There’s a major subject lacking from our schools’ curriculum. It’s a very important subject, one of the most important perhaps. Kids are taught everything they need to get a good job and make good money (or so we’re told), but nobody teaches them how to hold on to that money. They are not taught the benefits of investing, the wonders of compounding, or the dangers of credit cards.
You can probably see where I’m going with this.
We are spawning more and more Visa, Mastercard, and Discover customers. Kids grow up carrying huge balances, using credit like it’s a gift, free money. The collective debt grows and grows while increases in income and large tax returns just lead to more splurging.
I focus the blame on two things:
- Education. School’s are failing at teaching kids how to live a fruitful, low-debt-reliant life. Parents are not only dropping the ball on teaching, but often setting a bad example by exercising the poor judgment I’m talking about.
- Accountability. Nobody is held accountable for poor spending habits. If the debt becomes too unmanageable, you just declare bankruptcy and start over. Sure, it hurts your credit, but if nothing else that makes you a better customer to many credit card companies.
How can we fix it? Firstly, education is relatively easy to fix. Start teaching personal finance classes in school. Simple as that. The closest I had in high school was an accounting class, which did little more than teach me how to track my spending, frugal or outrageous as it may be. By requiring one class in high school that discusses the basics of investment, saving, smart spending, and the ramifications of poor choices would have a huge effect.
In addition to education in schools, parents need to practice and preach as well. My mother has been pounding smart spending and saving into my head for years. She uses the ‘don’t do what I did’ method. She’s currently making up for a lot of lost time. As a kid my age, she was buying new sports cars, motorcycles, and horses every couple of years. She was undeniably the coolest twenty-something this side of the Mississippi (much cooler than myself), but she’s paying for it now. As a result, I’m already saving a lot of money, and I just graduated from college this past May.
I’m saving quite a bit more than anyone else in my age range (or beyond it, honestly) that I know. I’m gainfully employed, and 10% of my paycheck goes right to my 401k. My employer matches 4%. In addition, I have $400 per month automatically withdrawn from my account and split between a Roth IRA and a money market account. I also have $100 automatically transferred from my checking to my savings account each month for my emergency fund. I’ve been out of school for less than a year, and I already have thousands saved. I know people that could pay off a large credit card debt in that time with some discipline, but they don’t have it, or don’t care.
As far as accountability, nothing is going to change there anytime soon. It’s much more profitable for the credit card companies to allow people to fall deeply into debt. The small number of people that actually do declare bankruptcy compared to the number that complacently pay the minimum every month is so small that there’s no reason to encourage people to stop their bad habits. Unfortunately, accountability is not gonna be an issue.
How to get started.
I’ll probably sound like a broken record, especially if you read other personal finance blogs, but the most important advice anyone can give you is start now. Right now. If you save $100 a month, but wait until next month to start, you will have $100 less. Simple enough? If you are unable to start now, find a way to start now. That’s enough of that.
Secondly, find a financial advisor. You don’t need to spend money on a financial advisor. Mine doesn’t charge me a cent. He earns his pay by investing my money in funds owned by his company and receiving a commission on it. I don’t even have to invest in those funds if I don’t want to. I do though because they perform well, and I want my advisor to get a kick back. He does good work for me.
The point here is that anyone can do it. Like I said, I’m sure I sound like a broken record, but it’s true. In addition to the money I’m saving, I’m paying rent, a car payment, and loan payments from school. And I’m nowhere near poor. I have some spending money when I want something. I occasionally do some freelance work on the side, but not with much consistency.
Debt is a huge problem nowadays. Whether it’s yours, your uncle’s, or your government’s, it’s everywhere. It’s not an ‘issue’, it’s an epidemic. In the end, you’re the one responsible for your financial health. Don’t let yourself fall into the trap. It’s very easy to get into and very difficult to break the habit. Do yourself a favor, and start managing your money today.
20 responses so far ↓
1 Tüketici Finansman Rehberi // Apr 21, 2008 at 8:27 am
Nice article, thanks.
2 Tenoch // Apr 30, 2008 at 11:55 am
agreed! im going to be that broken record and say…. the best time to start is NOW! because that is just how it should be… because sometimes the hardest part is starting, but once you get your groove on, youll realize that it is not as hard as you think it would be….
3 shawna // May 13, 2008 at 11:33 am
Agreed! I’m 29 and finally have an idea of where our money should be. But only after going to a financial advisor. They really need to teach this stuff in highschool and have a required class in college. Those exit exams for student loans just aren’t enough. With three kids and gas and grocery prices on the rise we really are pinched. There’s not a lot of extra unless it’s for socks or underwear
But we’ve learned to pay ourselves 10% right off the bat and put it into 401K, Roth IRA and a wholelife insurance plan. CD’s are also in the picture. It’s not near the amount you’re putting in but it’s something. Hopefully our kids will learn quicker than we did. Until then we’ll just have fun playing outside..it’s free!
4 Mortgage Accelerator // Jun 25, 2008 at 2:21 am
I totally agree with you! Every month, I make a contribution to my Roth IRA, plus I put some into stocks and savings, and I just began making extra principle payments on my mortgage. I don’t know where I found this “discipline”, but I can tell you that 99% of people I know would be spending all the money that I save on new cars, jewelry, etc.
5 Visa // Sep 30, 2008 at 4:29 am
Spending habits are often influenced by peers and I think the right peer group can save the problem.
Schools well I dont approve of them, they are waste of space.
6 Visa Services // Oct 2, 2008 at 3:01 am
School just fail to take resposibility and see their success in terms of the grades that the students achieve and as long as that mind set is there , I think there is no hope for a change.
7 HSN // Oct 11, 2008 at 3:41 am
I think taking debt is something that all kids dont mind doing and not many realize what a dangerous habit it is and I think for this reason there have been so many cases of student suicides and also the kids in future dont have a strong value system.
8 financial advice - laura // Jan 19, 2009 at 7:10 am
nice article. I totally agree that all of us should be aware about debt even the kids. we must all know how to take care of our finances
9 Steve Sildon // Mar 13, 2009 at 4:37 pm
The real key is starting early. Very early. Those who start to save and invest at an early age are undoubtedly the best off. The longer you wait the worse it can get.
10 Wayne // Aug 10, 2009 at 6:55 pm
The single most important thing we can teach or kids is what the meaning of NO is. You want something now? NO. Can I buy now and pay later? NO. Can you provide for me when I can’t do it myself? NO. Of course most of us don’t know what it really means. The government sure as hell doesn’t. I think the last people who really understood, lived thru the crash in ‘29 (probably why they’re considered the “Greatest Generation!)
11 Wink // Aug 20, 2009 at 2:26 pm
Manage your money…don’t let your money manage you. That’s what debt does…it controls your life. It seem that once it’s there it never goes away…it actually becomes a way of life…managing your debt. “The absence of debt is the truest measure of real freedom”.
12 Bookkeeper // Sep 9, 2009 at 5:08 pm
Very nice, younger people these days do not think about saving. Everyone needs to start saving in these hard times.
13 Free Online Film // Sep 16, 2009 at 7:12 pm
I completely agree with you. Look at the amount of people getting buried in debt these days. Heck, most of them are college students. Our schools and universities need to concentrate on educating our students that debt is not a good thing, and can bring allot of headaches.
14 Funny Sms // Oct 7, 2009 at 1:37 am
Very nice, younger people these days do not think about saving. Everyone needs to start saving in these hard times.
15 Sell a Structured Settlement // Oct 27, 2009 at 7:34 pm
early education is the key here. if kids knew the value of good credit in high school, or at the very least, freshman year of college, there would be many less debt ridden graduates out there starting off on the right foot.
16 doublef // Feb 8, 2010 at 5:40 am
I see the comment above has a heading heading is Sell Structured Settlement. You can also take a loan against a structured settlement. It might not be the best way to go but the option is there. I feel that people rush into things where debt is concerned and then only after the money has been spend they realise their mistakes.
17 jon // Mar 14, 2010 at 9:15 am
things to note if you have to prioritize your finances before buying something else and do not let your debt more than your income
18 Accounting Schools Online // Mar 18, 2010 at 7:59 am
Start with a simple budget and keep an eye on spending habits. You don’t have to get crazy with things at first… keep it simple.
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20 F&O Derivatives // Jul 8, 2010 at 6:00 am
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