($)99 problems

[aidenfire]

I saw this website, put out by the US President's Advisory Council on Financial Capability, entitled Money As You Grow -- 20 Things Kids Need to Know to Live Financially Smart Lives. In theory this is a great idea; the website is simple and eye-pleasing, the information is presented in small easily understood chunks, but I have some concerns about what they're presenting as need-to-know information, especially for the older ages. For example, yes, technically you shouldn't use a credit card unless you are able to pay it off in full every month. But there are instances when you do actually need to buy something that you can't pay off in a month. My computer broke when I was in college. I needed a new one for my school work, and I didn't make enough money to buy even a not very nice one outright in a month. I feel like teaching kids to never use a credit card is like teaching abstinence only sex education -- they're going to do it eventually, but if you just say no no no, they're not going to know how to do it responsibly.

Also, the website advocates having 3 months living expenses saved by the age of 19. I didn't live an extravagant life when I was 19 by any means, and I worked at an above-minimum-wage job 20+ hours a week, while going to school full time. I wasn't even making enough money per month for living expenses, let alone saving anything; I was getting by on student loans, help from my family, and yes, credit cards. By presenting that as a basic necessary life lesson, it seems to frame people for whom that is not a possibility as failures. I recently came into some money unexpectedly, and I used it to buy a car, which I needed for work, and to pay off a good chunk of my credit card debt. It would have been fiscally irresponsible to just put that money in a savings account to gain at most 2% interest (and probably more like .5%), instead of pay off debt that's got a 18%, or even higher, interest rate. And I haven't even touched on my thousands of dollars of student debt.

I'm disappointed that the US administration seems to be tailoring its advice to people and families that already have money (starting your Roth IRA at 16, really?). I don't know these people that have 3 months living expenses on hand, and that don't need credit cards, and that can start investing as teenagers. I think more useful money lessons would be things like how to know if a credit card is offering you a good rate or not, that late payments mean you'll have to pay more later both on your bills and due to your credit score, how to deduct everything you qualify for from your taxes, or why it's good to pay down debts as fast as possible.

Thoughts?

Comments

[ashkitty]

I don't think that's quite what they're teaching, the way I read it, especially because 'credit can get you stuff' is a message they're going to get practically everywhere else! From the 18+ bit:

There may be an emergency expense that you can't pay off immediately and need to charge. That's why it's important not to charge everyday items.

That seems to me like it would cover your computer situation? I know what you mean; I had to live off my credit card totally once in uni because I got mono and couldn't go to work. This is what credit cards are for. (And I never had 3 months living expenses either, I do think maybe the teenagers on this website have imaginary high-paying pre-college jobs.) :p

Overall I think it's good advice, and things that people whose families don't have money to start with often don't learn, since if you don't have money you have to manage it a very different way. I think it's all good stuff to shoot for, and if you can't do it then you can't, but it's still good to have the information in the back of your head somewhere. (Like the retirement plan thing! I have a tiny retirement plan because I never get jobs that have them, but I always do it anyway, whereas I know people who are in their 40s now and all OH LOOK MY 401K HAS MONEY IN IT, TRIP TO EUROPE! which is stupid.)

I might be rambling a lot, I haven't had coffee yet, sorry. *remedies this*

[aidenfire]

Maybe I just didn't delve deep enough! I didn't read through all the subtopics for each of the main year lessons. And I'm definitely not disputing that it's good advice or something to shoot for; it just seems so idealistic that it's almost not practical. People who don't have money do manage it in a very different way, and it's more important to pay rent than it is to invest at that point, in my opinion. I also think that kids who grow up with money are more likely to learn these lessons. For example, one of my friends in college was filthy rich, and he did have money invested at the age of 18. It just seems like a lot of this isn't practical to a lot of lower middle class/working class families, who are often the people who most need financial advice.

[ashkitty]

If you read the subtopics it does clear things up a bit, I think--the headings are VERY general. I'm not saying it's all going to useful to everybody--a diversified portfolio at 18? At 18 a 'portfolio' to me was something you carried school papers in. :p Though I think if you started this very young, with the 'save a dime from every dollar' idea getting into your head, you could have some savings built up by 18, even if it isn't much.

I do definitely agree that it's the people who don't have money who need to learn to spend it (and said so I think, above, but may have done so incoherently, I really wasn't awake yet!). The friends I have whose families lived on credit and never had savings seem to have the same lifestyle now they're adults, and never seem to quite register that buying every shiny thing you see is going to come back to bite you when that emergency comes up.