When I’ve been interviewed by The New York Times or Fox News, I haven’t always revealed the full truth.
I tell them my job is to get Americans out of debt. What I don’t mention – because it would take too long to explain – is that I really hope to keep their children out of debt, and their children’s children, too.
During the dozen years I’ve been chairman of Debt.com, I’ve met many clients who are smart and hard-working – and clueless about personal finance. They tell me how they grew up watching their parents spend money recklessly. In school, very few learned anything about managing their finances. Their view of the value of money lacked the basics.
When I suggest that personal debt is a genetic disease, some folks flinch until I explain what I mean. I’m not being glib or hyperbolic. The defining trait of a genetic disease is: It’s not your fault. It runs in your family. If you don’t know the rules of personal finance because you didn’t grow up with them, you’re not lazy or stupid. That’s important to know.
Then again, many genetic diseases can be postponed or even avoided by changing our habits or taking preventive medication. Coincidentally, that’s also how you break the cycle of personal debt. Let’s review three methods.
1. Teach your children through technology
My favorite way to break the cycle of generational debt is through technology. And one of my favorite companies doing that is called Jassby. It offers a debit card for kids. That might sound like a laughable idea that only makes the problem worse, but it’s proven to be quite the opposite.
It’s quite possible a child born today will never handle cash as an adult. Money will be virtual instead of tangible – and that can be a huge problem. As I wrote in my 2013 book Power Up…
Learning to live without a credit card is an integral part of financial empowerment. The lessons you discover will add to your building blocks that will eventually lead to your financial independence. Those who don’t use credit cards take money much more seriously than credit card users. The act of physically handing over the dollars to a cashier or waitress generates a feeling of loss. The money is gone.
That’s still true 12 years later, but it’s also increasingly unlikely that adults of tomorrow will even be able to go credit-card-cold-turkey for a little while. So we need to instill in this generation the notion that money is still money – no matter the payment system.
Jassby does this with a digital or physical debit card that parents can monitor in amazing detail. Parents can literally add allowances to the card through their linked bank account. They also get spending notifications in real time and can lock and unlock the card through the Jassby app.
The kids get something, too. There are, of course, rewards. Jassby has also gamified financial education, offering educational games through its app.
I was so impressed with Jassby that I now sit on its board of directors.
2. Teach your children with old-fashioned
Junior Achievement is another savvy program I also support. JA runs a few dozen different programs, but my favorite is the opposite of high-tech. I live in South Florida, and the JA down here works with local schools to bring 8th graders to “Finance Park.” That’s a massive and intricate section of JA’s campus that consists solely of small storefronts. These range from a Wells Fargo to a Toyota dealership.
Students rotate from one storefront to another, learning about these businesses and how to be savvy savers and spenders. Of course, Debt.com has a storefront, too. We teach about budgeting and responsible credit card use.
In an era when we’re trying to put computers in every classroom, it’s amazing how educational the good old-fashioned field trip can be.
3. Teach your children in school
Way back in 2015, I wrote on Debt.com that high schools that teach physical education should also teach financial education. At the time, eight states required such a course to graduate. Today, it’s 27 states.
It should be 50.
If your state is on this list, rejoice:
Alabama, California, Connecticut, Florida, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia, West Virginia, and Wisconsin.
If it’s not, rebel. Contact your state legislators and tell them this is one time to succumb to peer pressure. Tell them, “Everyone else is doing it!”
This is a big deal to me, because for three decades, I’ve had to cure the genetic disease when it’s already done a lot of damage. I’d love to see some preventative measures start young.
That’s not a pipe dream. You can teach your kids yourself by embracing technology, you can sign permission slips for them to visit Junior Achievement, and you can encourage your state to mandate financial education to high schoolers.
I want to cure this genetic disease, but I need your help.
