Matt Listro wrote a blog post about the new credit card rules for 18 - 21 year olds. Basically, in order for members of that age group to get a credit card, they need a co-signer, unless they can show proof of employment. Granted, this was a knee-jerk over reaction to the targeting of that age group by credit card companies. However, rather than really address the problem the government has put a band aid on it that, just as Cash for Clunkers did to the automotive industry, will only move the problem to the future.
Basically, it is telling legal adults that they do not have the capability to make credit decisions for themselves. Granted, this may be the case, but requiring a co-signer will not necessarily make that person more credit savvy or reliable after the age of 21.
Couple this with the requirement for insurance companies to cover children up until the age of 26. This is telling this age group that they are not required to fend for themselves, that they can legally, by fiat, rely on their parents for support, at least insurance-wise, up until that age. (On a side note, during a particularly heated divorce, since my kids were over 18, my ex's attorney told her that she could get child support up until they were 23).
These two recent pieces of legislation, as well as some previously passed and others yet to come, are basically saying that this age group does not need to be self-reliant, they can depend upon bailouts.
However, at the same time, 18 year olds are allowed to sign a contract with the government for military service. They are allowed to sign on the dotted line that they are voluntarily putting their lives, their health, etc. in jeapordy yet they are not required to have anyone looking over their shoulders when they do this.
Additionally, at 18, they are allowed to marry and have kids without any "co-signer". This is certainly a more serious issue than signing a credit card contract.
It is yet another case of nanny state, good intentioned but poorly implemented legislation. And this legislation will fail these young people just as badly as the lack of it has. Yes, some of the credit card companies have been targeting this group specifically. But why is that? The answer is simple, these kids, who immediately become legal adults on the 18th anniversary of birth, are not prepared for life on their own, in the world. They are not taught about credit, finances, banking, checking, etc. in school. They are not taught it in homes, partially because their parents don't know enough themselves, partially because of today's societal influence on families.
Yes, the answer to why they are not ready is simple. But, to address the problem systemically, to eliminate the root cause, and not just to put legislative bandages upon it, is a bit more complex. No, not really complex, just a bit more difficult. Schools need to start incorporating life, beyond sex education, into the curriculum. Parents need to understand their finances and work with their children. Show them what it takes to balance a check book. Show them how much they earn, and how much the government takes in taxes. Show them how much it costs to live the life-style they live. Show them the differences between wants and needs and how to prioritize for them.
I know its not a popular message right now, but, we need to teach our children to be self-reliant. We will not always be there to bail them out. And we cannot afford to have the government instill upon them a sense of dependance. Maybe some of us should start practicing that ourselves and set the example.
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