2 Mistakes to Avoid to Stay Out of Financial Trouble

Moms of the world –according to the experts our kids are in big trouble. And I’m not talking about “time out” type of trouble, this is “my baby just might be a loser forever” type of trouble. And we are all part of the blame.

The financial crisis of 2008, is what happens when this kind of trouble goes unchecked for long periods of time. You remember, 2008, right? That was when the U.S. economy went down the tubes due to a ridiculous medley of catastrophic events. Here is a refresher; Hundreds of thousands of families bought into pricey time adjusted mortgages that were then traded away in the secondary financial securities market. Housing prices were skyrocketing, since everybody under the sun was in the market. When the interest rates adjusted on the mortgages, families couldn’t afford to pay the more expensive house notes, which turned the securities based on those mortgage into garbage. It all came tumbling down, fast– leaving one of the world’s greatest economies in complete ruin. And contrary to popular belief I think we are all to blame.

Even I got caught in the frenzy and bought an overpriced shoebox of a condo in Washington,DC. Nope, and I didn’t read the 100 page mortgage document that I signed when I bought the home. (And I know better) I didn’t care to, I was too busy salivating about all of the money I was going to make, when I flipped the shoebox. Call it greed, selfish ambition, whatever you would like –but what you can’t say is that it was a smart choice. Well, its 2013, and my shoebox is limping along in value (still upside down by the way) –I never got a chance to flip it. But here is the point. Most of not all of the craziness that happened back then can be attributed to :

1) Lack of knowledge,

2) Lack of attention to detail.

That’s it. Two simple problems with complex remedies.

Lack of knowledge has and always will be the bigger problem. Back in September 2013, Richard Cordray, the Director of the Consumer Financial Protection Bureau (CFPB), a consumer watch dog type federal agency, said that “financial education is of the upmost importance for the future of our economy and our country”. But the real kicker is when you look at a study the CFPB did recently that compares money spent on financial marketing versus money spent on financial education. The results are staggering!

The financial services industry spends $17 Billion dollars on marketing their products to you and me. But only $670 Million dollars is spent on financial education. The $670 million number is a combined contribution number from non profits, banks, and other organizations. Let me put that number in perspective —for every $1 spent on financial education, $25 are spent on financial marketing. That means that our kids are bombarded with these advertisements 24/7–on their phones, on TV, on the internet, in magazines, and if we are not helping them understand this stuff –they are doomed to repeat OUR mistakes.

I agree with the CFPB, the best consumer protection is self protection -and you can arm yourself and your family with the knowledge to make informed choices.

Lack of attention to detail is a issue that can be resolved over time. The more you understand about financial literacy, the more you will pay attention to the details. We are committed to helping you do that with the information provided on this blog. Overtime, as we help you build an expanded level of knowledge for children, we will cover attributing the right level of attention to detail –to the most important things. We are all very busy, and strategies to prioritize your child’s financial education process are oh so important too. This will be marathon, and not a sprint, and the prize at the finish line is a better future for our children.

Find out more about the great work the CFPB is doing around financial literacy at consumerfinance.gov.