Parents teach their children to look both ways before crossing the street, to buckle their seat belts and to avoid talking with strangers -- all good advice in a world full of physical dangers.
Parents and schools are not doing the same good job when it comes to teaching their children the financial dangers they will face. When it comes to credit -- how it works and how it can overwhelm a young person -- the lesson is not being taught adequately.
State Treasurer Janet Cowell recently toured four colleges and met with 53 students. She found that this generation doesn't understand debt.
One can argue that the nation's Wall Street bankers didn't understand debt, either, and that's how we got into our current economic mess. But if Americans hadn't fallen for the questionable mortgages and the too-good-to-be-true credit-card deals, the recession would have been less severe. We must all admit that our own financial naiveté contributed to today's problems.
Cowell learned that students were using their credit cards to meet their everyday expenses and, in the process, piling up large balances. It's an old story: college students leave home, don't know how to use a card but get one anyway. They pay only the minimum balance every month but keep driving the balance higher. As interest rates rise, the students are suddenly in too deep to get out.
The General Assembly has tried to address the situation in the past by directing public schools to focus more study on financial literacy. But Cowell says more effort is needed. And she is right.
All high-school students should take a rigorous course in home and personal economics, learning how financial instruments such as credit cards, mortgages and car loans work. They should know how to prepare a personal budget, balance a checking account and determine what is a good deal on a debit card.
Cowell also recommends that college-orientation classes include financial lessons. And she rightly calls for colleges and universities to act responsibly when it comes to credit-card companies and the offers they make on campus. The schools should be vetting the offers they allow to be made on campus to ensure that interest-rate and repayment terms are fair.
Of course, as with all family matters, the ultimate responsibility for keeping a child or young adult safe rests with the parents. Mom and dad need to talk to their youngsters about these issues, teaching them the dangers not just of stepping into the street without looking but also of running up too large a credit-card balance.
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