>Debt Ain’t What It Used to Be

This entry was posted by Monday, 19 November, 2007
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>“Living with increasingly higher levels of debt has become an accepted normal state of affairs considered an inevitable and likely permanent feature of everyday life.…The social stigma of high debt levels is largely gone,” says Robert D. Manning, PhD, economist and professor of finance at the Rochester Institute of Technology and the author of Credit Card Nation, in a 2005 study commission by LendingTree.com.

Manning has drawn a lot of attention since then for warning about a basic change in attitude among young consumers that leads many of them down “that slippery slope of financial insolvency.”

Generations ago, debt was a necessary evil at best and an indication of a character flaw at worst. But that was before the economic boom of 50 years ago, which released a demand for consumer goods that had been building steam during the hardships of the Great Depression and World War II.

The children of that boom learned to indulge themselves and passed that trait along to their children. In the process a desire to enjoy in a little luxury from time to time turned into a constant sense of entitlement. Now for example, says Manning, “Many students view the use of consumer credit as a reward for their hard work at school.”

What is particularly troubling is the apparent loss of a reality check on Gen Y expectations. Manning notes, “Relatively high starting and early-career salaries among young adults (who have not experienced major macro-economic fluctuations) have created a heightened sense of optimism about future earnings potential.”

Given that many 20-year-olds don’t make a distinction between what they need and what they want, preaching a sermon of sacrifice is unlikely to make many converts to personal financial planning.

What can a financial educator do to motivate young adults?

One Response to “>Debt Ain’t What It Used to Be”

  1. Dani T

    >What can a financial educator do?? I ask myself that frequently (I am the financial educator at my credit union). I find that there are two topics that are most successful to present to youth 16-22. The first is the cost of credit, and once you rack up credit card debt, how long (and hard) it is to pay down. The second is to see different examples of what they could save today and have tomorrow. It really hits home when I show what can happen if you wait to save. I then try to roll that back into credit and debt by explaining the more debt you incur, the harder it will be to save now– and become rich later!


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