Photo: Mike Yoder/LJWorld.com
As with any skill that must be taught, the core to helping American adults improve their financial literacy is starting this education early. Since schools are responsible for students’ academic learning, it only makes sense to integrate the necessary skills associated with personal finance that teens will face into adulthood.
The Council for Economic Education revealed in the Survey of the States 2011 review that only 13 states in the country required a personal finance course as part of graduate requirements — that’s only 26 percent of U.S. states taking active strides in helping young adults succeed financially after high school.
Young people are the most likely to make purchases compulsively, with most American Millennials shouldering an average debt of $45,000 ranging from auto loans, student loans and credit card debt, according to a PNC financial independence survey.
What needs to be stated, however, is that credit cards in themselves are not to blame — in fact, they are a necessary tool.
Gen Y Facing Financial Realities
It may be true that credit cards account for 98 percent of U.S. consumer debt, but the reality for Gen Y and younger generations is that credit cards are useful mechanisms for building a good reputation for borrowing money and paying it back.
This record of good financial habits is essential in accomplishing bigger things later down the line, like being approved for a home mortgage loan.
Changing the course of action within the education system to develop financial literacy in students won’t come about overnight. However, by understanding that responsible credit card use can be beneficial, and eliminating the stigma that credit cards sometimes hold, Gen Y can tackle how to overcome these realities and stay smart about money as an adult.
How Gen Y Can Benefit from Secured Credit Cards
A secured credit card not only helps young adults and Gen Y professionals build their credit, but also keeps the amount of spending relatively low.
Go Banking Rates surveyed a sample of Americans to find out if they knew the benefits of secured credit cards. Of those who participated in the quiz, 33 percent of respondents identified secured credit cards as being beneficial for those who are only interested in rebuilding their credit.
This response is not necessarily incorrect — as consumers often use secured credit cards as a way to slowly improve their credit history — but there are more pros associated with this type of credit card which specifically benefit Gen Y.
When opening a secured credit card, consumers are required to forward a deposit to the creditor, which in turn will be used to set the limit for the credit card. Thereafter, cardholders make regular monthly payments using (typically) low credit limits. This allows young card users to develop responsible and smart credit card practices that can contribute to a strong credit score when the time comes to buy a car, home or other big item.
Individuals who must have their credit limits tempered or have no existing credit history at all can turn to a secured credit card. In addition to using revolving credit actively, new high school graduates can avoid spinning out of control with debt.
Taking appropriate measures to enhance the financial literacy of younger generations is the key to avoid nationwide financial hardship among future adults, and using helpful tools like a secured credit card is the baby step adults need to achieve their goals.
This article is part of the Go Banking Rates Financial Literacy Movement, helping Americans get smarter and grow richer. Take our credit card quiz to test how knowledgeable you are!
Provided by Go Banking Rates