High school students are the citizens of tomorrow. In a very few years they will join the ranks of voters, with the power to influence the future of their nation. They will hold jobs, form partnerships, support children, and negotiate loans for houses, cars, and further studies. Many of them will learn about debt the hard way.
Popular advertising depicts loan providers as the consumers’ friends, eager to help them reach their goals and make their dreams come true. Slogans like “Get two hundred dollars for only twenty!” make it sound like they are giving money away. Debt relief agencies make debts sound like some sort of achievement. An ad by CreditGUARD of America proclaims: “Consumers need only $2,000 or more in total credit card debt and behind on any account, to cut their payment by 35% to 50%, and reduce or eliminate interest charges altogether.”
Without some hard-nosed education, inexperienced youngsters can get the impression that the miracle of credit makes saving unnecessary, and that people who make their payments on time are losers who are missing out on the benefits of debt relief. They may not realize that when they use a credit card to buy something, they haven’t paid for it until they clear up the bill in full. It may not be clear to them that paying interest erodes the buying power of their money. The more they owe, the more money disappears into the pockets of loan providers.
Our society puts a great deal of effort into making sure teenagers know about safe sex and the dangers of substance abuse. Driver education programs strive to reduce the number of vehicle accidents. We provide gun safety courses, but what about financial safety? Many teens leave home without their own bank account, without a financial plan, without ever having had to struggle with grocery budgets or utility bills.
FISCAL RESPONSIBILITY should be a compulsory course on every high school curriculum. Failing that, the lessons can be taught in the context of mathematics, social studies, and family studies. Extra-curricular programs can be used to teach students entrepreneurial and financial skills as they formulate business plans, borrow seed money, and persevere until they succeed.
Every high school student needs to know the facts of life about personal finance. Money that is borrowed must be paid back. Paying interest decreases the buying power of one’s money. Borrowing more money is not a solution for financial distress, but makes matters worse in the long run. A thriving family unit has a workable budget and the discipline to stick to it. A responsible consumer knows that doing without a luxury today will lead to greater prosperity in the future.
It is important to distinguish between helpful debts and toxic debts. A student loan, a mortgage on a house, or seed money to start a business can all have positive outcomes if they are used responsibly, with a commitment to repayment as quickly as possible. An interest-free loan is profitable for someone who has the money for the purchase in the bank earning interest, and the self-discipline to hang onto it until the loan is paid.
Students need to learn about corporate and government finances as well. As voters and participants in society, they will have input into the decisions their governments make. It is useful to study the financial history of other countries in the world, the various strategies governments have used to bail themselves out of difficulties, and short-term and long-term results of those decisions. If ever there was a time when citizens need a firm grasp on the mechanics of debt, interest, and repayment, it is now.
The foundations of financial education are laid in the home. How does the family handle its finances? Do Mom and Dad treat credit as if it were cash? Do they bail their children out when they make poor financial decisions, or do they allow them to experience the consequences? Do they discuss budgets, and include the children in age-appropriate decision-making? Does the family work together to raise funds for a new car or special vacation? Do the children help meet household expenses when they start earning their own money? Do the children have their own bank accounts and financial goals? The ability to use money wisely is one of the best tools a young adult could have to take into the challenges of independent living.
The seeds of future harvests are sown today. We are currently harvesting the fruit of irresponsibility. If we want a different harvest, we will have to sow different seeds. We must change our own behavior, lead by example, and teach our children what they need to know to succeed. Positive financial reform is a difficult road, but it leads to satisfaction and freedom.