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The end of an institution

Jonathan Clements

TEXT OF INTERVIEW

Tess Vigeland: If Jonathan Clements took the Fed's quiz, no doubt he'd ace it. The Wall Street Journal columnist has been writing about personal finance for the last decade and a half, but starting Monday, he's putting down his pen to become director of financial education for Citigroup.


Vigeland: Jonathan Clements, before we say farewell, let's say hello and welcome to Marketplace Money.

Jonathan Clements: Great to be with you Tess.

Vigeland: You know, throughout the show today, we've been mentioning this quiz that the Federal Reserve gave to high school students across the country and the bad news, of course, is that on average, they got less than 50 percent of it right. You've been writing about these things for years and I'm curious, do you think most adults would do much better?

Clements: Unfortunately, I fear not. I do think the general level of financial literacy has increased over the past 20 years. I mean, people have basically been compelled to get more involved with their financial life just because of the disappearance of traditional company pensions and the emergence of these 401(k) plans where you have to decide how much to save and where to invest the cash, but still, even with that, I'd have to say the level of financial literacy in the U.S. is not great and we have two pieces of proof of epic proportions. First, we had the tech stock bubble and the subsequent collapse and the more recently, we had the real estate boom and subsequent collapse. Clearly, people are not making entirely rational investment decisions.

Vigeland: Why do you think issues of personal finance are so difficult for many of us to grasp?

Clements: The investment problem is not difficult. You save regularly, you buy a diversified portfolio, you repeat as necessary. 30 years later, you retire with more money than you could possibly imagine. And yet people cannot do it. We know that people make all kinds of behavioral mistakes: they're too short-sighted, they struggle with self-control, they don't save nearly enough and I think a lot of it has to do with evolutionary psychology. We are the great, great, great, great grandchildren of cavemen and women who were able to survive and reproduce because they focused relentlessly on the short-term. They weren't thinking about retiring 30 years hence; they were thinking about how they were going to survive until tomorrow.

Vigeland: You wrote 1,009 columns. Were there any trends in personal finance that surprised you either when they came along or when they went away?

Clements: One of the things that I tell people is there are basically only 20 personal finance stories, which means that I've written each of those stories 50 times each and this, of course, is one of the reasons why I thought it was time to give it up. I mean, eventually readers were bound to notice. In terms of trends, what constitutes prudent investment advice has not changed over the past 13 and a half years. What you should have done in 1994 is the same thing you should be doing today in 2008. It's just that the market's changed. Something gets hot, everybody gets overly enthusiastic about it. This year it's commodities. A couple of years ago, it was real estate. We get this continuous new scenario thrown up by the financial markets and we all get all hot and bothered about it, but what you should be doing stays the same. You should be saving regularly, putting money into that 401(k). The answers don't change; it's just the scenarios that we're dealing with.

Vigeland: What's the reader reaction been to your departure?

Clements: I have had 1,800 e-mails in response to my last column in the first 24 hours after it appeared. I started to go through them and there hasn't been one negative one so far. One of the things that's really interesting to me is that a lot of people feel like they know me personally and over the years I've written a lot about my two children Henry and Hannah and how I've tried to teach them about money and I think that's a big reason. People feel like they can relate to the struggles I've had trying to teach my kids about money and so, as a consequence, they feel like I'm a friend and that's nice to know. It really has been very touching

Vigeland: You're heading into a new job -- you're leaving journalism entirely -- and I'm sure you've given plenty of advice over the years in your columns about how to tell when you're ready for a new job. Tell us what a personal finance columnist does to prepare for a career change.

Clements: Well, I've got to tell you Tess, I knew it was time to move on when people started referring to me as an institution. I've got to tell you, there is not a single child in America who gets up in the morning and says, "Mom and Dad, when I grow up, I wanna be an institution!" Yes, it was time to move on and I feel like this is really a good moment. I have written just over a thousand columns, I've said pretty much everything I want to say, so better to quit while I'm at the top of my game. In terms of why I'm moving on, I think change is good. At some point, you need to have this sense of progress that we seem to love so much and I'm hoping this change will give me that.

Vigeland: Well Jonathan Clements, good luck on your new endeavors and thanks for coming in to chat with us and thanks for all your advice and words of wisdom over the years. I think a lot of people, including myself, will miss them.

Clements: Sure thing Tess. Happy to do it.

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