Americans Fail the Grade When it Comes to Basic Economics

Americans are failing. It is happening right before our eyes. A Nation once so proud is failing quicky. We are happy to spend money on Fancy Coffee Drinks and Nintendo Games. We are happy to run up credit card debt to get what we want today . But when it comes to paying higher taxes for better roads, education and health care we balk. We spend more time watching TV than planning our futures or helping our children plan theirs.

Have Americans become arrogant, because we think we are the best? We have lost a proud focus on what our parents and grandparents taught us – to evaluate and plan for what is most important to us. We should learn to SAVE for a rainy day. We should PLAN for retirement. We should BUDGET our expenses. We should TEACH our children good habits about money. We are not setting a good example.

Point in case – How much time have you spent educating your children about money? Do you know if they can define “interest rate?” How about “Annual Percentage Rate.” Can they tell you how long it takes to pay off a credit card when they only make the minimum payment with a 21% interest rate? Can they tell you how much that $1,000 hi-def TV really cost on that same credit card?

And the older we get, the worse it gets, apparently. We are lazy. On the most important decision of most people’s lives, their mortgage (note I didn’t say house.) Studies from the FTC show us that in reviewing standard mortgage documents:

• Half the borrowers surveyed couldn’t correctly identify the loan amount.
• Nine in 10 couldn’t figure out the total up-front loan costs.
• Two-thirds did not recognize that they would have to pay a penalty if they paid off the mortgage within the first 3 years. And 95% didn’t know how much that penalty would be.
• Three-quarters did not know when substantial charges for FHA or PMI insurance had been included in the loan and monthly payments.
• One in five couldn’t correctly identify an annual percentage rate, the amount of cash due at closing or the monthly payment, nor did they know if their payment included charges for taxes and insurance.

And why can’t we read and interpret these documents? Partially, because we do not educate our children about economics. Not in the home. Not in school. At home, we are setting bad examples. At school, only 17 states require students to take an economics class to graduate from high school and only seven states require a basic personal-finance course, according to a survey by the National Council on Economic Education

With the economy as it is, and all the worry about gasoline prices, we have more than just oil to worry about. We need to take a better look at our priorities. Let’s look in the mirror and recognize where we are going. Then stop, and think, where do we really want to be.