B.F. Pettingill, Jr., Ph.D., Economist, Comments on Instant Gratification vs. Future Economic

B.F. Pettingill, Jr., Ph.D., Economist, comments that according to US Department of Treasury, Senate Committee on Banking and Housing and Urban Affairs, from 1990 to 2005, the rate of personal bankruptcy in America increased over 69% and credit card debt increased to over $900 billion. Credit card safety-nets are used by nearly half of all Americans to avoid bankruptcy. To add insult to injury, in 2005, over $10.3 billion was charged by banks for overdraft fees, which only exacerbated this problem.

Baby boomers or generation X'ers all are awash in debt. The term subprime loan is routinely used to entice individuals to purchase a home or refinance an existing mortgage. Subprime loans led individuals to believe available loans below the "prime rate;" but, these loans should be called "super high risk loans." Subprime loans are now maturing and Americans are discovering the truth about hidden costs and usurious interest rates.

Former Federal Reserve chairman Alan Greenspan stated, "In many respects, improving financial education is essential to ...help prevent people from making poor financial decisions that can take years to overcome."

As financial systems become more complex, the responsibility of financial decision-making falls increasingly on individuals to manage their finances. One way to address this trend is public education. A broad-based financial literacy educational movement needs to be undertaken, with the emphasis placed on life long learning.

Americans are conditioned to look for instant gratification, which hinders long-term financial planning. By reprogramming one's thinking, i.e. delaying instant gratification, immediate satisfaction (debt) can be replaced by increased financial rewards.

One simple solution is to educate individuals on financial literacy by explaining what is a "need" vs a "want." Next, reward individuals who take basic financial education classes online. Finally, each individual in America has a Social Security number; one could also carry a credit card number score, monitored on an annual basis; anyone who falls below a set range, would be required to take financial literacy remediation.

Financial decisions must shift from the limbic system of decision-making (instant gratification) to the frontal lobe (rational decision) in order to avoid future crises. Please contact author for full text.

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