perishing for lack of knowledge
Sistah Beginner called me the other day because she had a revelation. She’s heard people say that they learned how to be financially responsible by following the example of their parents. Well, Sistah Beginner’s mom has excellent credit. So how did her credit get so messed up?
Sistah B says that all she can remember getting from her mother was, "Don’t go getting a whole bunch of credit cards." That’s it. That’s all.
I shared with her that my dad did have a talk or two with me about interest rates, minimum balances, etc. My mom did explain a little about mortgages and liens. And I regularly saw my mom go through a stack of bills while scribbling columns of numbers on the back of an envelope before writing checks and putting records in her check register (which is pretty much how I pay bills today, except she uses stamps and I pay online). I picked up what my mom showed me pretty well. But the stuff my dad told me about credit… well, I understood the concepts he was trying to explain, but it didn’t stick in my adolescent mind, partially because I didn’t have access to credit cards or bills and couldn’t see how credit card debt worked in action, which I think would’ve made the lesson he was trying to teach me come alive. Then, in an orientation program in college, I attended a workshop where an upperclassman ran through the fundamentals with us, warning us about the cards we’d be offered, explaining how foolish it would be to not pay balances in full or worse, continually make only the minimum payments. It was a good follow-up to my dad’s primer, and it really did help me to understand why it wasn’t a good idea to use plastic for eating out.
Sistah Beginner didn’t get any of that. When she first started getting cards, she got a bunch of store-issued cards, the ones with the worst interest rates, ran ‘em all up, and then lost her income. Then the delinquencies started happening. She says she never knew why a 23.9% interest rate was bad. People would shake their heads, but not explain how interest rates like that could affect her ability to repay a loan. And she never asked. It’s something she understands now, almost ten years later, after her credit has been tarnished. She’s in the process now of learning the factors that FICO uses when they calculate your score. To her, it’s confusingly contradictory. Sistah Beginner believes we don’t have practical consumer education in schools because the consumer product industry and the credit industry want us to be ignorant regarding credit and finance. And to her, it seems that the whole system is designed to make people hit pitfalls. I told her that if we learn the rules and adjust our behavior accordingly, we can work the system instead of the system working us over.
Sis B wants to go to school to learn what she should have been taught about credit and homeownership before now. I want her to learn how to work the system, and will help her find a class - there are free seminars for adults being offered all over the place. I think it would be really smart for parents to send their teens to seminars and classes like these before they leave home. And maybe I’ll bring her with me on the way to the homeownership seminar my credit union has invited me to attend.
