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Young
People Taking on More Debt |
Posted:
05.25.05
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Although over a third of young adults own credit cards, young
people receive little in the way of financial education.
Printer-friendly versions: PDF
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As young adults graduate into the real world weighed down by
student loans and credit card debt, experts are increasingly concerned
about the absence of financial education courses in high schools.
 Credit
card companies have flooded college campuses, offering free T-shirts,
no interest and spending power, and statistics celebrate their
success.
Over the past decade, credit card debt among 18-24 year olds
rose by 104 percent according to a report released by the nonprofit
research organization Demos entitled "Generation Broke: The
Growth of Debt Among Young Americans."
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Unprepared
for the future |
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Only seven states mandate that students take a course in basic
finance to graduate from high school. Fifteen states require a
general economics course.
A national survey conducted by the Jump$tart Coalition for Personal
Financial Literacy found that high school seniors tested on income
tax, credit card liability, retirement plans, and stocks and bonds
on average answered only 52 percent of the questions correctly.
Often young adults find themselves overwhelmed trying to understand
and organize their finances.
"It's impossible. No one teaches you what you're supposed
to do. It's a real shock getting out into the real world,"
Jeffrey Berman, a recent college graduate working in the entertainment
industry, told the Associated Press.
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Mandatory
financial education |
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A survey by the National Council on Economic Education found
that 38 states include financial themes such as saving and investing
in their curriculum standards, up from 31 states two years ago.
Often, however, these standards are not fully enforced.
 "There
is more good economic and financial education being offered in
schools than ever before. But as a subject area, it continues
to be marginalized as an add-on in an already crowded curriculum,"
council president Robert Duvall told USA Today.
This worrisome trend is driving experts, including Federal Reserve
Chairman Alan Greenspan, to push for mandatory economics and personal
finance course for all high school students.
Financial themes, experts say, can also be reinforced in other
classes -- for example, a history lesson on the Boston Tea Party
can touch upon taxation issues.
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High Stakes |
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While credit card companies aggressively market to students,
young adults must also confront a host of other economic issues
that previous generations did not.
College costs rose by an average of 38 percent in the 1990s,
and young adults now carry the highest student loan balances in
U.S. history at an average of $18,900 in 2002.
A tighter job market, rising living costs, and fewer employee
benefits such as pension plans and health care make for a steep
financial slope for young adults to climb.
 The
Demos report found that indebted adults between the ages of 18
and 24 spend almost 30 cents of every dollar earned to repay debts.
There are also concerns that the government retirement program,
Social Security, will not be around for that much longer.
"The twentysomething generation, more than any other generation,
is going to be left to fend for itself," vice president of
retirement and savings plans for MetLife told the Associated Press.
Young adults like Jason Roth, who racked up so much debt that
he couldn't get a loan for an engagement ring, urge immediate
action.
"Every high school student in America should have to take
some kind of financial-strategy class to learn about everything
from banking, credit cards, savings, loans and protection from
identity theft. If I had that type of class, I wouldn't have gotten
into such a credit mess," Roth told MSN.
--Compiled
by Monica Villavicencio for NewsHour Extra
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What you
can do |
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Youngmoney.com offers the following money-saving tips:
1. Write it down: Get a notebook and write down what you spend
and where you spend it, what your required expenses are, and the
income you expect for the month. This will help you be a better
consumer and keep track of your money.
2. Check your options: Talk to your parents and bank representatives
about what type of products are available to you such as interest-bearing
savings accounts, checking accounts, and overdraft protection
programs.
3. Save the slips: Keep all of your receipts -- that way you
have proof of what you spent and know if you've been overcharged.
4. Don't overspend: Only buy what you need -- daily expenses
can eat up your money if you don't set limits. Open a savings
account and put a little bit in every month.
5. Keep it clean: Organize your wallet or purse and have discount
cards and student IDs handy -- you never know when they might
be useful.
6. Pay up: Each month pay the full balance on your bills, especially
your credit cards. Once the credit card companies start charging
you interest, your bills will become more and more unmanageable.
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