Market Crash Course

It's not just Wall Street; we have to stop being stupid about money.

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I was recently talking to a group of high school seniors at a girl's school in Harlem in Manhattan. I'll never forget how quickly our discussion about credit cards changed their attitudes about debt.

Alarmed by recent knowledge that about a third of all high school students have credit cards, and many are carrying at least $1,000 in debt, I asked these girls what they thought about credit and debt.

For the most part, they thought credit cards were the greatest thing in the world, amazed that they could rack up big balances and pay them off by just paying that minimum number. (I'm not joking.) I showed them on the Internet what paying just the minimum will cost them in money and time, and they were appalled. I also told them how credit card balances affect something called our credit score.

High school seniors are into their futures, their careers, getting their lives started. When I told them that many companies look at their credit score to help determine if they should hire them, well, the only way I can describe it is to say that these girls "freaked out." It didn't take them long to realize that how we manage our credit may affect people's perceptions of how we conduct different aspects of our lives, including our work ethic.

These girls got their first lesson in how important it is to make sure our financial choices are in line with our values. Prior to my talk, no one had talked to them about money—at home or at school.

It's not just young people who benefit from just a small amount of guidance. A survey released by non-profit financial literacy giant Operation HOPE found that adults who participated in financial-literacy programs saw an average 68-point jump in their credit scores. That means lower interest rates on everything from credit cards to mortgages.

Folks are Getting the Message

The link between our financial woes and financial illiteracy finally seems to be gaining some traction. This year, the Bush administration created the President's Advisory Council on Financial Literacy, the first time an entity has been charged with creating policies surrounding financial literacy. They are pushing the public and private sector to do things like make financial education mandatory in schools and create counseling and literacy programs for adults.

The Internet, TV, newspapers and the growing number of financial-counseling programs—some even required before you can get a mortgage in certain states—make financial illiteracy no longer acceptable. Check with your bank, employer, credit bureau, etc., about other options as well.

Now that financial literacy is gaining a spotlight, we must expand our dialogue to include more than just dollars and cents. There are other forces at play in our financial experience. Things like race. An African American earning $100,000 a year with a good credit rating will likely get a higher interest rate on a mortgage than a white person earning $35,000 with a lower credit rating. Gender also plays a role. Single women are the fastest growing group of new homeowners and tend to have better credit ratings than men, yet they are three times more likely to get targeted for a subprime loan.