> even though the utility function doesn't make a ton of sense.
What if it never makes sense?
One thing I didn't realize until embarrassingly too late in life is that savings should only function as a buffer for emergencies. Anything else is just burning your money since there haven't been savings accounts that consistently beat inflation even in the US.
I was fed these same myths as a kid, and earnestly believed that part of success in life was to have a huge savings account one day. I remember well all those "power of compound interest" talks in grade school, about how working hard and saving was the path to wealth. But that's all a complete myth.
The real irony is that anyone who has built themselves serious amounts of wealth typically does so by making high risk/high reward choices. Teaching kids to play it safe and building saves, different desires to the future etc. doesn't make any sense in the world we live in. It's ultimately bad advice. No one I know who ended up very successful did so by living conservatively and within they're means. They're people who aggressively pursued improving their conditions, often times because they were forced too precisely because they didn't have a savings.
The lesson of "save money, life within your means and make conservative choices" sounds nice, but in the world we live in today this is a recipe for short terms austerity and long term decline.
> that anyone who has built themselves serious amounts of wealth typically does so by making high risk/high reward choices.
You have the logic backward. If it was "typically, anyone who made high risk/high reward choices has built themselves serious amounts of wealth", it would be good advice, but what if most of those people failed terribly? An example is pursuing a career as an artist/sportsman which are common high risk/high reward aspirations of children which most people fail at.
I also had that same late lesson in saving being useless. Luckily, I learnt it by buying a house which appreciated fast and showed what a disaster savings would have been.
> Luckily, I learnt it by buying a house which appreciated fast and showed what a disaster savings would have been.
The better way to learn this is to be able to look at a graph like this: https://inflationchart.com/spx-in-m3 understand it, and make an informed decision taking in to account your personal risk tolerance.
> No one I know who ended up very successful did so by living conservatively and within they're means. They're people who aggressively pursued improving their conditions, often times because they were forced too precisely because they didn't have a savings.
This also seems like bad advice. You can aggressively pursue higher earnings and simultaneously spend conservatively (on anything that does not contribute directly to higher earnings). You seem to be setting up a false dichotomy.
That said, I agree that at least in free market economies, high risk / high reward + tremendous luck is a requirement for extreme wealth generation.
I don't think people really mean savings accounts when talking about saving money consistently instead of spending it as an adult. Same goes for compound interest. Regardless, even just putting it in a savings account surely is not "burning your money" if the alternative, spending it directly, brings little utility.
I knew a guy who had saved his way to millionaire status when he retired. His salary was in the high 5 figures. He never bought anything, lived like a hermit, and just socked it all away in a savings account (back when savings accounts earned decent interest).
Kind of an extreme way to live but it used to be possible.
What if it never makes sense?
One thing I didn't realize until embarrassingly too late in life is that savings should only function as a buffer for emergencies. Anything else is just burning your money since there haven't been savings accounts that consistently beat inflation even in the US.
I was fed these same myths as a kid, and earnestly believed that part of success in life was to have a huge savings account one day. I remember well all those "power of compound interest" talks in grade school, about how working hard and saving was the path to wealth. But that's all a complete myth.
The real irony is that anyone who has built themselves serious amounts of wealth typically does so by making high risk/high reward choices. Teaching kids to play it safe and building saves, different desires to the future etc. doesn't make any sense in the world we live in. It's ultimately bad advice. No one I know who ended up very successful did so by living conservatively and within they're means. They're people who aggressively pursued improving their conditions, often times because they were forced too precisely because they didn't have a savings.
The lesson of "save money, life within your means and make conservative choices" sounds nice, but in the world we live in today this is a recipe for short terms austerity and long term decline.