Risky Businesses

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Consider this: In 2001, more young people declared bankruptcy than graduated from college.

College administrators speculate that bad debt, not bad grades, is the major factor behind students leaving college. The average undergrad has three credit cards and $3,000 in debt, not counting student loans. These statistics are the end result of a much larger problem, which has been documented by the Jump$tart Coalition for Personal Financial Literacy – which fuses financial awareness and responsibility into educational programs for youth – along with the American Bankruptcy Institute and various market research organizations. Among their findings:

• 12- to 19-year-olds spent $175 billion in 2003, an average of $103 a week. Teen spending seems to be “economy-proof,” evidenced by the finding that only 21 percent anticipate spending less money in 2004 than they did in 2003.

• Two-thirds of high school seniors recently failed a basic financial literacy survey. The lowest scoring groups were those whose families have the least disposable income: African Americans, Hispanics, the poor and non-college bound youth.

• Market research suggests that African American teens spend six percent more a month than the average American teen because of the heavy emphasis that they put on trendy, high-end clothing, jewelry and footwear.

Teen financial literacy has made it into the big league of national youth problems, fueled by the same three forces that put teen smoking, alcohol abuse and obesity on the big list: consumer ignorance, community apathy and corporate marketing. More facts according to Jump$tart and the American Savings Education Council:

• Most (94 percent) of students ages 16 to 22 report that they are likely to turn to their parents for financial advice. But 40 percent of Americans report living beyond their means.

• Only 32 percent of American parents talk to their children regularly about personal finances. And only 7 percent believe that their children understand financial matters well.

• Only 12 percent of high schoolers and 21 percent of 16- to 22-year-olds say they have taken a personal finance course in school.

Changes are afoot. According to Jump$tart, half of the states have passed or proposed legislation in the past year requiring financial education in K-12 schools. Congress passed the $1.5 million Excellence in Economic Education Act as an addendum to the No Child Left Behind Act. Financial companies and credit unions are underwriting consumer education curricula that targets students. Relatively modest educational programs are showing positive results.

But dangers lurk. Young people have buying power. They are not likely to be left alone by companies marketing products or by banks marketing credit cards. Consider three news stories about teen marketing that appeared in April alone.

The first: aggressive cell phone marketing. Teens make up a small portion of the total market, but they are big consumers of high-end products and services like cameras, games, custom ring tones and instant messaging. These options, coupled with limited financial training, have driven some teens’ cell phone bills way above the $50 a month national average.

The second: aggressive alcohol marketing. According to researchers at Georgetown University, the alcohol industry aired 39 percent more adds in 2002 than in 2001, with big increases in ads aired during shows such as “Fear Factor” that cater to teens. The industry has also introduced a host of new products, like Smirnoff Ice, designed to ease the transition from soda to alcohol.

The third: aggressive credit card marketing. According to Jump$tart, one-third of high school students have credit cards. That percentage is likely to jump. Several of the largest credit card companies have developed “teen cards” that look like credit cards, but operate like prepaid phone cards. Companies say the cards are an opportunity for parents to educate their children. Marketing experts suggest this is a thinly veiled ploy to cement brand loyalty early.

Schools, families and companies are each a part of the problem. Left to their devices, each will leave young people vulnerable to developing behaviors that threaten their financial, emotional and even physical health (through alcohol abuse and smoking, for instance).

There is an urgent need for more education, parental involvement and marketing controls across the board, on subjects from smoking to spending to fast food consumption. Most of all, there is a need for more youth involvement. We don’t need to protect young minds; we need to use them to inform and empower themselves and their peers, families and communities.

Research over the past decade tells us that providing young people with the right tools to challenge the systems and institutions that oppress them empowers youth to take action and create change on their own terms.

Let’s not wait to see what new market research next month brings. Engage youth now.

Karen Pittman is executive director of the Forum for Youth Investment. Related readings are available at mailto:www.forumforyouthinvestment.org.