WS Chronicle

Financial illiteracy is widespread, and 4 out of 10 Americans do not understand how to balance a checkbook, so I spend countless hours throughout the year advocating for economic and financial literacy in our local community. 

I was approached by a young woman and she asked, “Is it a good idea to use credit cards for Christmas this year?” 

I am against the use of credit cards during any time of the year; however, many Americans have been rocked by job losses and have less available cash after stringing together a number of part-time jobs.  With “Black Friday” recently passing, many parents are now concerned about how they will provide Junior with the latest and greatest Christmas gift of the year.

The young lady’s question reminded me of a personal childhood experience.  I vividly remember a conversation that my mother had with me about the upcoming Christmas holiday when I was only 6 years old.  At the time, I was a staunch believer in Santa Claus, and my excitement grew daily as we approached the magical day that he would descend upon my apartment carrying bags of toys. 

Imagine the shock that I felt when my mother went into an explanation as to why Santa could not visit me this year.  I asked, “Have I been bad?” and I promised, “to be better in the final days leading up to Christmas.”  My promises of good behavior failed to change the conversation, and she went on to explain, “I do not have the money to pay him this year.” 

I was surprised to learn that a wish list mailed to the North Pole must be accompanied by a check.  Several years would pass before I learned that my mother was Santa and there was no money in our household available that year for gifts.

It took great courage for my mother to have that “talk,” and she demonstrated an invaluable lesson on how to face challenges.  She recognized that our family’s situation had reached a critical point and refused to mask our financial challenges through digging us deeper into debt or depleting needed cash reserves. 

She could have borrowed the Christmas money in order to provide me with my desired false sense of happiness.  Instead, she dismissed ideological beliefs for pragmatic solutions.  My mother understood that maintaining her ability to provide me with shelter, food, and clothing trumped my longing for the newest G.I. Joe action figure.

This year provides a great opportunity for us to educate our children about making hard financial decisions that might go against our short-term interests, but will benefit our long-term goals.  We have the rare chance to educate younger members of our society against the dangerous use of credit, while exposing them to traditional principles, such as saving and spending less than you earn. 

Over the past several years, the savings rate in America has been miniscule, and our unquenchable thirst for “stuff” has caused the average family’s consumer debt to reach 140 percent of discretionary income.  We diminish the power of our money and rob ourselves of its wealth-creating effects when we saddle our budgets with looming credit card bills. 

The key principle to mastering money and creating wealth requires that we understand that our past financial choices have created our current outcomes, so to reach financial independence, we must change our daily choices.  The altered economic landscape should encourage more of us to become financially empowered through education, long-term planning and sound decision-making.

Algenon Cash is the managing director of Wharton Gladden & Company, an investment banking firm, he is also a national spokesperson for the oil and natural gas industry.  Reach him at acash@whartongladden.com.