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http://freakonomics.blogs.nytimes.com/2008/07/01/when-it-comes-to-saving-who-would-you-listen-to-my-wife-or-milton-friedman/ http://freakonomics.blogs.nytimes.c

http://freakonomics.blogs.nytimes.com/2008/07/01/when-it-comes-to-saving-who-would-you-listen-to-my-wife-or-milton-friedman/ http://freakonomics.blogs.nytimes.com/2008/07/01/when-it-com... Consider a Standford CS undergrad working part-time in an on-campus computer lab who will graduate in a few months. Given that he/she has decided to take a market-rate job somewhere upon graduation, what is the probability that his income will be substantially higher a few months from now? How concerned should he be that his ship will not come in? Would it be rational for him to spend some money he doesn't have on bar tabs, weekend trips, and other such frivolity before working 60+ hours/week for Google/Facebook/Whatever? Conversely, it would be much riskier if this undergrad, after taking a job at Facebook, took upon debt with the assumption of a pay-off upon an IPO.

webwright 16y ago
They'd probably be fine. But debt (or lack of savings), as Jessica points out, limits options. Failure to save also results in a lifestyle inflation. Cable bills, expensive hobbies, etc. It's hard to step out of that tarpit once you're in it. Your CS undergrad would be LESS fine if, at the last minute, they realized they wanted to start their own company. My understanding is that (until very recently) household debt tended to go up every year. That seems to indicate that most people are pretty bad about judging when and if their ship will come in.