Give a graduation gift that will pay dividends

High school and college graduates are frequently ill-prepared for the financial decisions they will face

May 13, 2003 - Madison, Wis. - With high school and college graduation right around the corner, many are asking, "What should I give the graduate, or graduates, in my life?" Rest assured, they will receive their share of money, computers, cell phones, video games, TVs, stereos, etc. However, if gifts are based on what graduates truly need, many will be receiving tools that improve their financial literacy.

A study by the General Accounting Office (GAO) suggests that high school and college graduates are frequently unprepared to make sound financial decisions. Lack of proper budgetary planning, poor understanding of the dangers of revolving credit card debt or the value of compounding interest are just a few of the characteristics that are common among people college-aged and up. According to a July 2001 study released by the GAO, university officials and debt counseling services believed that, "college students were more likely than other types of credit card users to run up debts they could not pay because of their financial inexperience. This problem could become particularly severe after graduation, when many students must begin making payments on education loans (about half of college graduates leave schools with an average of $19,400 in student loans)."

This notion of poor financial literacy among college-aged people is supported by professionals and academics alike. In a June 2002 Foxnews.com story titled, "Financially Illiterate: Schools Not Teaching Personal Finance", Cleveland-based accountant and financial planner Kathy Seitz Watson said, "Many of my clients who are college graduates don't know a thing about personal finance". In the same story, Dr. Allen Martin, a professor of consumer affairs at California State University, added, "Even my business students don't know the material."

To compound the problem, college students and recent college grads are aggressively targeted by credit card companies with hip marketing campaigns designed to entice them to sign up for one or more credit cards, or as the GAO put it, "One student union administrator complained that the vendors created a 'carnival atmosphere' with loud music and games, noting that 'the incentives, along with the party atmosphere, masked the responsibilities of owning a credit card,' especially since there was no discussion of the consequences of misusing a credit card." Unfortunately, the short-term fun that comes from unabated credit card spending leads to high interest that can often produce long-term damage. According to the GAO, "Two universities [of the 12 visited by the GAO] made bankruptcy attorneys available to counsel students who were having financial difficulties." According to an attorney from one of the universities, in the 3 years following April 1998, an estimated 1,328 students had utilized the legal service. Of that number, "255 students had sought advice on credit card debt issues." According to the study, "the credit card debt of these students ranged from about $2,100 to nearly $39,000, with an average of approximately $11,200."

Clearly, a lot is at stake when a young person heads off to college, and many students are getting hit hard because they just don't know enough about finances to make sound decisions. The silver lining in all of this is that a college-aged person who learns about good financial behavior, and then takes action, can get a head start on savings that will benefit him or her for life. Consider this, if a 20 year old saved $80 each month until he or she turned 60, and earned 10% on those savings, that person would have more than $500,000. However, if that person waited until 30 to begin saving the same monthly amount until age 60, the resulting savings would be approximately $180,000. That's an additional $320,000 by starting just 10 years earlier!

So the potential difference financial education can make is obvious though the right graduation gift may not be. There are numerous books and classes on the market that might fit the bill, but the question is, will the graduate actually use them? A potentially more viable option, especially considering the amount of time college students or recent grads new to the workforce spend in front of the computer, is financial education software. This alternative makes sound information readily available to them right on their desktop.

One such product is The Encyclopedia of Personal Finance 2003, a CD-ROM produced by Precision Information, LLC. Unbiased and independent, the Encyclopedia offers straightforward, easy to use information that will empower the user with a solid understanding of investing and financial planning. The Encyclopedia's content is divided into over 2500 pages of articles, tutorials, definitions, and interactive quiz questions that enable users to test their knowledge as they learn. Much of the content in the Encyclopedia is at a beginner or intermediate level, with enough advanced content to augment text materials for students taking business courses.

Combined with a proactive attitude, perseverance, and discipline, products like the Encyclopedia can help a high school or college graduate avoid the all too common financial pitfalls that trap so many people their age. As importantly, financial education can help these young adults begin building a prosperous future sooner rather than later.

Precision Information is a leading provider of interactive financial education products to financial service firms and millions of individual investors. PI's customers benefit from the company's proprietary database of more than 2500 pages of articles, tutorials, definitions, and quiz questions. Such industry leaders as Ameritrade, Morningstar, Intuit, and New York Life rely on Precision Information to provide accurate, reliable, unbiased, engaging and easy-to-use NASD-compliant material through web, print, and software applications. PI's flagship software product, The Encyclopedia of Personal Finance 2003, is the most comprehensive personal finance education resource available for the individual investor.

For more information about the Encyclopedia of Personal Finance or to request a sample copy, call Steve Royko at 608-347-5644, or log on to the company's web site at www.precision-info.com.