January 05, 2009
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News: Educating Students for Financial Life.
Instead of focusing of the ‘deplorable tactics' of marketing, maybe we should take a more comprehensive look at priorities. Is ignoring the dangers of financial ignorance of our next generation better than providing a little practical education? It doesn't appear to wash. Understanding the use of financial leverage for liquidity is proving to be the only way out of this mess. Credit cards are proving to be essential during this interim of joblessness. Until we can get our economy rolling again, most Americans have need to still provide food, medical attention, a place to live and gasoline to go out and find work. Are graduating college students exempt from these conditions? Certainly not. They are at a tremendous disadvantage if they don't know how to ‘play the game'. There is no greater opportunity to shore them up than before exiting from their formal education experience. Credit cards are more than just another ‘tool' in the box. They are the sustenance for the many who are ‘cash-dry'. We desperately need counseling in how to survive an era plagued with an almost hopeless job situation. Without responsible use of credit cards, our population will experience extreme hardship even greater than we have already seen.
Yes, it's a problem that one-quarter of our graduates start out with credit card debt averaging $5,000. It may or may not be a problem that half of our graduates average a $2,748 credit card debt at the time of leaving school. Healthy debt ratios are set at 30% now. If someone is in debt for $2,748 and their limit is $9,160, then they're consider to be a healthy candidate for building a strong credit rating for later needs. That means ‘not at risk'. Provided that they can maintain this ratio, they have been proven statistically to be financially sound. Not enough Americans understand that. Also, not enough Americans understand that paying minimum payments at high interest can be financially devastating. In can take 18 years just to pay off that small debt using that method. They should know that maintaining a healthy debt ratio determines how much to pay each month.
So should we beat up the credit card industry for marketing the benefits of credit accounts to this soon-to-be working population? Isn't this everyday life in out culture? Perhaps we should institute compulsory education, paid for by the industry but administrated by independent educators (like driving schools are). They can be fun (like the comedy schools) where the lending institutions sponsor attractive amenities for attendance and then are only provided with the names of students who have passed this 2-hour class.