Is there any amount of education or disclosure that can overcome the power of sexily-advertised instant gratification?

Perhaps it's time for the creation of a public education fund to address this problem. TILA can't hack it- we need credible people talking in the right media about the hazards of debt.

It would be helpful if Martin Scorcese, Sheryl Crow, Ellen DeGeneres, Alicia Keyes, Andres Aggasiz and Shaun White got together and did some PSAs about the dangers of credit cards. Unfortunately, all of those people are currently pitching something for American Express- some kind of do-gooder contest. And don't forget about Tiger Woods and Robert DeNiro.

Perhaps there are celebrities, professional athletes, etc., who would be willing to participate in a broader financial education effort: targeted at kids. The question then is whether our commercial media would dare to air them and risk losing ad revenue from Capital One...(Which reminds me that David Spade is unfortunately spoken for, as well...)

Christine, as you point out, lifetime credit habits can develop early and the other noise needs to be canceled out.

Perhaps the answer is that kids can grow up just fine without TV and the Internet. The notion that kids could learn financial responsibility from watching celebrity sound bites is laughable.

And American Express has offered a revolving credit card for many years. So we need a more plausible hypothesis for why the Seinfeld commercials for Amex have disappeared.

Disclosure or education about dangers of easy debt must go beyond just providing information for people’s cognitive, deliberative systems to making visceral appeals to people’s affective, emotional systems. Graphically and visually depicting adverse consequences of bad credit, bankruptcy costs, and financial ruin might scare kids into developing financial acumen, knowledge, and wisdom. Another possibility is to have adults who have suffered from bad credit histories talk and share their experiences with financially at-risk youths. This type of targeted interactive dialogue is akin to adolescents potentially at-risk for becoming criminals being “scared straight” by visiting prison inmates in jail. Of course such "scared straight" programs also have the potential for generating anxiety or exacerbating already existing mathphobia. See George Loewenstein & Ted O’Donoghue, “We Can Do This the Easy Way or the Hard Way”: Negative Emotions, Self-Regulation, and the Law, 73 U. Chi. L. Rev. 183 (2006).

Since 2001, the Credit Card Project of the Saint Paul Foundation has been engaging in, and researching such targeted financial education initiatives. See Kimberly M. Gartner & Elizabeth R. Schiltz, What’s Your Score? Educating College Students About Credit Card Debt, 24 St. Louis U. Pub. L. Rev. 401, 419-31 (2005). As part of this project, University of Minnesota Department of Family Social Science Professor Virginia Zuiker developed an online one-credit course about credit card management. Another part of this project is entitled “What’s My Score,” a public awareness and educational campaign, that is designed to help college students realize that credit scores are so crucial for their careers and lives that they should manage them like they manage their grade point averages.

Providing optional financial education to college students might already be too late to change bad financial habits. A greater benefit might come from providing voluntary if not required financial education to high school or younger students. There are cognitive benefits to requiring that young students take a course in financial decision-making. See B. Douglas Berheim et al., Education and Saving: The Long-Term Effects of High School Financial Curriculum Mandates, 80 J. Pub. Econ. 435 (2001). Of ocurse, part of financial decision-making is about general decision-making over time and under risk. See Jonathan Baron, Teaching Decision Making to Adolescents (1991). There are also likely to be emotional benefits in terms of less worry over financial decision-making due to a better understanding of, developing personal autonomy concerning, and a sense of control over financial matters. An example of a Internal Revenue Code § 501(c) (3) non-profit organization that is dedicated to providing instruction at decision-making skills to at-risk students, low-income students, and even gifted students is Decision Education Foundation. An example of a private sector financial educational initiative, that is perhaps a move similar to Christine's link to voluntary industry self-limniting of junk food ads to kids, is Visa’s website titled Practical Money Skills for Life.

It might also be helpful for most high school students to learn financial decision-making skills if they practice making financial decision-making in environments that simulate real-life. Similar concerns apply to making high school driver education occur in more realistic scenarios than is typically done, for example with the latest popular music playing, perhaps too loudly and passengers in the front and back seats talking, possibly also too loudly. Poor financial decision-making entails habits which are very easy to pick up, but quite hard to undo due to irreversible or very costly to reverse consequences.

To be effective, learning basic financial ideas can and should be made engaging, fun, and relevant. See, e.g.,

Katherine R. Bateman, The Young Investor: Projects and Activities for Making Your Money Grow (2001);

Arthur Bochner & Rose Bochner, The The New Totally Awesome Money Book for Kids (3d ed. 2007);

Arthur Bochner & Rose Bochner, The New Totally Awesome Business Book for Kids (3d ed. 2007);

Janet Bodnar, Raising Money Smart Kids: What They Need to Know about Money and How to Tell Them (2005);

Gary W Buffone, Choking on the Silver Spoon: Keeping Your Kids Healthy, Wealthy and Wise in a Land of Plenty (2003);

Eileen Gallo & Jon Gallo, The Financially Intelligent Parent: 8 Steps To Raising Successful, Generous, Responsible Children (2005);

Neale S. Godfrey, Money Still Doesn't Grow on Trees: A Parent's Guide to Raising Financially Responsible Teenagers and Young Adults (2004);

Hollis Page Harman, Money Sense for Kids (2d ed. 2005);

Gail Karlitz, Growing Money: A Complete Investing Guide for Kids (2001); and

Jayne A. Pearl, Kids and Money: Giving Them the Savvy to Succeed Financially (1999)

As with all types of decision-making, people develop and master financial decision-making by repeated learning involving doing, reflecting, discussing, and teaching others. People can accomplish much of their financial decision-making by employing user-friendly computer software or web-based interactive programs. A concern is whether making financial education fun could mislead people into failing to appreciate the seriousness of investing and irreversibility of financial ruin that can result from ill-conceived choices and mistaken assumptions. Such dangers exist if people come to view investing to be similar to playing a video game, whose initial values they can reset by declaring personal bankruptcy upon insolvency. A related danger is that some people may become addicted to taking excessive financial risks because of the adrenalin rush, visceral thrills, and similarity to gambling.

Jake, I take issue with you somewhat on this point:

"Perhaps the answer is that kids can grow up just fine without TV and the Internet."

That's just not the reality in most households- and we have to accept the fact our children are being immersed in a culture of financial irresponsibility, both on television and off. Our culture of consumption also permeates our kids through peers, experiences in retail stores and just being a part of the commercial soup. You can keep your kids away from TV, the internet and satellite radio, (if they'll let you) but you can't wholly protect them from this.

"The notion that kids could learn financial responsibility from watching celebrity sound bites is laughable."

Celebrity sound bites are not the answer- I was merely illustrating that we are up against a celebrity culture that takes our children in the wrong direction- even in finance, of all things. (Who exactly was Capital One trying to build brand with by using a Saturday Night Live veteran using flexibility of frequent flier miles usage as the value proposition? I'm pretty sure it was 18-24 year-old males looking for ways to use miles to go on spring break.) Having consulted to the card industry (shame on me), I can tell you with certainty that this is how it's done.

Perhaps you would agree with my more nuanced point, Jake: I don't consider celebrity influence or the influence of our media culture to be laughable, and I know those who doled out the checks to those celebs were literally betting on it. Now, would celebrity PSAs cure the problem? Of course not. If celebrities rejected endorsement offers from companies that promoted financial irresponsibility help the cause? Maybe only marginally. To quote a soft drinks executive, "There's always another way to sell sugar water..."

On a separate note, I think Peter covered the challenge, potential solutions and pitfalls exceptionally well. The problem that you run into with education in this area is that the people who need it least to begin with are probably the ones who absorb it most. (One is reminded about Ralph Rohrer's admonition that providing more disclosure and information can't fix innumeracy or indifference. "Whither Truth in Lending?" Consumer Finance Law Quarterly Report 50 (1996): 114.) The parents who buy these books for their kids are probably pretty conscious about financial literacy anyway.

Peter's point about early intervention, perhaps before high school, is, from my intuition, the most powerful tool. It would also be interesting if retail banks were mandated to provide a certain amount of education to new account-holders between 18-21; especially if the 18-21 year old has been pushed to sign up for a credit card.

That being said, people (including children)still smoke, the city of Las Vegas was built on bad math, and we subsidize education spending through government-sponsored and advertised lotteries.

Priceless? More like Hopeless.

Note: I don't mean to single out Amex or Cap One. It's the industry- and not just the card industry.
Disclosure: I did not consult for either of the aforementioned institutions.

David, I appreciate the thoughtful remarks.

You state --

Jake, I take issue with you somewhat on this point:

"Perhaps the answer is that kids can grow up just fine without TV and the Internet."

That's just not the reality in most households- and we have to accept the fact our children are being immersed in a culture of financial irresponsibility, both on television and off. Our culture of consumption also permeates our kids through peers, experiences in retail stores and just being a part of the commercial soup. You can keep your kids away from TV, the internet and satellite radio, (if they'll let you) but you can't wholly protect them from this.

*********

Let me take issue with that.

Parents who say "[t]hat's just not the reality in most households" are sacrificing principle for convenience. That is not a good example to set for our kids.

Translated into common sense English, "the reality in most households" is whatever you let your kids tell you their friends' parents let them get away with, then accept for the sake of avoiding a realistic dialogue with your kids about what is right and what is wrong. Keeping the peace with one's kids in this manner is rather amoral and excessively utilitarian.

This issue, of course, is much larger than twinkies or financial responsibility. Everyone here has indirectly touched on it (Peter may have even directly addressed it, but I glossed that post. No offense intended).

This issue is that firms market to our children based on both short and long term objectives. These objectives, especially the long term objectives, involve everything from tobacco and alcohol, to restaurants, airlines, gas stations, etc, etc.

IMO, Christine hit the answer squarely. External action may be helpful and is certainly desireable in some instances, but ultimately it is a question of whether the parent chooses to be a parent - who is in control?

I think Jake's point on this is equally strong. As parents, we DO and SHOULD control what our young children are exposed to and how they are exposed to it.

In our home, that is very easily done. When our children watch tv or are on the internet, either my wife or myself is doing it with them. If we don't agree with what we see, we don't watch it. Same goes with all of their activities. We do things as a family.

While we don't intend to shield them from learning about things in the world, we do intend to control, as best we can, when and how they are exposed to what. Much of the trash that the media feeds to our kids has no business being fed to kids.

Doing things with our children while they are young, and monitoring what they are exposed to while they are young provides us with the opportunity to teach them correct principles as they are prepared to receive them, so that they are prepared to deal with the marketing and whatever else they encounter as they grow older. ie: if I teach my child about financial responsibility before he is bombarded with ads from credit cards, and if I allow my child to experience situations that require financial responsibility before he is old enough to become involved with credit, I will have little to worry about when either of those times arrive.

This doesn't mean that a parent can forsee or plan for every situation, but it does mean that a parent can plan and take control of what is allowed into the home, and to a large degree what is experienced out of the home, especially while children are young and most impressionable, and extending opportunities for children to make those choices as they mature. That is not unrealistic. That is simply called parenting.