The kids are not all right

If young adults are overindulging, as a study this week suggests, it probably isn't because they are flush with cash.

Youth unemployment has remained stubbornly high for the last three years at around 14% while the average student debt has ballooned to an average of $27,000.

Yet American Express suggests that Gen Y, who it describes as those born after 1983, has boosted fashion spending by 33% between 2009 and 2011, travel spending by 74%, and fine dining spending by 102%.

The same week, TD Canada Trust released a survey showing that more than half of those between 18 and 34 are carrying credit card balances. About 40% are just making their minimum monthly payment.

“Using your first credit card responsibly is a smart way to establish a strong credit rating and help set yourself up for an attractive interest rate when you apply for your first car loan or mortgage,” said Stephen Menon, associate vice-president of credit cards at TD Canada Trust.

But credit cards should not be used as a means for “perpetual, permanent borrowing,” he warned.

“Be wary of permanently carrying a balance, having maxed out your limit and being unable to pay it back, or using your card to finance a lifestyle you can't afford.”

One in five young people say they use their credit card to “supplement” their income.

So TD's advice might be timely, it calculates that a $2,000 balance at 19.99% interest rate will take more than seven years and cost $4,000 in interest to pay off by making the very worst of financial decisions and whittling it down by only the minimum payment.

Credit card balances and addictive cash advances are definitely not the way to go for young people just starting out. TD warns that cash advances, including credit card cheques and balance transfers, typically have a higher interest rate and that interest is usually charged from the day of the transaction.

Maybe today's youth are counting on inheritances from their aging Boomer parents as they run up their credit cards with spending on luxury goods That's another bad idea, according to a recent study from U.S. Trust, a division of Bank of America. Only about half of U.S. Baby Boomers say it's important to them to leave an inheritance for their children. Almost as many – about one-third – say they'd rather leave money to charity than their kids.

Sixty percent of wealthy parents said they were not confident their children could handle such an inheritance.

Which begs the question – whose responsibility is it to educate today's youth in responsible financial planning Arguably, parents are having a tough enough time managing their own finances and may lack the skills to educate their kids.

The school system is a logical option. Junior Achievement, a non-profit organization founded in 1955, is one of the few broad initiatives in Canada's schools. JA works with financial institutions and corporations to provide one-day courses on entrepreneurship and financial literacy. Last year, more than 216,000 Canadian students benefited from their programs. Is one day of financial education enough for students though

Government has tried to play a larger role in teaching us all about our finances. The 2009 launch of the Task Force on Financial Literacy was a step in the right direction, but got stalled before long. In fact, the task force's website currently states: “This website has been archived and will no longer be supported. Any information provided is for historical purposes only.”

The Canadian Institute of Chartered Accountants has been at the forefront of the financial literacy, and Ontario CA Robin Taub is an  influential champion for the cause. Perhaps Robin's book, , should replace Shakespeare's Macbeth as required reading in our schools.

Jonathan Chevreau's is another book that focuses on different stages of a young person's financial development. While Taub's book has chapters directed towards parents with children ranging from five to 21, Chevreau's is aimed more specifically at young people aged 20-40. Findependence Day follows a young couple's financial planning journey from their 20s to their 40s.

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