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HSFPP Weekly Update # 100—Bankruptcy Judges Warn Young Consumers About Credit Card Debt

Message from Flashman: We have reached a milestone with our 100th update; and this week we continue with the money management theme of consciously deciding what to do with current and future financial resources. This week’s article In the New$... reflects what happens when individuals fail to budget for financial emergencies and do not save money for the future, which, for many consumers, results in personal bankruptcy. Unless teenagers see the necessity of investing early, and the significant impact of not saving enough, they are more likely to consume current and future income in the form of credit card debt.

This week’s student activity gives teens a chance to see what they can do with their money besides consuming items that advertisers say they need to be happy and/or accepted by peers. To demonstrate how starting early can be a great advantage when investing, we are including the chart, “The Advantage of Starting Early,” from Page 49 of the Student Guide, in this update. The content of the Student Guide is also available at http://www.nefe.org/hsfppportal/, which has separate sites for students and teachers. Teens need to know that saving and investing at a young age will make them a “Have,” instead of a “Have Not.”

Website Pick of the Week:

http://www.nefe.org/hsfppportal/

NEFE’s HSFPP website provides all material in the Student Guide, right at your fingertips.

Suggested Activity for Teachers:

Show the video, “Invisible Persuaders: The Battle for Your Mind” and/or “Why Ads Work: The Power of Self Deception,” both of which are available through your county Cooperative Extension office. The following website provides the complete list of videos:

http://www.ca.uky.edu/fcs/hsfp/rclist.htm.

You can also show segments of “Affluenza” and “Escape from Affluenza,” both of which are relevant to this week’s update, and available from your county Extension agent; both are on the website above.

Discuss investing with your students and find out what they have learned. Compare with them the situation of being in credit card debt versus having a lot of money built up as a result of developing a financial plan based on their goals and setting up a budget to carry out their plan. What can your students do to become better off, as this comparison goes?

Go to http://investsmart.coe.uga.edu/C001759/stocksquest/mystocks.htm.

On this website, you can trade stocks, free of charge, using virtual money. You’re not actually trading stocks, but it is a great way to simulate what goes on in the stock market without losing money. Our website also provides a link to the website above at:

http://www.ca.uky.edu/fcs/hsfp/stlink4.htm.

Their Web address has changed; we are currently doing our twice-yearly update of links on our site and will have this corrected soon.

Have students create their own accounts at home or on computers at school. They can print out the page that lists the stocks and mutual funds they have “invested” in. Try holding a competition to see who gains the most money. This will need to be a somewhat long-term project but, except for the initial discussion, it should not take up much class time. Students can track their investments and print the changes they have made to turn in every two weeks or so. I would suggest that you end the competition in early May. You then can have a final discussion about the results. Remember to emphasize that the best approach to investing is almost always long-term, and that six months is usually not long enough to reach investment goals. The market can do just about anything in the short term; but, over the long run, for investors with diversified portfolios, experience shows the market almost always goes up.

You can always find the latest update and all previous updates on the HSFPP website. Our other links are available at

http://www.ca.uky.edu/fcs/hsfp/lessonlinks.html

and are currently being updated.

In the New$... Bankruptcy Judges Warn Young Consumers about Credit Card Debt

“Overwhelming credit card debt often afflicts young consumers, but federal bankruptcy judges are trying to provide a cure.

“‘Many of the debtors who come into bankruptcy court admit that if someone had warned them about the pitfalls, they would not be in that predicament,’ said Chief Bankruptcy Judge John Ninfo of the U.S. Bankruptcy Court for the Western District of New York.

“‘We live in a competitive society. Many young people grow up thinking they can afford something if they can just charge it on their credit card,’ he said. ‘Often they spend because everyone else is spending.’

“Bankruptcy Judge R. Thomas Stinnett, who chairs the Public Education Committee of the National Conference of Bankruptcy Judges (NCBJ), agrees, and notes that college students often are solicited by credit card companies during registration.

“More than half of today's college freshmen owe over $1,500 in credit card debt. A survey by an educational lending company also indicates that the balance will more than double by the time those students are seniors. And the interest charged for credit card debt typically is far higher than that for student loans.”

Source: Excerpted from The Third Branch: Newsletter of the Federal Courts, Vol. 36, No. 2, February 2004.

http://www.uscourts.gov/ttb/feb04ttb/bankruptcy/

 

Source: http://www.bankruptcyaction.com/USbankstats.htm

The Advantage of Starting Early

The Impact of Time on the Value of Money (Assuming 9% interest)

Your Age	Saving Early	Your Friends Age	Saving Later
16	$1000	16
17	$1000	17
18	$1000	18
19	$1000	19
20	$1000	20
21	$1000	21
22	$1000	22
23	$1000	23
24	$1000	24
25	$1000	25
26		26	$1000
27		27	$1000
28		28	$1000
29		29	$1000
30		30	$1000
31		31	$1000
32		32	$1000
33		33	$1000
34		34	$1000
35		35	$1000
36		36	$1000
37		37	$1000
38		38	$1000
39		39	$1000
40		40	$1000
41		41	$1000
42		42	$1000
43		43	$1000
44		44	$1000
45		45	$1000
46		46	$1000
47		47	$1000
48		48	$1000
49		49	$1000
50		50	$1000
Total Amount Invested: $10,000		Total Amount Invested: $25,000
Amount at Age 50:
	$131,050		$84,701
		Difference: $46,349

Activity for Students:

Go to http://investsmart.coe.uga.edu/C001759/stocksquest/mystocks.htm

Start an individual account and begin investing. Make changes to your investments by buying and selling when you feel it is necessary. Also be sure to check out the information about investing on the website. It will help you make better investments with virtual money now and with real investments in the future.

Kentucky High School Financial Planning Program

http://www.ca.uky.edu/fcs/hsfp

The purpose of this Web site is to assist county extension agents, credit union educators, and high school teachers in improving the economic well-being of our constituency, beginning with today’s students; and also, to assist teachers in Kentucky in meeting KERA’s goal that all students become technologically literate. Weekly Updates are provided by the University of Kentucky Cooperative Extension Service, and are free to all educators.