Skip to comments.Survey: Most are financially illiterate
Posted on 07/30/2004 10:09:15 AM PDT by OldBlondBabe
One of every 73 U.S. households filed for bankruptcy last year, an all-time high, according to the American Bankruptcy Institute. One of 69 filed in Michigan, ranking the state 19th for the most filed bankruptcies. This comes as no surprise to Pontiac resident Noah Coleman, 22. Coleman said he represents the most poorly educated social class when it comes to financial literacy, and the reason for so many bankruptcies is people are not being taught how to manage their money.
A recent survey conducted by Jump$tart Coalition for Personal Financial Literacy, a Washington, D.C., firm that works to ensure that basic personal financial management skills are attained during grades K-12, reported that 68 percent of 4,000 students taking the Jump$tart finance survey received failing scores.
Eighty-five percent said they had never taken a personal finance course before, and only 26 percent reported that their parents actively taught them how to manage money.
As a graduate of Pontiac Central High School in 1999, Coleman said he was never offered any courses in money management, nor was he trained in governing his credit.
It wasn't until his fiancee Natalie Jones, 22, started taking financial management courses that he learned the "ins and outs" of the credit industry.
"There's a lot of things we don't know because no one ever sat down to teach us," Coleman said. "Then when you turn 18, companies start sending you all of these credit cards, saying you can spend up to $1,000 and only have to pay back $15 a month. But what you don't know is you're only paying back the interest -you haven't even started paying back the $1,000 yet."
Coleman's case is much like those of the 64 percent of 18- to 24-year-olds who don't know they pay interest rates on their credit cards, according to Lee Bailey, chairman of Credit Advantage, a West Bloomfield educational program designed to teach people how to establish, maintain and improve their credit ratings.
Bailey said he's found people of every age and ethnic group who don't know how to manage money. Because of this, he concluded 9 is a good age to start learning about credit.
"Building character starts when you're young, and good character is basically what having good credit is all about," Bailey said.
"If you begin as a youth showing responsibility and doing what you say you're going to do, then you'll do the same as an adult when it comes to paying your bills on time. That's the goal of establishing credit - showing that you can be responsible."
Jones, a child care provider in Pontiac planning to open her own daycare center soon, said she's always been a responsible person.
But as a graduate of Pontiac Northern High School's class of 1999, she agrees with Coleman, saying she, too, fell victim to the "credit card game" early in life.
"Now that we're planning a wedding and trying to purchase a house all within the next year, I knew there were some things I needed to learn about managing my money," Jones said. "But look what it took for me to take the initiative. That's the problem. A lot of people my age have credit problems, but they aren't taking that extra step to learn how to fix them."
In 2002, the Bush administration took that extra step with the No Child Left Behind Act, which includes a section that authorizes the use of funds by schools to create programs that teach basic personal finance and money management skills to school-age children.
For the 2002-2003 school year, $385 million made up the funds available to be distributed to state educational agencies, according to the U.S. Department of Education Web site, www.ed.gov.
With the government getting involved and organizations offering free financing courses, Bailey said this is obviously a problem that needs to be fixed.
"It's not just me saying the world is facing a financial literacy crisis, it's the U.S. Senate, bank presidents and even the president of the United States," Bailey said. "The system puts so much effort into preparing us to spend money, but not enough to prepare us on making good financial decisions."
Bailey said he blames 60 percent of the problem on lack of education and the remaining on individual effort.
"This is tearing away at our country, and it's not just one race, it's a national problem," Bailey said. "Look at the demographics, the amount of people filing bankruptcy is crazy. When you file for bankruptcy, that means you can't afford your day-to-day lifestyle, so look at how many people simply can't afford the way they live."
Some tips Bailey offers on managing finances are reviewing your credit report once a year, taking courses that teach money management skills and learning how credit scores are calculated.
This can't be stated enough times.
You know, I was struck by the same question! I never had a money management class and yet here I am today - a happy little capitalist with excellent credit.
Of course maybe some of us are just self-starters. I also have a career without having a "career course" and a 22 year marriage without a "marriage class".
I did go to Sunday School, though, so that explains the Christian angle.
My parents believed that the only debt should be a home mortgage. They had store credit cards, but paid them off every month. I have never had a credit card in my name, they were always in my ex's name, with me as a secondary name. I get offers every week. They get tossed in the trash.
Though I have taught personal finance to high-schoolers, this really is a character issue. While a teacher can warn, cajole, and provide data - character must be taught AND modeled at home.
Most likely your parents stuffed some common sense into your head, which is commendable. But when my tax dollars are funding public schools to the tune of $20,000 per year per student, I sure expect those students to graduate knowing that one pays interest on credit card debt.
Can anyone recommend some literature I can give to my 15-year-old daughter to help her out. As a fairly normal 15-year old, she doesn't understand how I "evolved" from a single-celled organism to my current physical form, so she won't listen to much I tell her. I'd like her to be well-versed in personal finance. Thanks.
one need only look as far as Congress to see what fine
examples of fiscal discipline we have going for us.
Well, this is probably true. but I still think it's funny that anyone would graduate from college without knowing how credit works. Of course, it would explain why lefty fiscal ideas are so popular with that age group.
Good credit can be a tool to the accumlation of wealth if one knows how to properly employ it. Likewise with debt. When managed cleverly debt can also build wealth. Example; investment properties that service their own debt and are then leveraged to acquire additional investment properties that in turn service their own debt.
My wife and I was in credit card debt. We payed the bills off. No bankruptcy. Everytime we get a credit card offer.. It goes to the trash....
If you're going to have public education, the most impt thing you can teach children is how to make money. Of course very few teachers know anything about it other than going on strike.
it's up to responsible parents
They set up booths at college registration day to catch the unwary freshman who's just turned 18, for crying out loud.
IOW, when they default, I don't feel sorry for the banks. They have no business lending to the uncreditworthy. Half of the job of lending is finding out if the lendees can pay the money back.
Sheesh! If I only knew what someone else came and taught me, I wouldn't know very much.
True, and then there are people like me, who have to survive a coupla trainwrecks in their lives to develop it.
Limping, but gettin' by ;)
Spend less than you make. Save and invest the difference. That is all.
There's nothing wrong with credit cards per se, just pay them off every month. Get the right ones and you can get cash back or other bonuses. I get 1% back on everything, and 5% on gas which is especially useful these days.
You could be a sibling of mine! My parents have always lived the same way - no debt except a mortgage, and pay that off as soon as possible. Don't use a credit card unless you can pay the balance in full within a month. My dad's retiring at the end of this year with virtually no debt.
Type out a list of 20 or 25 questions pertaining to money management, give them to your daughter upon her next request for cash.
100% get her the amount she asked for + 10% to be invested.
90% sorry, failed
80% sorry, failed
70% sorry, failed
60% sorry, failed
50% sorry, failed
40% sorry, failed
30% sorry, failed
30% sorry, failed
20% sorry, failed
10% sorry, failed
failed= no cash
This test is to be given each time she asks for cash until she passes it with ease. The questions change each month.
Why is it that so many parents neglect to teach their kids about financial matters anymore?
The problem is, it's not the banks who pay. Any loss suffered by a bank on bad debt is passed on the the bank's other customers ion the form of lower interest on their deposits and/or higher interst on their loans. Deadbeats cost us all money.
This whole "character education" charade needs to be curtailed immediately.
When most most eighth graders can't read at grade-level, or solve a simple algebraic equation, I don't think that burnishing their morals should be the first priority of the government.
Besides, most public school teachers (note: I didn't say ALL) don't have high enough standards to teach character anyway. Most of them can't even model self-control, professionalism, or gracious speech on the job - much less teach values, ethics, or character.
Banks who lend without a care of how that money will be paid back--hurts us as well.
Absolutely! I'd be careful about being a landlord, though. Commercial land/buildings are a better bet.
My mom paid the credit cards off every month. I've been told that doing that will give you a less that perfect credit rating?!
I've heard about getting a percent of your purchases back on some cards, but haven't paid attention to it. I know I'm not organized enough to keep one step ahead of the end of the introductory interest rates.
My parents were old enough to be my grandparents. They weren't impressed with the latest gadgets, and held on to the belief that debt was bad. It is bad, depending on the kind of debt. It's hard to stay out of debt these days, even living a spartan existence.
My parents retired debt free, and had nice things and a decent car.
Absolutely! I'd be careful about being a landlord, though. Commercial land/buildings are a better bet.
Yeah, I learned my lesson about vetting tenants very early in the game. Now we focus our investment properties around two factors, proximity to a hospital and/or LIRR station. Nurses, techs are a good bet as well as people with solid work in the city. We're looking to expand south now...exploring Jacksonville-Ponte Vedra area condos.
Landlords go through a lot. When my folks house gets auctioned off, we'll be living with my older daughter. I'm hoping to find a HUD home, because I don't have any rental history, no credit, and at the moment am just receiving child support and alimony. No one is going to rent to us. Well yeah, someone will, but I don't want my kids living in Adelanto. Seriously, I've seen what some people can do to an apartment or house. I was hoping to buy vacant land. Someday I will.
Look for a spot through your church or the local Catholic church. I've found two good tenants that way, perhaps the reverse will work for you.
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