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Published: April 2010

Can financial education head off early conomic woes?

A commentary in the Huffington Post delves into the problem of twentysomethings who are struggling to make financial ends meet and how financial education can play a role in heading off disaster earlier.

Below is an excerpt from the commentary:

On average, 1.5 million people graduate from college every year in the US. In our current environment, many of these recent graduates are struggling to pay down their credit card debt and student loans, searching for jobs and trying to desperately to figure out how to gain financial independence. According to a recent study by Sallie Mae, college seniors graduate with an average of $4,138 in credit card debt, up 44% from 2004. Further research shows that people in the 18 to 24 age bracket spend nearly 30% of their monthly income just on debt repayment. (A recommended amount for debt obligation stands at 10% of net income.) If that doesn't strike a chord, the number of 18 to 24-year-olds declaring bankruptcy has increased 96% in 10 years.

As our nation strives to find solutions for the dire state of the economy, many recent graduates attempt to find solutions for their financial burdens without any educational background in personal finance. If we can bring financial education to the 1.5 million people who graduate each year in debt, we could prevent them from making future financial mistakes and empower them with greater financial well being. Then, I believe, we will have found a solution for their financial problems and a great way to improve our current economy.

Without any formal personal finance instruction in our high school or college curricula, many college seniors who graduate in the red will continue to make common financial mistakes that only exacerbate their debt burdens.

Without any formal personal finance education or trustworthy resources to tell them otherwise, the majority of people in the 18 to 24 year old age bracket do not know how to use credit effectively, tackle debt or make wise decisions when it comes to spending. In the 2009 study of undergraduate credit card spending by Sallie Mae, the majority of undergraduates students polled reported they lived beyond their means and eighty-two percent carried balances and incurred finance charges each month. Interestingly enough, eighty-four percent think they needed more education on financial management topics to better manage their finances. I believe we can positively affect these young individuals' financial well being and in effect, the future state of the economy by providing them with access to basic, trustworthy personal finance education.

For More Information

Financial Education: The Solution for the Future of Our Economy? by Alexa von Tobel

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Consumer Protection   ♦   Credit Cards   ♦