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.
It’s great that she’s hungry for knowledge and wisdom and it’s great that you are sharing. What’s that saying about teaching a man to fish? Yeah, that one.
Comment by s23 — October 25, 2007 @ 10:09 am
The class sounds like a great idea. I’m only just learning how to work the system myself after many years. College credit cards did me in, but I’m just about completely out of the woods. Saving and spending my money much more wisely than I did even just 5 years ago. It seems the more I make, the more frugal I become, instead of the opposite and I’m so thankful for that! When I got my cost of living increase a few months ago, I immediately set up my online savings account to automatically get those funds and continued to operate as if I were getting the same paycheck I was getting before the increase. Haven’t missed a beat. Back in the day, that extra cash would have been spent!
That is good for you! I wish more people could learn that lesson, sooner rather than later.
Comment by Sugar — October 25, 2007 @ 10:36 am
I educated myself through the internet. MSN Money has some great articles for beginners, then I moved up to CNN Money….then to personal blogs.
That’s what I’ve been doing, reading as much as I can. But as much as I’ve suggested this to Sistah Beginner by suggesting various helpful websites, I think she would prefer to sit in on a class. She hasn’t gone to college - I mention this because I believe that college has a good way of getting people to read and teach themselves things, as opposed to high school, where you are actually taught things face-to-face without having to rely on your reading to learn. Many people I know who only have high school educations would rather be told things than have to research and read it for themselves. Many people I know, college-educated or not, are not big fans of reading, because they find it boring. Even then, some folks, like Sistah B, don’t have a lot of time to read anything because of their busy schedule, even if they were inclined to read and teach themselves.
Comment by SavingDiva — October 25, 2007 @ 11:37 am
You are on track, Knowledge is the begining, education and seminars are great starters. The point is to get her around the culture of finance and how it works.
In addition to my education, I still read pf books and attend seminars, simply to stay in the know.
Comment by Moneymonk — October 25, 2007 @ 1:02 pm
Like saving diva, I’m learning through the internet. It’s confusing and stressful but I’m having fun learning.
Comment by Kahnee — October 25, 2007 @ 11:25 pm