Financial Literacy Woefully Lacking ... We Have 'Implanted' in the Young a Lack of Knowledge Concerning the Financial Basics ... As a Result, Major Life Problems NEEDLESSLY Lie Ahead for Them

Most young people (too many oldsters as well, but that's another story for another time) are lacking in basic financial knowledge. That's likely to be harmful to their financial health and general well being as they progress through adulthood. In other words, they will encounter a lifetime of financial headaches without a proper understanding at the outset of what they are doing to themselves.

When young, they begin making wrongheaded life altering financial decisions at an early age, become needlessly heavily indebted (underwater car loans, underwater home mortgages, home equity loans, needlessly burdensome student loans and super expensive credit card balances), and never acquire an understanding of the freedom associated with having unencumbered assets and being debt free.

As a result, too many of our young adults become older adults wishing that they would have known 'way back then' what they now so painfully know. But by then lots of damage has been done, and there's no realistic way to quickly and easily undo the damage.

Due in large part to a poor educational system and a government that encourages too much personal debt, our young people aren't able to save and invest for the long haul. They become early lifetime debtors instead.

Why financial literacy isn't a basic part of our educational system has long been a mystery to me. Perhaps it's because most teachers and other well intentioned adults don't know enough about it to teach it. If so, that means even more trouble lies ahead for our nation's young people.

College freshmen flunk financial literacy 101 has this to say about the troubling topic:

"The same teens saddled with thousands of dollars in debt to attend college have little understanding of how to put themselves in the best position to pay it back.

On average, freshmen at four-year colleges could only answer about two out of six questions correctly about topics like the right amount of money to set aside in case of a financial emergency, the conditions placed on student loan borrowers and how long a late payment remains on your credit history, according to a study . . . . of 42,000 college freshmen {which} found that just 39% of four-year college students use budgets and 12% don’t even check their account balances because it makes them nervous.

Young people living on their own for the first time often learn basic financial lessons by over-drafting on their dwindling accounts to buy a slice of pizza or forgetting to pay a bill and discovering the late fees later....

But this approach doesn’t suffice for many in an era when 71% of students graduating from four-year colleges have student debt, which they’re expected to pay back at risk of losing future wages or tax refunds if they default.

“All college students are stressed financially, regardless of their experience or knowledge or behaviors,” said Mary Johnson, the vice president of financial literacy and student aid policy at Higher One. “The one area that seemed to make it worse is the level of student loans.”

The debt makes having the financial wherewithal to get through school particularly important. Students who make the investment in their education, but ultimately don’t get a degree, are the most likely to default. . . .

At Tyler Junior College in Tyler, Texas, officials are including financial literacy as a component of the school’s core curriculum and holding workshops on topics like budgeting around Christmastime and what to do with a tax refund.

“We saw a need to hit them both inside and outside the classroom so they can really understand how finances can impact their future and how it impacts their education specifically,” said Ashleigh Lewis, a professor at the school and the chair of the financial literacy committee. . . .

Many are using some kind of financial assistance, Lewis said, so her program tries to help students better understand their aid. Many need a primer on the difference between a grant and a loan or when and how to pay them back.

The workshops focus on “really understanding the impact. This federal money, this federal loan, this does not go away ever,” Lewis said. “You can’t just run away from your student loans.”"

Summing Up

Student loans are a huge problem facing young Americans.


Car loans, credit card balances, home mortgages, home equity loans and other forms of indebtedness are a big part of the 'underwater indebtedness' mix as well.

Financial literacy represents both a huge and unaddressed issue for both young and older Americans.

Not knowing the easily knowable basics of personal finance has been, is, and will continue to be harmful to our financial health and future prosperity, both as individuals and as a nation.


Don't borrow the money if you don't know how and when you're going to be able to pay it back.

That's my take.

Thanks. Bob.