It used to be that parents would blush with pride when their children were accused of being “born with a silver spoon in their mouth”. I am not talking about the likes of super brats like Paris Hilton or Nicole Ritchie here. Just regular people like you and me, who would strive to make a good living for themselves and have something left over for the future generations.
But with the ease with which credit is available these days and the rather successful marketing campaign conducted by credit card companies, it seems that more and more people are being addicted to the plastic. Add to that the lack of any formal education on the proper usage of the cards or the consequences of abusing them, and our reliance on credit cards paints a bleak picture. Which makes me wonder, what is the legacy we are leaving behind for our future generations? Are we condemning them to be born with a plastic spoon in their mouth?
Here are some of the facts published in a report by the Consumer Federation of America -
- Eighty percent of all households have at least one credit card.
- With well over one billion cards in circulation, the average household has about a dozen credit cards.
- About sixty percent of cardholders carry credit card debt from month to month.
- The average credit card debt for households that carry a balance is more than $10,000.
- Americans owe more in credit card debt than for education.
No matter how you slice it, those facts are quite sobering. As a matter of fact, the impact of these statistics is downright depressing. According to this report,
- Bankruptcy rates for young Americans aged 25 to 34 increased by 19% between 1992 and 2001.
- An average indebted young American spends nearly a quarter
of every dollar earned servicing debt, under the assumption that he/she pays only the minimum payments of 2½ % of the debt amount.
- If mortgage and student loan payments are included, 13% of indebted young Americans spend more than 40% of their income on debt payments.
So, what can we do to leave a better legacy behind?
Well, first off we could start in our own homes. Instead of expecting the “system” to teach our children how to responsibly use credit cards, we can teach them these lessons ourselves. Instead of cribbing and whining about how schools do not teach the children about money management, we can start with these lessons at home when they are still early. A piggy bank for pre-teens, a bank account for teens and a credit card (yes, a credit card) for college-bound kids can go a long way in ensuring that they learn the good and the bad of handling money in a controlled environment. By making them loans and rewarding good payment behavior we can encourage them to grow up to be responsible adults. (The dynamics of each house is different – so make sure that you don’t push it and make them averse to financial responsibility).
Second, we can lead by example. Kids not only learn the lessons we consciously teach them, but also soak up a lot from the way we behave. Making sure that we pay our monthly bills in time instead of carrying balances is as important as sneaking in a lecture about debt being bad. When it is time for vacation, by cutting back on some of the luxuries so we can save ahead of time instead of charging everything to a card, we can teach our children the habits of saving at an early age. By not chasing after the Joneses ourselves, we can help them learn to stand up to peer pressure. Our response to unexpected expenditure can convey a lot of unspoken lessons.
Finally, encourage communication about money. If our kids are ever in financial trouble and need a hand to pull them out, it is better that they turn to us and not to the first credit mongering company. As they grow up, instead of punishing them for being bad, if we develop a culture of rewarding the good, then they will not hesitate to come to us first if they land themselves in financial trouble. It is a delicate balance – to teach independence and yet convey that they can depend on us if the need be. But by striving for this, we can hopefully save them a lot of heartache and distress in the future.
Overall, I think we still have hope. Our future generations may be born in a world where credit cards are omnipresent and omnipotent, but by teaching our children how to handle credit properly, we may still be able to prevent them from messing up their lives. And by being responsible credit users ourselves and replacing a habit of carrying debt with building savings, we may just be able to leave them a silver spoon or two too.