Let's think about the following... (and do what we are entitled to do):
Saving lessons start at home
With words like "tsunami" being used to describe the country's current economic calamity, a recent national report reminds parents and all caring adults to teach kids how to swim in the wake of the financial tidal wave.
Testifying to a U.S. House committee last month, former Federal Reserve chairman Alan Greenspan said our nation is in the midst of a "credit tsunami," from maxed-out credit cards, to a negative savings rate, to subprime loans bundled into bad investments. Months earlier, a diverse group of family, community and financial experts recruited by the Institute for American Values issued a similar warning, along with a lifeboat.
Their report, "For a New Thrift: Confronting the Debt Culture," reveals that America's consumer debt has reached nearly $1 trillion. The typical American family now spends more than 18 percent of income on debt -- the highest percentage since these statistics have been collected. Nearly half of all credit card holders missed at least one payment in the last year.
The authors list several reasons for America's debt culture including "individual greed and recklessness . . . irresponsible choices . . . (and) a rampant culture of consumerism." But the lack of personal responsibility is not the only cause. The study also points to institutions such as payday loan and cash advance centers, rent-to-own stores and government-sponsored gambling as posing additional challenges for low-income residents.
This culture of debt has been passed on to the next generation. While the report carefully acknowledges the necessity of credit cards in today's online "e-tail" economy, the authors note that many teenagers obtain their first credit card while in high school, and more than half will have four credit cards during their college-age years. Those teens and young adults owe an average of more than $2,000 on that plastic, and this is on top of the average debt of $21,000 they hold in college loans.
The institute describes two negative influences on the younger generation. The first is intentional marketing by credit card companies to adolescents who lack sense about dollars and cents. "Too often," the study states, "teen credit card users fail to appreciate how much things cost, fail to grasp the concept of a sales tax, and fail to experience the (melancholy sadness) of an empty wallet following a spending spree."
Do not, however, simply blame the wizards of Wall Street for spellbinding strategies. The report argues that the credit crush also has been encouraged at home. "Young people also had a hidden asset: Parents who would be likely to come to their financial rescue if they got over their heads in credit card debt."
According to the institute's president, David Blankenhorn, "We as parents naturally want to, and can, give our children a lot of stuff. But we short-change them terribly if we don't also teach them to spend wisely, to avoid credit card debt, to live within a budget, save money and help other people.
"For children, as for adults," he continued, "the question, 'How much do I have?' is not nearly as important as the question 'What do I do with what I have?' "
Blankenhorn recommends that "parents can help their kids make a budget, think before they spend and start a program of regular savings. Parents can help children look for ways to avoid waste while also encouraging them to choose worthy causes to which they want to give time and money."
Blankenhorn and his colleagues also endorse financial literacy lessons in school.
"For a New Thrift" also calls for a national public education campaign promoting thrift as a value and a practice. For example, the study recommends replicating the war bond movement of World War II, when Americans responded by saving an average of 25 percent of their income.
Children do not grow up on Wall Street. They don't even grow up on Main Street. Instead, children grow up on your street, and mine. The sooner we teach them streetwise common sense about their money, the better chance they will have of not repeating today's economic distress.
(Image: Flickr)
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