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‘Get a Financial Life’

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2009 guide offers tips to getting young people on financial track in tough economic times 
06/22/2009

‘Get a Financial Life’ photo 1

A poll* finds that 78 percent of people surveyed, between ages 20 and 39, know the name of Tom Cruise and Katie Holmes’s daughter, but only 45 percent of those same people know the interest rates on all their credit cards. Young people need to learn to be more financially literate, according to Beth Kobliner, a Jewish personal financial expert living in New York City and a former staff writer for Money Magazine.

To make matters worse, people in their 20s and 30s—like other age groups—are facing severe financial troubles in the worst economic crisis since the Great Depression. For instance, 20- and 30-somethings are earning less than young people in the 1970s, adjusted for inflation; they’re drowning in debt; and they are the least-insured age group in the country.

In 1996, Kobliner wrote a practical guide to finances entitled “Get a Financial Life: Personal Finance in your Twenties and Thirties” (Fireside Press). Now, in a revised and updated edition, released this spring, Kobliner offers tools and solutions to helping young people get their finances under control in tough economic times, covering financial topics including debt, housing issues, banking, investing, taxes, and insurance.

This spring, just a few weeks before graduation, Kobliner traveled to Chicago and spoke with students at DePaul University, Loyola University, Northwestern University, and the University of Chicago, where she encountered many seniors frightened to face the poor job market.

Following her trip, Koblinger sat down for a phone interview with JUF News to discuss her new book, the financial crisis, and tips to help young people ride out the recession.

‘Get a Financial Life’ photo 2

Why did you originally write this book back in the mid 1990s?
When the book first came out, I was in my 20s and I had been writing for Money Magazine. I was an English major in college at Brown University. I really didn’t have all that much financial background. When I graduated, I started writing for a Jewish woman, [the late] Sylvia Porter, who was the first person, at least the first woman, to write about personal finance. Then, I got a job at Money Magazine. I realized that there were no books at the time for younger people starting out. Everything was written for people who already had stock, who already had savings. I realized there was a real need out there.

As you travel around the country today, including to Chicago universities, what are the biggest concerns you’re hearing from students and other young people?
A lot of them are so overwhelmed because they have on average $22,000 in student loans and many have much more than that. They also have, on average, $4,600 in credit card debt. They have a huge amount of debt and the economy is so bad right now that they are overwhelmed and can’t find jobs. It’s very stressful for young people. That’s why a record percentage of them are moving back home with their parents. Their parents are stressed because they’ve paid for, often, expensive colleges, and their kids not only can’t get a job but are loaded down by debt.

Young people also have to see this as an opportunity: Move back home, make some money, do some volunteer work that you may not have done otherwise, because maybe, when the economy does get better, that will lead in a direction that you wouldn’t have thought about. I am seeing young people thinking more about what they really want to do. The knee-jerk response in the 1990s was, I should go into investment banking because that’s a smart thing to do…A lot of people [in the past] chose a field based on money rather than what their passion was. One young person in Chicago recently said to me that he had more in common with his grandparents than his parents because his grandparents were from the Depression generation and they lived through tough times [like now].

You’ve done studies about young people knowing more about celebrities than their own personal finances. Where did we go wrong in society? Shouldn’t we be teaching our kids about finances in schools from an early age?
One of the biggest problems is that we don’t address financial literacy. There are some basics that aren’t being taught in schools and if we did, it would make a huge difference. [Schools need to teach] how debt can add up and be a huge problem for people. If we educated people starting in junior high school, or maybe even in elementary school, it would not only make people more knowledgeable, but it would be a great way to teach subjects like math, because it’s so practical and it’s going to be used for the rest of your life.

How bad is the job market looking for recent grads?
The unemployment rate for people, ages 20-24, is 14 percent and the unemployment for the average general public is 8 percent. I have visited about 20 colleges in the last month and a half. I would always ask the seniors, “How many of you guys have jobs?” In a room of 100 people, maybe three or four would have a job. It’s really tough.

Are older people filling the jobs that graduates usually take?
Teen unemployment is at the highest rate since World War II. What’s happening is that people in their 30s and 40s are keeping their jobs. If a company can only keep a couple of people, they’re going to keep their older ones, who have more experience. The people in their 20s aren’t getting those jobs. Then, the college graduates, this summer, are going into what teenagers used do, scooping ice cream and lifeguarding, all the jobs that used to be classic teen summer jobs. So everyone is moving down a notch and a lot of people can’t find work at all.

What are a few of the preliminary steps young people should take to ‘get a financial life?’
If they are graduating and they have credit card debt and student loan debt, it’s really important to analyze what they have, because a lot of people have a mix of private loans and a mix of government or federal loans. The interest rate on federal loans is much lower than the interest rate on private loans. Credit card debt is usually the highest of them all. The goal is to pay off your highest rate debt quickly. Managing your debt is really important.

If you’re lucky enough to have a job, and if the company has a 401(k) or another type of savings plan, you must take advantage of this because it’s just free money.

The other thing is, if you can save a little bit of money, you want to open a Roth IRA, an individual retirement account. Even just putting a small amount can really make a difference long-term. The good thing is that you can withdraw money you contribute to your Roth IRA for any reason without paying taxes or a penalty. It’s a smart way to save because it will allow your money to grow tax-free for life. It gives you a lot more flexibility than you realize.

Also, if you’re on your own for the first time, and you’re moving back home with your parents, use it as an opportunity to save money, to save as much as you possibly can… [until] the economy does come back.
 
What can the Madoff scandal teach young people about finances?
It was so sad, especially for the Jewish community and it’s very upsetting to think about. It teaches everybody that tried and true ‘If something seems too good to be true, it is.’ The problem is that it goes counter to the notion that if you’re smart and research things and you shop around, you can get a good deal.

What did your parents teach you about saving money growing up?
My parents worked really hard—my father was a principal and my mother was a teacher. They didn’t have a lot of money and they saved a lot and that is something I always saw as a kid. That’s partly why I got interested in this field, not really from a money perspective but from a values perspective. In order to get into a good college, you needed to have enough money to pay for it. I don’t know if that’s called Jewish values or good values or just a hard-work ethic.

*The 2009 poll was designed and commissioned by Beth Kobliner and conducted by Harris Interactive.

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