FICO score and frappuccino... Yes, there's a difference

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ABA Banking Journal
By: Arthur Johnson
June 16, 2010

High-school graduations are under way across the country and proud parents are watching restless seniors wave their diplomas in triumph. Soon those going off to college, to work, or military service will be walking into your bank and mine to open their first checking account--and apply for that first credit card. Many of them with no clue about financial matters.

This comes at a time when financial education and financial literacy have never been more important. Bankers need to do our part to help young people become financially literate.

A recent survey of college students by Student Monitor LLC reported that nearly half the students with a credit card applied at their bank, and that's "the preferred method of acquiring a credit card," the survey said. College students also make heavy use of ATM cards and debit or check cards. That's good news. But while young people can get a credit card, do they really understand the responsibility that goes along with it? Nearly six out of ten college students surveyed agreed that "financial literacy is more important now that I'm in college."

Yet other surveys tell us that less than half the high school seniors interviewed know the basics of personal finance. As one father of a high-school senior put it, high school and college graduates "don't know the difference between a FICO score and a frappuccino" because it's not part of the curriculum.

That has to change--for the sake of the students and the economy. A number of bankers have made financial education part of their mission. And the ABA Education Foundation is taking the lead to teach young people about savings and credit--with the help of banker volunteers.

On Oct. 21 the Foundation will mark its eighth annual "Get Smart About Credit Day." It will bring thousands of bankers together with students for lessons on developing good credit habits--paying bills and paying them on time, using credit wisely and not borrowing more than one can repay.

Bankers should be putting "Get Smart About Credit Day" on their calendar now because new legislation and a new emphasis on the importance of credit make your participation more important than ever.

And let's face it. The broad brush that tarnished the banking industry with the failures on Wall Street and elsewhere damaged our industry's good name. We need to get out and show young people that traditional bankers care about them and their financial future.

Bankers bring an understanding of what a good credit history can mean to a borrower--and how easy it is to be overwhelmed by credit card debt. With the help of the ABA Education Foundation, we can make a difficult subject like credit come alive with interactive lessons on account management, credit reports, identity theft, and more.

And it will be a real test of your ability to explain credit because you never really know a subject until you can explain it to a teenager.

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This page contains a single entry by CFED published on June 16, 2010 3:20 PM.

If you get in a bind there are ways to avoid the payday loan trap was the previous entry in this blog.

$317M for troubled homeowners; Mortgage help on the way for the hardest hit is the next entry in this blog.

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