Wisdom of Rich Dad

A new study reveals young Americans are overly cautious toward investing. Could their attitudes be undermining their financial future?

When they’re not tweeting, texting or downloading the latest Lady Gaga tune for their iPods, young Americans are actually seriously focused on money. While that’s a good thing, their investment habits are overly cautious, according to a new study, and that could undermine their financial futures.

The data comes from Bank of America’s Merrill Lynch Affluent Insights Quarterly, in a regular survey that tracks the investment habits of Americans.

It’s a comprehensive survey, and worth examining for a broader look at Americans’ investment habits.

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The stock market experienced its biggest loss in over a month, falling 140 points, or 1.1%.

What spooked investors? Standard & Poor’s (S&P) downgraded the US debt outlook from stable to negative.

The reasoning behind the S&P’s downgrade is the growing debt crisis in America. As The Wall Street Journal reports, the US deficit is expected to grow from $1.5 trillion to $1.65 trillion this year and now comprises 10 percent of total US economic output.

The rating firm cited the budget gridlock and lack of faith in the government’s ability to reach a deal to substantially lower the deficit as reasons for the downgrade, “The outlook reflects our view of the increased risk that the political negotiations over when and how to address both the medium- and long-term challenges will persist until at least after the national elections in 2012.”

Currently, the US is the only one of 19 countries to have a negative outlook for their debt while enjoying an AAA rating. This move is substantial, and while the US still retains its AAA rating, over 50 percent of countries that S&P downgrade to negative eventually lose their AAA credit rating.

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In Las Vegas, which has the highest foreclosure rate among large U.S. cities, the wave of defaults that began with subprime borrowers and the unemployed has spread to upscale homeowners who see no point in staying, even if they can afford to. “You feel like a sucker if you’re paying a $5 million mortgage on a house that’s worth $2 million,” says broker Zar Zanganeh.

In the first quarter, 30 homes in Clark County, which encompasses the Las Vegas Strip and surrounding residential areas, with mortgages exceeding $1 million were repossessed by banks or bought by third parties in foreclosure sales. That’s up from 20 homes a year earlier, according to ForeclosureRadar, a company that tracks defaults. Short sales, in which the bank agrees to accept less than the loan balance, and bank-owned properties accounted for about three-quarters of all home sales in the period, according to the Greater Las Vegas Association of Realtors.

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