Show me the money

Financially speaking, we live in difficult times. We’ve witnessed the collapse of mega banks and the decline of the auto industry. And for more than a year we’ve been hearing pundits bemoan impending economic doom.

But a larger scarier economic problem is lurking just beneath the surface. And it has everything to do with college students.

Recently the Center for Economic and Entrepreneurial Literacy released the survey results about American college students’ financial literacy. Some of the findings were downright scary.

The survey reported that of the 500 U.S. college students surveyed, 64 percent already have at least one credit card. Sixty-one percent said that they had credit card debt and 42 percent of freshmen identified themselves as credit card dependent. Another quarter said they owed more than $1,000 in credit card debt. Also, more than four in 10 respondents were unaware of the annual percentage rate of the credit card they use most often.

Beyond credit cards, many had made other financial blunders. Fifty-four percent said they had overdrawn from their bank account, and almost two-thirds of the students thought that a wire transfer was more expensive than bouncing a check.

So what does all this mean? While we were so busy worrying about macro problems, have we neglected to teach the micro skills that students need to be fiscally responsible?

We say, the answer is yes.

The fundamentals of personal finance should be taught in public schools. A class on basic financial concepts – from interest rates to balancing a checkbook – should be mandatory for high school graduation. You can’t tell us that, in this day and age, replacing home economics with basic instruction on the way a home mortgage operates isn’t a great, or even necessary, idea. Colleges, too, should encourage financial literacy among non-business major students. Small courses on debt and money management should be incorporated into general education curriculum.

As we criticize Americans for not saving enough and purchasing homes they couldn’t afford, it’s important to remember that many of them were duped into deals that they simply didn’t understand.

We say that now more than ever we need to teach our high school students and young adults to be smart with their money. If we want a strong financial system, we need to start by producing a generation of smart financial thinkers.