Swimming Against the Tide

One of the key issues for many people pushing for more financial literacy programs in the schools is credit. They point out (correctly, I might add) the levels of debt many adults carry, they bemoan the levels of debt students are burdened with upon graduation, and they attack the purveyors of credit for making credit available, particularly to student.

They advocate (again correctly) teaching young people about credit. But for some, the issue is not the wise and proper use of credit. For these, the issue is "credit is bad." Now, given the current media focus on subprime mortgages, there is a feeling abroad that maybe the "credit is bad" faction is correct. I don't stand with that group.

I have long advocated teaching students about the "wise and proper use of credit." I personally see nothing wrong with (horror of horrors) giving credit cards to teens while still in high school.

Jonathan Clements, in today's issue of The Wall Street Journal talks about the importance of helping your students develop a good credit history, and provides some sound recommendations on how to do so -- including a secured credit card.

This option makes a great deal of sense. The idea is that a sum of money is deposited with the financial institution as collateral. It can be $300 or $500. That determines the card's credit line. Use up the collateral, the card is maxed out.

However, the key is what to do then. My advice is when confronted by a teenager with a bill and maxed out card; you should sympathize and then ask how they plan to pay off the bill. You can even offer to hold the card to help them stay on the straight and narrow, until it's paid off.

What are your thoughts?