Why We Need Credit Education For Young Americans

by: Daniel Blackhall

I would like to tell you a story about how signing up for a free t-shirt on a college campus would ultimately lead to the financial ruin of a kid named Jimmy. Of course, the first question you are asking is how in the world could an insignificant shirt cause so much damage. The answer lies in the details of the shirt's acquisition, and what the true cost of the shirt turned out to be.

Jimmy, a freshman at a well respected midwestern liberal arts college was on his way to his Chemistry 101 class a few years ago, when he sees a booth on campus that has a great looking t-shirt displaying the school colors and logo, along with a sign that reads "Free T-shirts, Today Only". Jimmy, being enticed by the offer approaches the booth, and asks how do I get my free shirt. The lovely young attendant says all you need to do is show me your ID, fill out this quick form, and the shirt is yours. Without hesitation Jimmy completes the form, knowing that it was an application for a credit card, but not truly know what he was getting himself into.

Soon Jimmy receives his new credit card and realizes that he can buy almost anything he wanted, and did not have to pay for it right away. He loads up on new CDs, video games, a couple new posters for the dorm room, and the groceries for the week. The total is a lot more than he anticipated, but he decides to take all the items anyway, even though the bill was more than he had in his entire checking account. He thought "That is the beauty of having the card, I can enjoy life now and pay the bill later when I have the cash." He would pay a little over the minimum balance for the bill each month, and by the end of school he chalked up a couple thousand dollars of credit card debt.

After he graduated, Jimmy married his college sweetheart Anne, who also racked up a few thousand dollars in credit debt during her time at the university. Both entered the workforce and proceeded to have a normal American life, with the big house, 2 cars and 2 kids. Life was grand for a while for Jimmy and Anne.

Unfortunately they continued their trend of spending beyond their means and taking out additional credit maintain their standard of living. Sure they were making more money than when they were in school, but their spending and expenses had dramatically increased as well. They were making it by for a while, living paycheck to paycheck to cover the minimum payments on the cards, along with the mortgage and car payments. Then tragedy struck, and Jimmy lost his job. All of a sudden, they were a one-income family with a mountain of debt. Soon they were forced to make the decision on which bills to pay, the house mortgage or the credit card bills. After a few months of this the bills were unbearable and Jimmy was forced to declare bankruptcy and sell his home.

As a result of Jimmy's bankruptcy, he entered into a deep depression, which along with the tremendous financial strain he and his wife were under, eventually broke up their marriage. The free T-shirt Jimmy signed up for all those years back eventually cost him his home, his family and his financial security.

Had Jimmy known about the responsibilities and dangers that surround credit usage, he may have never signed up for that shirt and his life may have turned out quite differently. Jimmy and Anne are not real people, but their story is too real for countless Young American Family's, who have gone through this exact situation.

In our consumer-centric culture, the temptations of easy credit are simply too enticing for most people to refuse. Credit is taken from a number of stores and businesses to fill our home with all the things we desire. The debt is manageable for a while, but there is a tipping point where the person accumulates so much debt that they are no longer able to make the minimum monthly payments for the various credit cards. All of a sudden the debt starts growing at a staggering rate, and you feel powerless to stop it.

Having a solid education about credit can help people to avoid these types of scenarios. Unfortunately, most schools do not provide any education about the effective use and pitfalls of credit usage, even though it is such an integral part of most American's lives.

Kids Credit School provides credit training classes for students to learn the fundamentals of credit and how to use it responsibly. Take our free credit awareness quiz to see how much you know about credit. Visit KidsCreditSchool.com for credit tips and additional Credit education resources.