- The Washington Times - Saturday, August 7, 2004

Much has been written about slippery scam artists, callous “caregivers,” and greedy family members who bilked senior citizens out of their life’s savings. This has created the impression senior citizens are especially vulnerable to financial fraud.

And why shouldn’t this be? The anecdotal evidence is compelling. As a group, older Americans tend to have more money, more property and greater savings and investments than others. So they would seem ripe for the picking.

And true or not, they are also seen as more trusting and more likely to listen to an unsolicited sales pitch — perhaps out of loneliness or politeness — than a typical on-the-go Yuppie or Generation X-er.

But the data don’t confirm the picture of the overly gullible oldster. What the data indicate — a story virtually unreported by the media — is that young college-educated professionals are far likelier to be fleeced than their less-educated grandparents. If you can be too smart for your own good, America’s “20-and 30-somethings” seem to fit the bill.

According to data from the Consumer Sentinel, a data base maintained by the Federal Trade Commission, financial fraud is a booming $350-billion-a-year industry in America. The statistics are sketchy, because financial fraud often goes unreported. Many victims refuse to file complaints — or won’t even call the police — because they don’t want to appear gullible, stupid or greedy.

One common characteristic of all financial fraud victims, however, is they end up with less than they bargained for.

Another common characteristic, according to the National Institute for Justice, is that no demographic group is immune to a good scam; the victims are as diverse as the swindles and swindlers that rip them off.

The wealthy, for example, are no more or less likely to be defrauded than people with limited means. But the two groups are likely to be susceptible to different types of scams.

A lower- or middle-income individual, for example, will often be told by a swindler that the get-rich-quick “opportunity” he is being offered is an investment vehicle used by the wealthy. If it’s good enough for Donald Trump, why not you?

While fraud doesn’t discriminate on the basis of geography (where you live), gender, income or race, some people do seem more susceptible than others. Counterintuitive though it may be, the most susceptible are the young and educated.

Research from the National Institute for Justice and other private and government organizations indicates high-school dropouts and people with graduate degrees are the least likely to be defrauded, while those who have attended college or earned an undergraduate degree are the most likely.

This could be due to a number of factors, but the most likely explanations are their general lack of maturity and inexperience in financial matters, coupled with the contemporary attitude success comes from “working smart,” not hard — and “getting there in a hurry” is better than slow-but-steady.

The young and educated also might fall prey because the media have convinced them they’re not targets. People who are swindled, according to the conventional wisdom, are either unsophisticated or too old and feeble to know what’s happening. Such misperceptions give swindlers a big advantage.

Regardless of the reason, the data confirm one fact obvious for generations: Formal education does not necessarily make you “street smart.”

Not too many decades ago, when schoolchildren were required to conjugate verbs and parse Latin sentences, the maxim “caveat emptor” was part of the vernacular. Today, many college graduates probably don’t know what it means.

Based on the evidence, they certainly don’t act as if they do.

Charles E. Murray is president of the American Institute for Economic Research (www.aier.org), Great Barrington, Mass., and primary author of the AIER Economic Education Bulletin, “How to Avoid Financial Fraud” (65 pages, March 2004).

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