Solving financial woes through education
One often-overlooked reason for our current financial mess is a lack of education about money and business.
Consumers were just as financially negligent as businesses. Bankers made mortgages to people who could not afford them. And those who were unable to afford their homes and other desires bought them anyway — unfortunately, on credit.
So far, 21 states now require at least some type of instruction on personal finance, according to Jump $tart Coalition for Personal Financial Literacy, Washington, D.C.
Plus, you can find a lot of free information at a U.S. government web site available to all families — www.mymoney.gov. Or, you can get information by phone at 1-888-MYMONEY. The web site and phone line are manned by the Financial Literacy and Education Commission, made up of 20 federal agencies.
More help for teachers and parents is available from the nonprofit Alliance for Investor Education, Washington D.C. Among the alliance's 21 members are state securities regulators, the Security and Exchange Commission and Financial Industry Regulatory Authority.
The Alliance for Investor Education provides free information at www.Inves toreduca tion.org. At www.inves toreduca tion.org/ backtos chool, you also can find links for 10 free educational tools.
Newly available to consumers: An interactive game-based financial literacy course, MoneyU, which already is used in public schools and colleges. Available at www.moneyu.com, the program, designed for young adults, between the ages of 17 and 24, teaches skills, such as how to compare credit cards and auto loans. It also teaches how to research starting salaries in a chosen field, manage debt, save and file income taxes.
The creator, Griffin Enterprises, Rockville, Md., is offering the game to students for $14.95 through June 1, 2010 for those not attending the 12 or so schools that already use it.
The aim of the interactive game is to use smart financial strategies to become a virtual millionaire. You can do this by maximizing your net worth and credit score.
Expect financial literacy to become an even bigger issue in the near future.
The "Financial Literacy for Students Act of 2009," introduced by Sen. Kay Hagan (D-NC), provides grants to states that add banking, credit and taxes into school curriculums for grades 6 through 12.
Tahira Hira, personal finance professor at Iowa State University, Ames, Iowa, is particularly interested in seeing fewer college students experience financial distress.
"People need to learn the basic principles so they can make the right purchasing and financial decisions," she says.
Those basic principles involve:
• First knowing how much you have available to spend. Keep that figure in mind so you can strive to stay below it. Always take care of basic needs-like food, shelter, health care, transportation and college supplies-first.
• Spend less than you have. Put unspent money away for a rainy day fund.
• Be wary of borrowing. While it's acceptable to pay for higher education because it results in higher-paying jobs, a student loan should be the last resort. Also, watch how much you pay for it. Fully understand the loan's cost and terms.
Distinguish between wants and needs, Hira advises. If you want something, avoid whipping out the credit card. Save for it instead.
Public school and college students must take courses that teach them how to budget, borrow, save and invest, Hira believes. Online interactive money teaching websites, she says, can be invaluable in building experience--once the basics are learned.
Spouses Gail Liberman and Alan Lavine are syndicated columnists. Their latest book is "Quick Steps to Financial Stability" (Que/Penguin). You can contact them at www.moneycouple.com.
