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Column: BofA says you can build a nest egg by giving up lattes and newspapers. That’s terrible advice.

Real sage advice from Bank of America, especially if you buy your lattes by the gallon.
(Bank of America)

Bank of America, like most of its industry brethren, portrays itself as a font of wisdom about how to secure your financial future (using its services, of course).

So that leads us to wonder why it’s purveying some of the hoariest and most irrelevant cliches in the personal finance game about how to build your nest egg.

The “money-saving tips” that purportedly could save you up to $4,400 a year through tiny economies and allow you to “take a big step toward achieving your financial goals” appears on a page of the bank’s consumer website titled “Managing Your Money.”

By... trimming some small daily expenses, you can make significant contributions to your savings account.

Bank of America’s irrelevant advice on personal finance

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We’re not sure how long it’s been there, since we couldn’t find a bank spokesman to answer the question. To be candid, it was brought to our attention just the other day by a colleague who was irked by its suggestion that you save money by giving up your daily newspaper at $1.50 a day and trawling for your news online for free.

But we don’t take that personally, any more than Bank of America would take it personally if we advised its depositors to give up the measly one hundredth of one percent interest rate it pays on savings accounts and keep their cash wrapped in a brown paper bag behind the toilet bowl.

What’s more disturbing is how slipshod and misleading the bank’s advice is. The whole package reflects a long-discredited and all-too-common meme put forth by personal finance gurus to the effect that the little “luxuries that get us through the day, from our morning jolt of java to an evening drink with friends at a local wine and tapas bar” represent squandered money. It’s cheap moralizing: We could all be millionaires, if we lived like monks.

The quote above about the “latte factor” comes from our former colleague Helaine Olen, who now writes on personal finance at Slate and is the author of the 2012 book “Pound Foolish: Exposing the Dark Side of the Personal Finance Industry.” She labels the latte factor the personal finance industry’s “favorite myth.”

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Bank of America’s small-luxury listicle is even more suspect than that. It includes such economies as taking public transit or carpooling rather than driving to work, even though in many parts of the country (Southern California, for instance), public transit can be inconvenient, time consuming, and more expensive than driving.

It advises giving up your gym membership ($1.83 a day) and running on park trails for free, for an annual savings of $448.35. Part of its rationale is that two-thirds of gym members never go to work out — but how many of those stay-at-homes would maintain a rigorous outdoor jogging routine instead? By the way, BofA’s source for this statistic is a company that sells home workout equipment.

Olen observes that lists like these never address the spending that really keeps the average American family from building a nest egg, like housing, education, child care and healthcare. 

“These are the things destroying the finances of all too many families, not mythical newspaper subscriptions,” she told me by email. “The out of pocket cost of healthcare alone for a household is up more than 50 percent since 2010.” In her book she quotes now-Sen. Elizabeth Warren and her daughter Amelia Tyagi, authors of the 2003 book “The Two-Income Trap,” which reported that the real threats to family finances weren’t splurges on small comforts but medical expenses, job loss, foreclosure and divorce.

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One other spending category that Bank of America doesn’t address is the cost of retail banking. That’s too bad, because it’s where a lot of family money can go down the drain. BofA’s own rate and fee schedules help tell that story, but they’re not so easy to find on its website. The bank will charge you $300 a year to maintain an interest-bearing combined checking/savings account, unless you keep $10,000 on deposit. That works out to a 3% annual drain on that nest egg. Of course, the bank will pay you interest on that ten grand — one dollar a year.

That’s if the bank is dealing honestly with you. But that hasn’t always been the case. In 2011, BofA paid $410 million to settle a class-action lawsuit alleging it manipulated debit-card transactions to maximize the overdraft fees it could charge customers. Around the same time the bank planned to charge debit card holders a $5 monthly fee for their accounts; it backed off after a public outcry.

At a certain level, Bank of America can’t be faulted for offering the cheesiest personal finance advice around; most people don’t pay any attention to recommendations that they give up the little things that are part of daily life, all to reach for the mirage of financial independence. They know that what really matters is being paid equitably for the work they do and insuring themselves against big expenses such as hospitalization.

BofA’s money management advice has nothing to say about that. It’s there almost as entertainment. But a bank is not an entertainment company. If it wants its customers to take it seriously, it should offer serious advice, not pap.

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Keep up to date with Michael Hiltzik. Follow @hiltzikm on Twitter, see his Facebook page, or email michael.hiltzik@latimes.com.

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