What’s Causing Record Household Debt in America? Financial Illiteracy?

Collectively, we as Americans owe a record amount of money—over 13.5 trillion dollars. Yikes!  If you’ve read any of our recent blogs you already know this. But what you might not know is that the recent report by The New York Fed (Mark talked about in last week’s blog) says that while the amount of debt is higher than before the great recession it’s not as risky this time around because things are different. Phew!

Debt in of itself isn’t a bad thing. It can be good when it allows us to buy a house, a car or a college degree we could not otherwise afford.  But it’s important to keep a good handle on our finances to not only understand what’s coming in versus what’s going out and the ability maintain a good balance of both. We also need to be able to understand basic financial concepts like risk diversification, inflation, interest and compounding interest.

Right now our economy is booming with unemployment at a fifty-year low and wages rising. You’d think we’d be having a field day getting our finances in order wouldn’t you? But according to a recent survey by Bankrate that’s not the case at all. We are actually marching in the opposite direction. (That’s why Mark and I keep writing about this topic!)

For example, this year’s report found only 44 percent of households surveyed have more money in emergency savings than the amount they owe in credit card debt. I can shine a brighter light on that 44 percent by telling you it is 14 points lower than last year’s 58 percent and the lowest percentage in Bankrate’s nine year history of conducting this survey. To make matters worse these numbers probably won’t be getting better soon because according to the same report only 43 percent of those surveyed said they were focusing on boosting their emergency savings this year, down from 53 percent last year. Uh Oh!

A couple of months ago I read an article in investmentnews.com called, “Financial Literacy: An Epic Fail in America.” The title pretty much says it all.  The article talks about a 23-year-old graduating senior at a Texas university who was starting his first post-graduation position when he had the rude realization that he had to begin paying back his $90,000 worth of loans and what that really meant in monthly payments—about half of his new monthly salary. This student made it through all those years of schooling plus four additional years of higher learning yet he had no idea what he had gotten himself into.

Sadly this is not an isolated event and many Americans (as well as many people world-wide) struggle with financial literacy. It begs the question: Are students learning enough about how to manage their money?

The Center for Financial Literacy at Champlain College doesn’t think so.  Established in 2010 the center was designed to promote and develop financial literacy skills in k-12 pupils as well as college students, teachers and other adults. In 2017 the center graded each of the states on a National Report Card on Financial Literacy. Sadly only five states received an “A”. 

Wisconsin, where I live, scored an “F” on that report.  That’s probably what prompted then-Governor Scott Walker to sign a bill requiring school districts to incorporate personal finance into k-12 instruction.

With these types of statistics trending like they are, it’s easy to see how many Americans—even in a good economy—are struggling to keep up with their debt. We need to educate ourselves and our youth on financial literacy now! If not, I don’t want to even think about what’s going to happen when our economy takes a tumble.

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 14 years.

Little Things that Make Big Impact

Remember the book “All I really needed to know I learned in Kindergarten” by Robert Fulghum? In it Fulghum lists a bunch of kindergarten rules that stand the test of time and remain relevant into adulthood.  Things like: share, play fair, don’t hit people, clean up your own mess, don’t take things that aren’t yours, say you’re sorry when you hurt someone, and many more.  You get the gist. I think what’s made the book so popular (in print since 1989) is its simplicity. It’s all very basic—stuff we all know, can agree with and relate to while also being very essential.  It’s one of those things that we read, see, or play (think hula-hoop) and think, why didn’t I come up with that?

Here’s the thing, I think we all can come up with them—the little things in life that can make a big difference.  All we have to do is remember the Golden Rule: do to others as you would have them do to you, and go from there.  We all know how we like (or don’t like) to be treated—that’s the easy part.  The harder part is the follow through.  Here are 3 of the little big things I’ve come up with.

 

  1. Say thank you

We’ve all been taught this, but do we say these two words or show our appreciation as often as we should?  I know this might sound petty, but when I’m driving I’m usually happy to stop and let someone in, but if I don’t get the nod it actually ticks me off. The nod—the thank you—is important to me. So, if showing gratitude is important (and I’m telling you it is) for something this insignificant, guess how much it means in the big scheme of things! We all love to get positive feedback. Wouldn’t the world be a better place if we all showed our appreciation for one another?

  1. Everyone needs help from time to time

But a lot of people just aren’t comfortable asking for help. This is where it gets a little more complicated: if you are one of those people who don’t ask for help because you think it will make you look weak or are afraid people will lose respect for you, guess again. Asking for help will not only benefit you, the person or people who help you will get to feel like a valued part of your life or business.  Remember, admitting you don’t have all the answers and need help from others is a way more admirable trait than being a know-it-all!

On the flip side, there are those who have trouble asking for help because they don’t want to appear needy or may feel like they aren’t in a position to ask for help.  Asking others if you can be of assistance to them sometimes gives them permission to ask for or accept help. In either case, asking for or offering help results in a win-win for everyone.

  1. Everyone needs to be seen

I’m not talking about being the center of attention, not everyone craves or enjoys being in the spotlight. Everyone already acknowledges the big achievements, what I’m referring to are the little things that really aren’t that little: Like the employee with young children who was having trouble getting to work on time who is now regularly clocking in on time.  Or the person who regularly refills the copiers with paper and ink so they are always ready when we need them. It’s important to let people know they are seen—especially when doing stuff right.

There are so many little things that can make a big impact on our lives and the lives of those around us.  Which ones are important to you?

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 13 years.

 

image provided by: Addy Lake

Back to School: Protect your Child’s Identity

It’s that time of year again.  It doesn’t matter whether you are a parent who’s dreading summer’s end and your kiddos’ hiatus from school or one who has been counting down the days until you are able to usher them back into the classroom, everyone needs to protect their children’s personal and sensitive information.

This morning I read a blog written by Colleen Tressler at the Federal Trade Commission who shared some great tips for keeping your child’s personal information safe.

Her recommendations:

  • Safeguard your child’s Social Security number

Don’t carry your kid’s Social Security card around with you and don’t share it unless you know and trust the other party.  Personally, I take this a little further.  Just because someone asks for your or your child’s Social Security number doesn’t mean they really need it.  I know from experience many entities, if challenged, understand your reticence and will allow you to leave that information blank or only require you to supply the last 4 digits.

  • Know your rights under FERPA

The Federal Educational Rights and Privacy Act protects the privacy of student records. FERPA requires schools to notify parents about their school directory policy.  It gives you the right to opt out of sharing directory information with third parties.

  • Limit what kids share online

Teach your youngsters not to post their name, address or full date of birth on social media. Take this further by being cognizant yourself and teaching your kids that many “games” you see on social media are actually phishing expeditions. I recently saw a post on Facebook that asked, ‘how many different maiden names (generations) can you come up with on your family tree?’ I was surprised how many people got sucked into playing and supplied a lengthy list. Were they having a fun social interaction or providing a scammer the answer(s) to a common security question?

  • Use Strong passwords on smartphones, tablets or laptops

Teach the importance of changing passwords and not sharing them. There is a great site we use here and at home https://howsecureismypassword.net/ .  Type in your password and it tells you how long it would take a computer to crack it. 

  • Use a shredder                                                                                                                                                            
  • Check whether your child has a credit report before they turn 16

If there is one—and it has errors due to fraud or misuse—you’ll have to correct it before your child applies for a job, seeks a loan for tuition or a car.

I know some of you are rolling your eyes and wondering if all of this is really necessary. But here’s the thing, according to the 2018 Child Identity Fraud Studyconducted by Javelin Strategy & Research more than 1 million children were victims of identity theft or fraud in 2017; resulting in $2.6 billion of total losses and $540 million in out-of-pocket costs to families!

If that’s not bad enough, I read in a cnbc.com article, “Identity theft isn’t just an adult problem. Kids are victims too” by Kelli B Grant that thieves are more likely to exploit kids’ information. Among the 58 percent of people notified of last year’s data breaches who became victims of fraud, 39 percent were minors and 19 percent were adults.

Synthetic identity theft, a type of identity fraud that creates new identities using a combination of real (Social Security number) and fictitious (name and birth date) information is also wreaking havoc for kids and their parents. Some fraudsters have even built identities around SSNs that haven’t even been assigned yet.  Can you imagine if you found out the Social Security number issued to your baby had earnings already associated with it along with a five-year credit history? Scary, right?!

According to the Child Identity Fraud study 66 percent of kids victimized by identity theft (or fraud) are 7 years old or younger. And while it might seem like a no-brainer that your kindergartner wasn’t responsible for the thousands of dollars’ worth of credit card debt assigned to them, experts say getting to the bottom of identity theft and fraud is just as complicated for kids as it is for adults.  The same hoops need to be jumped through.

The fact that 60 percent of child identity theft or fraud victims personally know the perpetrator complicates things even further. The same is not true for adults; only 7 percent know their thief personally.

I know, it’s not as if parents don’t already have enough to deal with keeping their kids safe, but child identity theft is a growing issue. We need to be as vigilant about protecting their identities as we’ve become protecting our own.

A. Alliance Collection Agency, Inc. is a full service, licensed accounts receivable management and debt collection agency providing highly effective, customized one on one management and recovery solutions for our business partners.  Founded in northern Illinois in 2005, we have been proudly improving the bottom-line on behalf of our business partners in and around Chicagoland for over 13 years.