Yesterday, I tackled the issue of how long negative items remain on your credit report. Today, courtesy of Credit.com, we have an answer to the question of how much bad credit will cost you over a lifetime. We know that a poor credit history (which translates into a low credit score) will make it difficult to borrow as many lenders will deny applicants if they don’t meet their standards. For those with poor credit, who are able to borrow, there is a premium that they pay which is a higher interest rate and also perhaps higher fees.
So, over a lifetime, how much more will someone with a lower credit score pay….drumroll please?
About $160,000. So not paying that traffic ticket or not paying your bills on time has a real consequence!
“According to Credit.com, somebody with top-notch credit would pay $209,590 in interest, while people with bad credit would be on the hook for $369,054, on average.”
This BBC article got me thinking about the important lessons we learn about money and work before we ever get to high school. I found myself nodding my head in agreement over and over again as I worked my way though the article and reflected on my own childhood experiences as a dog-walker, paper boy and snow shoveler. I thought it would be interesting to ask students to reflect on their own experiences.
Here were three principles that I learned early and are incredibly important to develop at a young age:
- Create a link between work and money:
I thought this article might appeal to those students who idolize the NBA and their stars. This interview with the NBA’s SVP of Player Development provides a behind the scenes look at the financial planning advice that the NBA provides their rookies. Ask your students what lessons they can take away from this interview (other than NBA players are very well paid!):
Here are a few nuggets:
- Importance of budgeting: “We know it’s critical to have a budget so one of the essential tips [we give] when the players join the league is to get a sense of their understanding of financial issues and how to manage money. What we find is that players just haven’t taken the time to develop a budget, know how to follow a budget and so we climb into that very, very seriously.”
Credit reports can be a challenging concept to present to high school students since it may not seem relevant to many of them who have thin or non-existent credit files today. I like the idea of the “permanent record” that Mrs. McLaughlin would scare us about in 2nd grade. Whenever we misbehaved (OK, I did get in a little trouble), she would warn us that our poor conduct would be “going on our permanent record.” It took us until about 4th or 5th grade to realize that future employers or colleges probably wouldn’t dig into our elementary school conduct grades and we all breathed a deep sigh of relief.
Credit reports come pretty close to “permanent records” and have extremely long memories so the intent of this question is to prime students to the concept that mistakes they make with their money now (not paying parking tickets, paying bills late or having a late bill sent to collections) can have a long-term impact.
So, back to the original question: How long do negative items stay on your credit report? Continue reading
From Jessica Endlich Winkler:
We did it — we undertook the task of designing a budgeting lesson around the costs of maintaining your health. In some ways, it’s a pretty straightforward — will students choose to join a gym or will they find a way to workout for free? But you can’t do a health budget without talking insurance, and the Affordable Care Act is still so new, fluid, and misunderstood that finding good web resources for this lesson was a real challenge. Here are some of my favorites from 6.5 Your Health: Insurance & Other Costs…
- Discussion Prompts — We start every lesson with discussion prompts, and this one poses the quandary of which is more important: buy health insurance or save for retirement?
This can be an instructive discussion as it helps students think about their futures and behaviors/habits that they can develop today to lessen the probability that they will have the same fears as adults.
From National Foundation for Credit Counseling eighth-annual Financial Literacy Survey; question asked “Which of the following areas of personal finance currently worries you most?”: Continue reading
This chart goes well with an earlier post about how interest rates impact the economy. The Federal Reserve announced today that they will be ending their Quantitative Easing program(technical term for the Federal Reserve keeping interest rates low by purchasing bonds) after almost five years of intervention. One major beneficiary of this policy: the stock market!
A few ideas to engage your students: Continue reading