WASHINGTON — The numbers are startling. More than half of high school seniors have debit cards and nearly one-third have credit cards.
One-third of college students have four credits cards apiece when they graduate, and more than half of graduates have piled up $5,000 each in high-interest debt. The number of 18- to 24-year-olds who've declared bankruptcy has increased 96 percent in 10 years.
Surveys show that many of these young people also are financially illiterate: They don't understand such things as interest, minimum payments, credit reports, identity theft or that they may be paying off their school loans for years.
The problem isn't just with the young, however. One in five Americans thinks that the most practical way to become rich is to win the lottery.
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Sen. Patty Murray, D-Wash., remembers that her kids started receiving credit card applications when they were 16. She said that she repeatedly heard from people, young and old, who wished they knew more about financial matters.
Murray will introduce legislation this week that would authorize $1.2 billion in grants over five years to promote financial-literacy education beginning in grade school and stretching into adulthood.
"It's a perfect time to be doing this," Murray said.
Ben Bernanke, the chairman of the Federal Reserve, agrees.
"In light of the problems that have arisen in the subprime mortgage market, we are reminded how critically important it is for individuals to become financially literate at an early age so they are better prepared to make decisions and navigate an increasingly complex financial marketplace," he said nearly a year ago.
Kerry Eickmeyer, 17, a senior at Richland High School in Richland, Wash., gave up her debit card after about a year when she kept overdrawing her account.
"My mother was getting frustrated," she said.
She and other students at Richland High must take a class in consumer economics before they can graduate. Eickmeyer said she received credit card offers all the time and shredded them.
"I don't need 10 credit cards," she said.
Jesus Pedraza, 19, wished he'd been prepared to handle his personal finances when he entered Washington's Tacoma Community College, even though he doesn't have a credit card.
"I thought I was ready, but money is running out faster than I thought," Pedraza said.
As part of its Human Development 101 class for freshman, Tacoma Community College devotes a section to personal finance. Students track their weekly spending and learn about credit cards, minimum payments, savings plans and investments. James Mendoza, who teaches the class, said he focused on the nuts and bolts of finance.
"We don't expect them to be Warren Buffett, George Soros or any of the big dogs," Mendoza said. "But they need to understand whether a venti mocha is a need or a want."
Over the past five years, 17 states added personal finance requirements to their curricula. Last year, President George W. Bush appointed an Advisory Council on Financial Literacy to work with the private and public sectors to promote financial education. The council is part of the Treasury Department. Its members range from the chairman of Charles Schwab to the leader of Junior Achievement USA.
Murray's bill, co-sponsored by Sen. Thad Cochran, R-Miss., would provide grants to state education agencies that agreed to establish financial literacy standards and assess how well students were doing in elementary, middle and high school. Nonprofit organizations also would be eligible for grants. In addition, grants would be available to community and four-year colleges to offer financial literacy classes for their students and for older adults.
In addition to financial literacy classes offered by school districts, Junior Achievement operates programs in many districts. About 4.5 million young people participate in Junior Achievement programs nationwide.
Other programs also are operating in the schools. Founded by a bankruptcy judge in New York, the Credit Abuse Resistance Education program sends bankruptcy judges around the country to high schools to talk about personal finances.
Pat Williams, a bankruptcy judge in Spokane, Wash., said that when she walked into a class of 25 or so 10th- or 11th-graders, it wasn't hard for her to spot the five that would end up in bankruptcy in three years.
"They are dealing with so much, cell phones, car insurance, credit cards, debit cards," she said. "It was stunning to them to learn there were late charges on a credit card bill."
High school and college students can end up paying for their lack of financial knowledge, said Pam Whalley, the director of the Center for Economic Education at Western Washington University. One survey of high school students found that they expected to earn an average of $143,000 a year and were confident they could handle the money but that few knew how to do a budget. College students know little about savings, insurance and retirement, and are lured to credit card deals too easily, she said.
"College kids will do anything for a T-shirt," Whalley said.
In the middle of a recession, she said, educating students about financial matters is crucial.
"If you make a mistake during a recession, you have less to fall back on," she said. "If you make a mistake when your job isn't safe, you could lose your house or your car. When you have financial literacy, you have more control over your life."
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