.

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  1. February 3rd, 2012 at 18:29 | #1

    I never understood the concept of governments getting involved in lottery, which is a form of gambling or, to take my state, alcohol and cigarettes.

    Don’t they more pressing matters to attend to?

  2. February 4th, 2012 at 07:40 | #2

    MoneyCone, thanks for stopping by. The lottery could be argued is an acceptable way for governments to raise revenue. It’s voluntary and provides entertainment. The sales job though like i mentioned is way off.

  3. February 4th, 2012 at 13:40 | #3

    Unfortunately, we all seem to know a few individuals that subscribe to the “Lottery as a Retirement Strategy” philosophy. It does seem a little bit perverse and twisted that the government is perpetuating this myth. Common sense and responsibility seem to have gone out the window.

  4. February 5th, 2012 at 12:12 | #4

    @Miss T @ Prairie Eco-Thrifter
    Right on. One can hope that all of these pf blogs out there can help people make good decisions.