Young Adults, Debt, and the Road to Bankruptcy

Are too many young adults experiencing financial trouble?  According to a recent article in the New York Post, people under the age of 30 don’t know how to properly handle their finances, and many end up with substantial debts they can’t pay.  And young people in the Chicago area are no different.  In fact, according to a recent survey conducted by the Organization for Economic Cooperation and Development, 15-year-old Americans across the country tend to receive markedly low scores on financial literacy tests.
Will a high percentage of young adults in America wind up declaring personal bankruptcy?  For many Oak Park residents, bankruptcy can be an option that allows you to manage the stress and anxiety associated with serious medical debt or credit card debt.  Yet, does consumer bankruptcy make sense for the youngest adults?
Facts and Statistics About Young Adults and Debt
A report from Demos, a financial research organization, recently explained that young adults between the ages of 18-24 aren’t doing very well when it comes to personal finance.  Some of the facts and statistics from the report include the following:
·      Between 1992 and 2001, the average American credit card debt increased by 55 percent;
·      Between those years, young adults between the ages of 18-24 experienced the most significant increase in credit card debt—an increase of 104 percent;
·      Nearly three-quarters of the youngest adults have revolving credit balances each month.  While this may sound like the average, only about 50 percent of cardholders over the age of 24 revolve their balances each month; and
·      The average young adult between the ages of 18-24 spends about 25 percent of her monthly income on debt payments.
Is there a way to provide better financial training to teenagers?
Helping Young Adults Establish Good Credit Practices
Now that the summer is over and many parents in the Chicago area will be sending their kids off to college for the first time, it’s important to think about how we teach our teenagers to establish good personal finance practices.
According to Charles Tran, the founder of CreditDonkey.com, one of the primary problems when it comes to teens and financial education is that schools simply don’t offer.  As Tran points out, “we offer sex ed in high school, and we offer driver’s ed.”  However, he emphasizes, “we rarely offer financial education,” and as a result, “we are doing very badly understanding money in comparison to young people in other countries.”
What should parents do to help?  When eighteen-year-olds go off to college, it’s important to begin that journey by “establishing good spending practices,” which include:
·      Piggybacking off your credit rating: when young adults don’t have much of a credit history, it’s difficult to be approved for credit or to be approved for a low-interest loan.  However, if those kids have parents with good credit ratings, they can apply for credit with a qualified co-signer.  With a co-signer, they’ll be eligible for more credit options and lower interest rates.
·      Using a credit card properly: when you’re approved for a credit card, it’s important to use it wisely and to make sure that you pay back what you’ve spent on time.  And these are practices we can teach our children.  Don’t spend what you can’t pay back at the end of the month, or you’ll end up paying significant interest on your debt.
·      Opening a checking account: many students and young adults are eligible for checking accounts with no monthly fees, and some accounts even offer rewards programs for good spending habits.
·      Student loan knowledge: if your child will take out student loans to pay for her education, it’s important to help her understand the details of her loans and to know what her payments will look like when she’s done with college.
Do you have questions about establishing good credit or whether bankruptcy is the best option for you?  An experienced Chicago bankruptcy lawyer can talk with you today about consumer options when you’re dealing with massive debt.  Contact the Emerson Law Firm to learn more about how we can help.   
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