Younger Americans going deeper into debt --
Robert D. Manning, a professor in the college
of business at Rochester Institute of Technology, founder
and author of the forthcoming "Give Yourself Credit!",
agrees society's pressures are squeezing this generation dry.
"It's not only having difficulties managing current financial
demands, it's a generation expected to assume a much larger
obligation of its cost of retirement," he says. He sprinkles
adjectives such as "novel," "unique" and
"unprecedented" throughout his assessment of their
"Clearly this is a generation that has
been set out in a life raft and told to row to shore. They
don't know if they have the will or the imperative to make
it worth their while," he says.
And who's to blame? Some blame a banking system that switched
to risk-based assessment models targeting young people precisely
because of their financial illiteracy.
"Twenty-five years ago, nobody would have
offered a college freshman who's never had a job a $50,000
credit card limit," he says. "These kids are being
told that staying out of debt is an old-school, parental value,
so rebelling is to enjoy a lifestyle now and get into debt.
"But the margin of financial error is so
small that any problem -- lose a job, get sick, family crisis
-- and they have no recourse but to declare bankruptcy."
Ninfo refuses to let parents off the hook, either.
He assigns blame at the personal level, using examples such
as his own family members who sent their daughters off to
college having used only $10-per-bottle Scott Miller Salon
shampoo. "Yet my sister thinks they'll use a $2 bottle
of Prell from CVS when they get to campus. My nieces don't
know Prell exists and couldn't find CVS if their lives depended
on it," he says.
He's full of stories in this ilk. For instance,
in the old days, parents treated students to a nice restaurant
when they visited, and the next day the kids returned to the
dorm cafeteria line. Today's scholars return to the restaurant
because that's the familiar standard of living. And don't
get him started on how college students get sucked into expensive
lifestyles keeping up with the Joneses on campus. He's heard
case after case of kids trying to blend in with their Lexus-driving
No wonder he's seen bankruptcies among the under-25
crowd soar 96 percent in the last 10 years.
If he sounds harsh with his wants-vs.-needs
handouts and "if you can eat it, pay cash" rules,
it's because he's also wise to the consequences. Bankruptcy
can mean the petitioner loses out on student loans for graduate
school, is passed over for jobs because of credit card problems
and pays higher insurance rates. "The consequences are
much greater for them than their parents," Ninfo says.
"They can't afford to have a strike against them."
But just-say-no programs won't work for
a generation that Draut sees as driven to economic hardship
by a starting salary too low to cover rent, utilities and
health care. "A lot of young people I talk to know very
well the difference between wants and needs, and are still
in credit card trouble," she says. Even the crazy, out-of-control
spending sprees reflect the economic insecurity of this country
in her book.
Meanwhile, Manning says the real answer lies
in a society that starts smelling the coffee. "It's essential
Americans recognize the promise of unlimited resources is
over. The government will not be there for this generation,
so they need to start targeting their financial goals in five-
and 10-year increments."
True reform, he believes, will happen only through
an awareness-building, skill-building and behavioral-change
approach. So far, he rates Americans as "barely at the
awareness level." Yet he pooh-poohs most literacy programs'
effectiveness because they lack a sense of urgency.
Ninfo agrees. "Ninety-nine percent of my
bankruptcies can balance their checkbook, they just don't.
So we don't teach that because it's not the problem. It's
the addictiveness of credit cards we're addressing,"
he says. His group pours on the real disaster stories, which
he claims gets their attention.
Officials at Junior Achievement also have
jumped into the gap, offering a personal financial literacy
program for middle schoolers beginning in March 2005. Yet
spokeswoman Stephanie Bell admits the cure will be a few years
coming. "Issues like mounting personal debt took a while
to get to this point, so it will take a while to fix these