I had the pleasure this past week to meet with a colleague who happens to be a Bankruptcy Trustee. The conversation was very enlightening as the stigma around people that need to claim bankruptcy can be quite harsh when in reality it is in some ways not the persons fault but the fault of society as a whole. Now what I mean is that people are not taught about money or credit or mortgages or borrowing. There isn’t a course in school that teaches you about credit, financing, savings or anything to do with money.
So how is it that society just expects us to go out into the world and know exactly how to handle money and credit?
If you really think about the above statement it is true. You turn 16, you want to drive a car, what do you do? You take lessons, you write a test, take some more lessons, and take a test and then maybe you get your licence to drive. Well if you take the same scenario with your credit it may look something like this. You start your first year of college or university, the bank sends you a letter stating that you have been approved for a credit card, awesome, of course you take it, who wouldn’t? You get the card you have lots of expenses as well as a few pleasures and before you know it your card is maxed. Well, that’s okay says the bank, we will increase your credit limit, no problem. Then while you are at school you decide you would like a car. You know that when you are done school that you will be able to pay the car off but in the meantime you decide to finance your car through the car dealership. They ask you a few questions and before you know it you have a car and a new car payment and the cycle continues. Once you have one credit card under your belt, another company will be approving you for their card, yes the vicious cycle continues.
If you are a young adult and didn’t have much guidance when it came to money you can see how this cycle starts and how the excitement of credit can be so very alluring and seductive. But like any good thing it always comes to an end and for some people that end is or can be claiming bankruptcy.
It is really unfortunate given the number of bankruptcies each year that the government has not done more about this. I believe that there should be a course in school that teaches our young adults all about money. Borrowing, lending, debt service ratio’s, how to use a credit card without getting into trouble. How to save. How much to save. There are so many things that need to be dealt with in this area. The fact is we use “MONEY”, every day. Should there not be more education around this? When was the last time you had to add A+B to equal C? I don’t know if I have ever used algebra in my day to day life, but I have had to deal with borrowing and investing money my entire adult life.
The point that I am trying to make is that we need more education when it comes to money. Our society needs to support money education and we need to come up with a plan to educate people on credit instead of taking advantage of people’s lack of knowledge when it comes to credit. In the end the cost of the education would be far less then the cost of the bankruptcies that are completed every year.
What are your ideas on money education? Would love to hear from you.