Disturbing financial statistics

[C.Ann]

Take a look at how people spend their money these days and it will become quite obvious to you just exactly why these statistics are being reported such as they are...

 

[Julia M]

I hope this isn't too much off topic, but do you have any ideas of how to teach younger children about finances? I think my parents did a great job of teaching me (looking back, years later ...) but I have no idea about how to teach my son.

One of the things I believe in is talking to kids about the money decisions you make, big AND small.

I talk to my kids all the time (ages 13, 11, 8) about the choices I am making. I don't specify amounts all the time (my kids don't know how much we make), but I do explain things. I talk about the choices we make, and when I use my credit cards I talk about having to pay the money at the end of the month, and how much it would cost if I just pay the minimum balance.

We have friends that virtually never vacation, except to the grandparents house in Tahoe. But they do get the best seats for the Nutcracker every year, and go to 8-10 concerts a year, attend Disney on ice, etc. DD asked why we don't do that. I talked about how much that would cost (approximately) and over a year, what they spend on those events, and what we spend on vacations. During a usual year, it's about the same (we have a big trip this year that is NOT our normal pattern). I talked about the fact that it's not good or bad.....it's different choices that families make, and that one day, they will need to make those choices. I talk about where I shop to buy clothes, and why, and what it would cost elsewhere. But I tend to emphasize that they will be making the same choices one day. (getting it in their minds early that you can't have it all)

One thing to remember, on a board such as this, when people talk about amounts of money spent for this and that, is that you can't judge by that alone. DH and I happen to have an income that allows us more flexibility than others.

For example, a previous poster talked about spending $1000 on Xmas for the family. For some families, that would be an insane amount, that would cause them to be in debt. For dh and I, that would be our low end of spending. (It's usually more like 1200-1400). But, I put money away each month, as well as purchase gift cards.

The same for vacations. Some family may spend 5K for a vacation,a nd it's well within their budget....anoter may spend 1K, and really shouldn't be doing it!

We are also lucky, in that dh will have a good pension, and I will have a small one (since I work part time, I won't get alot). We both contribute to before tax savings plans. We haven't moved up in housing, so our house will be paid off when dh hits about 57, despite the fact we have taken money out for remodeling (but refinanced for 15 years), We use credit cards, but pay them off each month. When i realized I was having a hard time paying my credit card each month, I stopped using it, and went to cash and debit cards, to get back in control.

What I find amazing is that people have no ready cash saved. My dh was laid off and out of work 6 months about 4 years ago. He was laid off in the beginning of November, which was bad for job hunting. He received 6 1/2 weeks salary from severance and accumulated vacation. I luckily bumped from part time to full time in February. We lived more simply, and of course, didn't add to savings, and in fact, had to take money out of savings, for things like insurance. Three months later, a friend was laid off. She was in a panic, because she didn't know how she'd pay the summer daycare costs that she was committed to. That amazed me.....that they could drive fancy cars, but not have a few thousand dollars in cash available (we live in Silicon Valley, where salaries are high, but people also seem to spend alot on appearances.)

My biggest hope is that I do a good job educating my kids on how to handle money wisely

Julia

 

[disneysteve]

That amazed me.....that they could drive fancy cars, but not have a few thousand dollars in cash available (we live in Silicon Valley, where salaries are high, but people also seem to spend alot on appearances.)

It amazes me too. And it isn't just in Silicon Valley where folks spend a lot on appearances. I learned long ago that you can't tell anything about a person's financial situation by looking at their house, their clothes or their car because they may be in debt up to their eyeballs to pay for those things.

Read that OP again. 30% of people earning over $75,000/yr live paycheck to paycheck. 44% of US households have NO savings at all. It boggles the mind.

 

[dvcgirl]

gottaluvdis and Julia M...

Your posts give me hope for the future. You both sound really balanced and are trying to teach your children about finances at a really young age. Good for you! I know that there are many others here who most likely do this...and boy, is it ever going to be important for the children or our nation to understand money.

For any other parents out there looking for some insight into how to guide your childrens' financial future you may want to check out this book. "Clark Smart Parents, Clark Smart Kids". Written by Clark Howard, die hard fiscal conservative talk show host. I don't know if this guy will ever make Oprah, he's not flashy enough or radical enough....but I love his show...love his advice. Smart guy and really practices what he preaches.

Here's a description from Amazon...


"From the bestselling author of Get Clark Smart comes this valuable new resource enabling parents to pass 'Clark Smart' skills for saving and spending wisely on to kids of every age lark Howard-bestselling author, money-saving expert, and host of the popular syndicated radio program The Clark Howard Show-is back with more of his winning financial wisdom, this time aimed at helping parents teach kids real-world financial skills for today and every day. Parents of children of all ages-from elementary school through high school, college, and beyond-will benefit from Clark's sound, uncomplicated advice across a comprehensive range of topics. In Clark Smart Parents, Clark Smart Kids, he addresses everything from allowances-when and how much to give-to teaching teens about credit cards and navigating the purchase of a first car-how to get it, pay for it, and insure it-to saving for college, paying off loans, staying out of debt, and much more!"

 

[EthansMom]

My biggest hope is that I do a good job educating my kids on how to handle money wisely

 

[Julia M]

Read that OP again. 30% of people earning over $75,000/yr live paycheck to paycheck. 44% of US households have NO savings at all. It boggles the mind.

Actually, there was just an article in the newspaper a few weeks ago.....it showed how you had to make $77,000 a year here just to pay the basic bills (rent, utilities, etc)

So I can understand how someone could live paycheck to paycheck here, especially with just one income.

What I can't understand are people my age (mid 40's), making a decent salary, and still being in that situation. I guess I was lucky, though.....my parents would good role models.

I may sound lazy, but I hope dh and I can retire at a resonable age. Dh was in his late 30's when our last child was born, so he'll be 62 when he'll (hopefully) be out of college. But I am planning for retirement not too long after that! I want to travel, and do volunteer work, and who knows what else. I'm also lucky in that I could always come back and work for a bit, to earn some extra dollars for a trip and such (I'm a speech therapist, and specialize in autism.....I could work as much as I wanted! )

 

[crazelion]

I thought I'd share some data that all came from national financial magazines the past couple of days. Personally, I find these stats alarming.

1. Over the past 10 years, credit card debt among 18- to 24-year-olds has risen by 104%.

2. Only 56% of US households have any type of savings, while 44% have no savings at all.

3. 32% of households headed by someone aged 65 to 74 were carrying home mortgage debt as of 2001, an increase of 26% from just 3 years earlier.

4. Nearly 60% of households in America with children under age 18 and over half of those nearing retirement depend on their latest paycheck to meet expenses. That also includes one third of workers earning $75,000 or more.

Curious, as always, to hear your thoughts.

disneysteve I will probably be working til I am 100 years old because I live from paycheck to paycheck and rarely have anything to show for it.

I work 3 jobs because I can't found a full time one right now. I have cut every where I can cut.

I try save something for dare emergency if only it's a dollar a week but even that pushing it.

.

 

[DMRick]

Great point. No matter how low the price is, it isn't a bargain if you don't need the thing. You may save $50 by buying it, but you'll save $150 by not buying it.

I was pleasantly surprised to see Staples have their leader items on line this morning, after saying up til 6 am, that you had to buy from the store.

I bought lots of stuff I didn't need today (a lot of it free or next to nothing)..however, you will be seeing it up on eBay...just another way to make money

Last year Staples had a paper shredder (it was a pretty good one..cross cut), that was free after rebate. Someone bought it off me for about $25 on eBay. The items I bought today will go for considerably higher.

Of course my children did inherit from both of their parents how to handle credit (I really think it's the parents responsibility to teach it, but the kids responsibility to use the knowledge, not the cc companies), and while they (like me) charge everything for points..that CC gets paid off monthly. Oh, and Steve, we still fill out credit card ap's for the free gifts (and nope, hasn't hurt our credit score at all)

 

[HaleyB]

I am all for personal responsibility, but it is the role of a government to protect the weak from those that would prey on them. In some cases weak means those who do not know better.

Perhaps in the end the only solution is personal responsibility, but I hate the fact that cc companies take such advantage of people.

 

[DMRick]

I am all for personal responsibility, but it is the role of a government to protect the weak from those that would prey on them. In some cases weak means those who do not know better.

That sort of scares me.

 

[Free4Life11]

If I had my way those trashy CC booths offering the "gifts" would be banned from our campus. You can talk about personal responsibility until you are blue in the face, but face it: very few college students lack the life exerperience or personal responsibility to know how to deal with being given thousands of dollars in credit. And yes, these companies DO give students thousands of dollars in credit. These companies KNOW how people think and they know how to get to them.

I'd like to know their justification in giving me a $1000 credit line increase. That was more than my original credit line! To me, it's like sending someone a fully activated credit card in the mail saying, for your convenience here is a fully activated credit card ready for you to use with a limit of $1000. I was furious as it was unsolicited and I KNOW that I simply don't lack the responsibility to NOT use it. I'll make about $8000 this year and they wanted to give me a credit line of $6000? Sorry but something is wrong with that picture. A credit line equal to 75% of my income...my parents don't even have that much % of credit!

I prompty called them up and said (1) to reduce my limit, I do NOT want another $1000 and (2) if I am such an "excellent customer" as you call me, why the hell do you keep INCREASING my interest rates?

I believe these companies DO prey on people and I think it's wrong. They give them unsolicited credit line increases, hoping that people will charge more. They give them nice interest rates and then jack them up. Even if they say 14.99% after that, they find SOME way to raise the rate. It may all be legal, but I think it's sneaky and rotten.

 

[DMRick]

I believe these companies DO prey on people and I think it's wrong. They give them unsolicited credit line increases, hoping that people will charge more. They give them nice interest rates and then jack them up. Even if they say 14.99% after that, they find SOME way to raise the rate. It may all be legal, but I think it's sneaky and rotten.

Are you a college student? And you turned down the credit? I hope by the time I sent my kids to college, they were smart enough to do the same if they couldn't handle it. My kids DID have credit cards in college, but knew the responsibility was theirs to watch the charging on it. On Payday, I assume that college kids are smart enough to know that they can't go and buy 15 CD's before paying their bills, and they should know if they charged them instead, that simple math will show if they can afford to do this or not. I certainly don't want the government making decisions on who will or won't be eligible for a credit card, and for what amount. I DO think the government should be sure credit cards clearly show what percentage the payback will be, but then who reads the pamplet that comes with the credit cards giving all this info?
I don't believe that most college kids can't figure out that they can't afford to charge everything in sight.

 

[imsayin]

I learned long ago that you can't tell anything about a person's financial situation by looking at their house, their clothes or their car because they may be in debt up to their eyeballs to pay for those things.

I point this out to my kids all the time. DD11 use to say "they are rich because they have a lot of nice clothes". Now she knows better. Material things don't mean you're rich, and a lot of times they mean you're poor.

 

[summersfam4]

Number 4 is the one that REALLY scares me . Probably because we have been in that situation untill recently, me (28) a SAHM, and DH (39) has a great job but is self employed (pay out of pocket for health care, self employment tax, ect can be very expensive) and after a being totally OK with a purchase that would finance out to $50-$100 per month because we could cover that, all it took was a glitch in being paid (we were not paid for 4 months, we co-own the company and had some major problems with a divorcing spouse) we received a real wake-up. We were not thinking at all about the future (looking back it's really scary) luckily for us that wake up call came early enough and lasted long enough for us to really get the message and turn the situation around. We will still have fun times, budget friendly vacations, and a great life, without the amazing flat screen like our friends have in their living room, and best of all we are bill free except a Mortgage (and of course utilities) and are saving for the important things in life (retirement, weddings, schooling, ect). Thankfully reading posts like this one have helped lead me in the right direction, and give me reasons to keep on chugging down the savings track Scary thing is that many will not have a real wake up call untill it is to late

4. Nearly 60% of households in America with children under age 18 and over half of those nearing retirement depend on their latest paycheck to meet expenses. That also includes one third of workers earning $75,000 or more.

time for some plus the 20% interest you will pay for the next 20 years of your life while making the minimum payment!

Thanks for the stats!
Kelly

 

[dcfromva]

IMO, a credit card company should be legally barred from granting a credit card to an individual with zero income and thus no means to repay any debt acquired. How can you possibly be a good credit risk if you have no money?

DisneySteve,
I agree with you that in some respects there should be stronger protections in place, but I think using a CC in college to pay for expenses is a good thing especially when comparing it to a debit card...
In some cases, money has been saved for the child to go to college and the child needs to get books and supplies. There are a few reasons that a CC might be preferred. One long term reason is the CC will help the individual start to establish a credit history for when it comes time to purchase a house. Another reason is that it will be far easier to obtain the items that are needed as sometimes, there may be bigger ticket items that need to be purchased that Mom and Dad might not know about in advance... (I don't think the child should have access to the whole pot of college money all at once! )
The most compelling reason I can think of to use a CC over a debit card is I think there is a general lack of consumer protections for debit cards. I am referring to such things as having more of your assets frozen than what was actually used for a transaction (like at the service stations when making a purchase) and taking several days for the excess charge to be released. Or, having your assets frozen or unavailable due to a transaction that is being disputed (even if the bank agrees with you, there is a period of time that you won't have access to your funds). That is not good when you were planning to use some of those funds for food over the weekend!

Also with a debit card, there is a chance to forget to record a transaction. I have also noticed that some things do not show up right away--and the assets are not frozen (like when you are ordering something and it is back-ordered).

If you make a mistake and don't record a credit card charge, you have a little bit of time to figure it out. But, if that happens on a debit card, you have the possibility to bounce a check --which is against the law. And certainly not a good start for someone looking for a job after finishing college--in some jobs, this is an automatic disqualifier.

I think as long as you do not charge more than you have money set aside to pay off the entire balance of the credit card each month, the CC actually provides a person with a lot of conveniences and consumer protections. (This applies to college students and everyone, really. ).



-DC

 

[crisi]

That sort of scares me.

Why? I have a friend with a mentally disabled adult daughter. The daughter has about third grade skills. She lives in a group home and works at Wendy's where she wipes tables and mops floors (but doesn't work the cash register or cook). She gets approved credit card offers all the time.

Personally, I'd rather have the laws that protect her - and protect me when they take advantage of her - than have her taken advantage of and us stuck with the bill, which is what happens now. If the credit card companies want to give her credit THEY should take the risk - not pass it along to me in the form of 23% interest.

 

[canwegosoon]

Wanted to post this, I know we all have or favorite financial guys we like, but I love this site for obtaining base knowledge...esp. for those that never took any type of financial management/lifeskills courses. It is put out by Visa..just so you know. http://www.practicalmoneyskills.com/english/at_home/

 

[CajunDixie]

I think part of the blame should lie with the credit card companies/banks. There isn't a day that goes by that I don't get something in the mail offering me another credit card.

For some offers that come in the mail you can OPT out. Possibly these companies are getting your information off of your credit reports. Call 1-888-5OPT OUT

I agree no income college kids should not be allowed CC. But I do think if they have a job they need to at least establish credit with maybe a gas card and a secured CC. At least if the card is secured they will have had to save up a few hundred to open the account and usually the secured part is not reported on their credit reports.

My cousin never used CC and paid cash for their vehicles and lived in a trailer that was paid off years ago. A couple years ago they found a house they wanted to buy and had a nice down payment saved up. They were denied the mortgage because they had absolutely no credit history for his wife and only the trailer purchase for him. So he had a very low FICA number. His mom (my aunt) came from a family of 16 kids and they lived through some poor times so she taught her kids to not use credit, to shop frugally and to live within their means.

 

[MrsPete]

Great point. No matter how low the price is, it isn't a bargain if you don't need the thing. You may save $50 by buying it, but you'll save $150 by not buying it.

Along those same lines, I HATE when I'm checking out and the cashier says to me, "You saved $____ today." I know I should just let it go, but I usually say, "No, actually I spent $______ today."

 

[DMRick]

Why? I have a friend with a mentally disabled adult daughter. The daughter has about third grade skills. She lives in a group home and works at Wendy's where she wipes tables and mops floors (but doesn't work the cash register or cook). She gets approved credit card offers all the time.
Personally, I'd rather have the laws that protect her - and protect me when they take advantage of her - than have her taken advantage of and us stuck with the bill, which is what happens now. If the credit card companies want to give her credit THEY should take the risk - not pass it along to me in the form of 23% interest.

In that case I understand, if she is able to hold a job, but still would not understand buying on credit and paying off, and hope your friend can help her daughter manage her offers. But I don't like the idea of the government deciding who IS capable. What if my IQ wasn't enough to suit them? Is it OK if my IQ is high enough but my salary isn't, or vise versa? Would they decide that all those who live in group homes can't get credit? We have a handicap group home a couple blocks from me, but not all of the residents would not be capable. What if the government decided I was putting too much on my credit cards, and didn't realize I paid them off every month. Who would decide the criteria? Too much government interference scares me. There are plenty of adults who have the same problem with cc's as young people, or mentally disabled people. I wish schools would have a required course in CC management...although so many adults know better and still get themselves in a bind. As far as the cc company's and their risk, and it being passed to me in the form of 23% interest, none of our cards are anywhere near that. But then I keep them paid off, so it wouldn't matter to me. If you have good credit (not you per se, anyone), be sure to call your cc company, if your interest is that high, and ask them to lower it. They often will.