Protect finances from Y2K problems, Mandell urges

By JOHN LAVELLE
Reporter Contributor

Smart consumers will take some precautions to protect their personal finances in light of possible Y2K problems, Lewis Mandell, dean of the School of Management, suggested to a "UB at Sunrise" audience on Feb. 18.

Although he believes there is no reason to panic-estimating the possibility of a major Y2K problem in the U.S. at "less than 10 percent"-Mandell offered some tips for those who want to be prepared.

He advised audience members to withdraw $1,000 from a savings account at the beginning of December. The Federal Reserve, he noted, will step up its reserve of cash from $60 billion to $250 billion in anticipation of such withdrawals.

"Anybody that doesn't do that is really foolish," Mandell said. "Don't wait until the week before Christmas to go to an ATM machine. If nothing happens, the money can go right back into the bank."

Individuals also should keep all their receipts, and have their bank books balanced by late December, he said. He urged those with stocks, bonds and other investments to determine if the brokerage house keeping the certificates is Y2K compliant. If not, investors should switch brokerage houses or obtain the actual paper certificates and store them in a safe deposit box until any problems are straightened out, he suggested.

On Jan. 3-the first business day of the year 2000-the world will know who really was prepared for the coming of the new millennium and who was not, Mandell said. While the U.S. "is better off than any other country," there are some foreign companies that don't "have a clue" about the Y2K problem, he said.

He added that he believes there will be fewer corporate mergers this year than in past years because companies do not want to intermingle computer systems.

The Y2K problem is only one of the problems to be faced in the coming millennium, Mandell noted in his lecture, entitled "Coping in a Bewildering Financial Environment." Another major problem is the number of bankruptcies being filed.

The dean said that more than 2 million families nationwide filed for bankruptcy last year.

He said that managing one's personal finances has become extremely complex in the United States, noting that consumers today must make many more decisions concerning their finances than those in past years. For example, he compared the defined benefit pension that in the past had been offered by most employers, where an employee who worked for a company for a certain number of years could expect a pension based on the number of years of service and his or her exiting salary, to the defined contribution pensions that have become popular today, such as a 401k plan, where the employee makes a contribution, the employer contributes a like amount and the sum is invested in securities, often of the employee's choice.

"This demands that you make, at a very early age, a very sophisticated choice of instruments... without any training," he said.

Mandell said that there is much concern about the ability of young people to make decisions that may have lifelong ramifications. He pointed to the results of a questionnaire used to determine students' financial literacy as part of a 1997 benchmark survey he conducted of 1,500 high-school seniors. Overall, students answered correctly just 57.3 percent of the 31 questions in the survey, questions "that everyone needs to understand at the age of 18 in order to go out into the world," said Mandell, who published the survey results in a book "Our Vulnerable Youth: The Financial Literacy of American 12th Graders."

He stressed that the public must become aware of the need to teach young people at the junior-high and high-school level "life skills" that will prepare them to make wise financial decisions.