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The Day the President Gave Us His Financial Advice

On Wednesday, while we were attending the first-of-its-kind summit of financial writers and editors at the White House, President Barack Obama made a surprise appearance and shared with us his core personal finance beliefs.

His advice will seem basic, but at a time when the average U.S. household debt is 114% of household disposable income, it's worth reiterating the basics.

Save, and earn interest on those savings
The president recalled the advice he learned from his maternal grandmother, who worked her way from being a secretary to serving as one of the first female vice presidents at the Bank of Hawaii (NYSE: BOH  ) . He said, "Save a little bit out of whatever you're earning, and the magic of compound interest applies."

The president also emphasized "spending discipline," indicating that we're emerging from a time when we had a bubble at every level -- governmental, corporate, and consumer. "What applies to the nation as a whole applies to individuals … spend less, save more," Obama said. (See "From the White House: What's Going On With the Economy" for our coverage of economic and policy issues from the summit.)

Investment vs. expenditure
Still, the president was clear to make the distinction that not all spending is wasteful.

President Barack Obama drops by the Personal Finance Online Summit in Room 430 of the Eisenhower Executive Office Building, June 8, 2011. (Official White House Photo by Pete Souza.)

Borrowing for things we don't need is a problem. On the other hand, making smart investments is crucial. On the national level, Obama believes that spending on schools, clean energy, and infrastructure is critical for long-term competitiveness. It remains wise to spend on things that will improve productivity in the long run.

The same is true for Americans at the household level. Education is not cheap, for example, but the president believes it can be an investment in anyone's future.

Obama said he was sympathetic to kids today who are graduating college in a tough economic climate. When he and the First Lady graduated from law school, they had combined debt of $120,000. Still, they were lucky to be entering the workforce with good jobs, and (clearly) that investment paid off for them.

Save. Earn interest on those savings. Be a disciplined saver. Understand the distinction between investment and expenditure. At a time when many Americans are struggling not only with financial hardships but simply understanding basic financial concepts, these four pillars bear repeating, no matter how obvious they may seem. managing editor Brian Richards also stands by his most basic money rule: Don't buy stuff you can't afford. He doesn't own stock in any company mentioned in this story. Follow Brian on Twitter @brianlrichards. The Motley Fool has a disclosure policy.

Read/Post Comments (34) | Recommend This Article (23)

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  • Report this Comment On June 10, 2011, at 4:57 PM, timeinthewind wrote:

    It is good fundamental advice although I am sure his grandmother truly meant interest as one would receive in a banking product (savings account, CD, etc) where the principal was completely safe. It's been a very long time since one could earn interest that could even keep up with inflation that way.

  • Report this Comment On June 10, 2011, at 11:46 PM, Frankydontfailme wrote:

    And since Obama deems a mighty military one of the key things to borrow for... I should use my credit card to pay for an illegal (analogous to his unconstitutional war) full auto silenced mp5sd5, with no intention of paying it back. And then rob a gas station (libya).

    Anyway, his financial advise is fine. His actions are ludicrous.

  • Report this Comment On June 11, 2011, at 1:16 PM, TBYZ wrote:

    As with any politician, when their lips are moving, they're probably lying . . . and so is the President. You cannot trust someone who gives such sound, moral advice and then does what he does in regards to shafting GM investors, nationalizing industries and selling America off one slice at a time. His policies suck so his advice should too . . .

    What would you have expected him to say ? . . .

    "you guys can yack all you want, we are destroying the American economy and making this country what my mentors, advisors and my main backer, Mr. Soros into a disaster"

  • Report this Comment On June 11, 2011, at 3:58 PM, jimdog wrote:

    Up next: Rep. Anthony Weiner lectures us on Internet social networking as a means of career enhancement.

  • Report this Comment On June 11, 2011, at 6:28 PM, richie54 wrote:

    Weiner For President!

  • Report this Comment On June 11, 2011, at 7:14 PM, AsturiMan wrote:

    Ditto to the above comment. Really sad when Motley Fool has to suck up to anti-capitalist/pro-union Hussein and his "advice". Any person with a pulse and basic common sense could have provided the same "advice." WTF Motley Fool?

  • Report this Comment On June 11, 2011, at 9:59 PM, ershler wrote:

    I think conservatives are even bigger whiners than liberals. Suggesting something other than laissez-faire capitalism may have some merit is equivalent to sodomizing their children. If we could harvest all the crap coming out of the Republican and Democratic parties fertilizers prices would plummet since it is both plentiful and rich.

  • Report this Comment On June 11, 2011, at 10:39 PM, TMFBrich wrote:


    This piece is decidedly non-political. Relaying what he said is not the same as sucking up. Is your use of quote marks around the word advice meant to indicate that you think it's bad advice? Basic (which I describe it as) doesn't equal bad.

    -Brian Richards

  • Report this Comment On June 12, 2011, at 12:49 AM, Frankydontfailme wrote:

    Sure TMFBrich.

    You have to admit though, an article like this written without irony makes any person knowledgeable of our current economic crisis gag.

    Technically you are right nonetheless....

  • Report this Comment On June 12, 2011, at 1:13 AM, xetn wrote:

    Obama wouldn't know a good investment if it hit him in the face. (The one exception is his becoming president and having all those perk and not having to be patted down by TSA goons) That is an investment that pays and pays. All at our expense.

    But ask your self, why does Obama not use Obamacare or contribute to Social Security or Medicare? There is a good reason why most (if not all) federal government employees are opted-out of all of those "benefits".

  • Report this Comment On June 12, 2011, at 4:53 AM, MrChapel wrote:

    Not only federal employees are opted-out. How about all the waivers that keep being extended? Wasn't Rep. Weiner requesting for the City of New York? How about the ones extended to SEIU and other powerful democrat-backing unions?

    With regards to education investment, isn't the US one of the biggest spenders on education?

    Yet, the results are dismal, to put it mildly. Literacy, math, history, geography... All seem to be totally forgotten. Detroit has a functional illiteracy level of 47 percent and it is by no means the only place. California is now teaching about gay/lesbian/tg history. Put a dozen HS kids in front of a map of the world, they'll be hopelessly lost.

    None of that rhymes with the president's claim of 'Winning The Future' (which btw, anyone with an ounce of common sense would know is a stupid acronym, easily hijacked) by putting more money into education.

    Maybe he should look into what kind of curriculum is being foisted upon children and go back to promoting things like math, language skills, geography, history, hard sciences, you know, the things people need to get a job, to do research, to be productive?

    Maybe TMF should do an article on what politicians (not only the current president) say publicly and their voting record. I think you'll be amazed how much talking points they spout, like he's doing here, and how their voting record totally disagrees with those points they purport to champion. Like the hot dog who just got caught with his pants down for what is essentially internet stalking but otoh is co-sponsor of a bill who tries to fight against it, to protect 'the children'.

    I call that hypocrisy.

  • Report this Comment On June 12, 2011, at 1:58 PM, smartmuffin wrote:

    I would suggest that an article about a politician making a statement that intentionally omits the obvious fact that he himself regularly goes against this statement IS in fact political, if only by omission.

    To characterize a statement as reflective of his "core beliefs" when his observed behavior does the exact opposite constanly is shoddy journalism at best.

  • Report this Comment On June 12, 2011, at 2:50 PM, TMFDiogenes wrote:

    There are flaws with out education system besides its underfunding, but c'mon seriously -- those links discuss total spending on education in dollar amount, which is absolutely silly.

    We spend 5.5% of GDP on education, which puts us in the middle of the pack as compared with the rest of the world (lower than Ethiopia, but higher than Mongolia.)

  • Report this Comment On June 12, 2011, at 7:49 PM, rfaramir wrote:

    "Save a little bit out of whatever you're earning, and the magic of compound interest applies."

    Mr. President, because you are printing money (as your predecessors did), interest rates are so low I cannot live long enough for compound interest to do anything for me in a savings account. In fact, real rates are negative. 0.25% interest would take 288 years to double my investment. Stop the printing presses, please.

    "What applies to the nation as a whole applies to individuals … spend less, save more,"

    No preaching to us is needed, Mr. President, rather you need to listen to your own words. If we lived like you do, we'd spend 66% above our income and borrow to keep up the spending: on an income of 6 Billion dollars a day, borrowing 4 Billion a day to spend 10 Billion a day. Turn it around: "What applies to individuals, living within or below your means, should apply to government." You know what your tax revenue is (pretty closely), cut spending to match it, no matter what it takes. And stop making spending promises you cannot keep, so you won't feel like you're breaking promises when you stay within your budget.

  • Report this Comment On June 12, 2011, at 7:57 PM, Bert31 wrote:

    Studies show that an increase in edcuational spending DOES NOT result in higher achievement scores. Or is the point that we should just spend more anyway so we are higher than Ethiopia?

  • Report this Comment On June 12, 2011, at 7:59 PM, Bert31 wrote:
  • Report this Comment On June 12, 2011, at 8:00 PM, mountain8 wrote:

    smartmuffin; Wonderfully concise and thorough statement, however it's not poor journalism, a true journalist only reports. He/she lets you make up your own mind, as you have so beautifully in the first paragraph.

    He's a great public speaker, but other than that, I can't find anything to say good about him. He is a common hypocritical politician (as are most) and many stupid people believe his story.

  • Report this Comment On June 12, 2011, at 8:05 PM, mountain8 wrote:

    TigerBloodWarlok, Sorry, we don't educate anymore. We just teach how to pass tests that are made up years before one takes them. If you want to see how dismal education is and has been for the last decade (at least) watch "are you smarter than a fifth grader. Listen to some of the college graduate, educated, people operating in our real world and you will be afraid, very afraid.

  • Report this Comment On June 12, 2011, at 8:06 PM, mountain8 wrote:

    Ron Paul for President. Sure it will hurt but it won't destroy us as our present course surely will.

  • Report this Comment On June 13, 2011, at 1:09 AM, TMFDiogenes wrote:

    Are You Smarter than a Fifth Grader is awesome.

  • Report this Comment On June 13, 2011, at 6:44 AM, devoish wrote:

    Studies show that an increase in edcuational spending DOES NOT result in higher achievement scores. Or is the point that we should just spend more anyway so we are higher than Ethiopia? - TigerBloodWork

    If you are looking for a connection to increased educational spending, perhaps you will find a connection between cost of living or property values and educational spending. In Manhattan, teacher salaries have to compete with hedgefund paychecks for living space.

    You may find additional connections to educational costs if you compare where in its life cycle each school district is. Older school districts, with retired teachers, or those with more experience may have higher costs than a new community where the school district is still on its first generation of teachers.

    Best wishes,


  • Report this Comment On June 13, 2011, at 10:03 AM, BMFPitt wrote:

    Sounds like good advice. If only he would listen to it himself...

  • Report this Comment On June 13, 2011, at 10:53 AM, rhutmacher wrote:

    "What applies to the nation as a whole applies to individuals … spend less, save more,"

    Did our President just make a joke?

  • Report this Comment On June 13, 2011, at 5:54 PM, zgriner wrote:

    Gee what a nice story. La dee da. Too bad he doesn't believe a word of it.

    He's destroying this country and debasing our currency so that our interest rates are the lowest they've been in a century. By the time he's through, he'll have doubled or tripled our debt.

  • Report this Comment On June 14, 2011, at 2:24 PM, ikkyu2 wrote:

    I received 0.01% interest on my savings account in 2009. Not 1%; 0.01%. Luckily, since then, rates have burgeoned to a hefty 0.025%.

    "Magic" is a good word to reflect the results of our Federal Government's interference with the interest rate market. There's no such thing as magic, and there's pretty much no such thing as interest these days either.

  • Report this Comment On June 15, 2011, at 12:41 PM, whyaduck1128 wrote:

    He's got his, and he knows that as an ex-President, he'll never have to worry about money, as there are always speaking gigs, books to be written and bought by people who'll never read them, and "consulting" fees. Given that my situation will never be anything like his, please tell me why I should listen to his financial advice.

  • Report this Comment On June 17, 2011, at 4:15 AM, treblih wrote:

    Concerning Obama's financial advice: even

    a solar powered clock is right most of the time.

  • Report this Comment On June 17, 2011, at 4:19 AM, treblih wrote:

    I use a small local well run savings bank and have

    been getting 1.5 % interest for the past year.

  • Report this Comment On June 17, 2011, at 12:43 PM, HighYieldAnalyst wrote:

    You might not know it but Reagan took the size of the government from a low of 19.7% to a high of 21.6% of GNP. All to leave it at the same level he had found it. What he did do, was to destroy much of the social programs created during the Roosevelt Administration, with a government that was even bigger than Roosevelt’s. In fact, up to the Second World War, the government was never bigger than 20.7% of the GDP, and this is during the years of government spending to get out of the big depression. What’s more, at its lowest point, the Roosevelt government was only 18.3% of the national GDP, a level never achieved by any other Republican up to President Bush.

    Was George W. Bush, in fact, a fiscal conservative? Well, the truth is, no. He was not. As a matter of fact, during his administration, the size of the government relative to the wealth of the nation grew by almost 2%.

    The “big government” size is not dependent on reducing social programs, nor investments in infrastructure or education. The biggest contributor to “big government” in the USA is national defense, not the investments the President refers to.

    If you are a fiscal conservative and you were thinking on voting Republican, you may need to think again.

    1.The last fiscal conservative Republican president was Richard Nixon (although he was highly interventionist, and if he were judged by the same standards fiscal conservatives applied to FDR, a socialist)

    2.You may think that social programs (people who spend money in the economy, infrastructure or ducation are not the solution, but neither are they the problem

    3.It is war, and not social programs, where the government gets fat

    4.Imperialistic adventures are the source of our fiscal problems, not a solution for our Republic

  • Report this Comment On June 17, 2011, at 2:29 PM, azmfool wrote:

    I'm begging you, please let this be a place where we can be sheltered from the Dems vs Repubs debate.

  • Report this Comment On June 17, 2011, at 2:30 PM, azmfool wrote:

    By the way, HighYield, that's not directed at you, just been reading through some of the comments above.

  • Report this Comment On June 17, 2011, at 4:47 PM, Gato337 wrote:

    @ azmfool

    I completely agree.

    Seriously - every time TMF reports on anything related to government policy or even mention's the president's name:

    1) all hell breaks loose in the comments

    2) people start abusing the TMF authors (kill the messenger syndrome?)

    3) inevitably someone threatens to cancel his TMF subscriptions because he is so outraged

    hilarious guys, hilarious and predictable.

    Thanks TMF for an informative article. Unlike some of these fools, I want to hear about what you are learning (learned?) at the White House regardless of my like/dislike of this administration. Their fiscal policies affect me, so its good to stay informed.

  • Report this Comment On June 18, 2011, at 10:33 PM, hachmujt wrote:

    Our workforce is still the most productive in the world. The workers do the work which makes the stuff/service. 80% of us are workers not managers.

    So trying to balance working conditions with production is not a crazy proposition. Remember if you have two children it is very likely at least one will be a worker.

  • Report this Comment On June 27, 2011, at 4:55 PM, rdmart2 wrote:

    The president's advice - like his other unqualified remarks are useless to the average citizen. It doesn't make sense to save money at less than 1% interest while paying 10% to 24% interest on outstanding credit. The wise thing to do is to pay down debt.

    I suppose the Federal governemnt is also using Obama's advise.

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