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Starting out without falling behind
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Nick Green admits it was hard for him to avoid using credit cards when he was in college. "I wanted more because other kids had more," says Green. "A TV, VCR, my own phone, clothes, name-brand book bag, Doc Martin shoes. You can go on." (MPR Photo/Cara Hetland)
There were more bankruptcies filed in 2002 than ever before. The American Bankruptcy Institute reports non-business filings broke records last year. More than 1.5 million people filed for Chapter 7 bankruptcy, a 7 percent increase from the previous year. Many blame poor spending habits and high credit card debt. The use of credit is important for recent college graduates. The choices they make about money at that time can stay with them for years.

Sioux Falls, S.D. — Nick Green stacks shoe boxes at a Sioux Falls shoe store. The recent Augustana College graduate is a manager in training.

"I get $6 an hour, plus 3 percent commission on what I sell," says Green. "My weekly sales are $5,000."

Green is on a track to manage his own store within a year. He grew up on a farm near Redwood Falls, and says he's worked since he was 12.

"I worked for my dad. When I turned 16 I got my first job in a pharmacy, then in a grocery store for three years. I've been working ever since," says Green.

Green stumbled upon his shoe store job. He says he was hired when he was in the store to buy shoes.

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Image Nate Helling

Nate Helling also graduated last spring from Augustana College. He is a shop manager at a Sioux Falls sporting goods store. He makes $6.50 an hour plus commission.

"They told me if I was really bad at this I'd make $22,000 a year. Some people make $28,000 in their first year," says Helling. "Right now I'm leading most of them. I'm hoping for $25,000."

Nate Helling has health insurance and dental benefits at his job. Nick Green, who is Helling's roommate, has to wait until he's been at his job six months before qualifying for an insurance package. Helling and Green share living expenses with two more roommates. All were business majors at Augustana. They're all trying to keep costs down, but they differ in how they spend money.

Nate Helling only buys the basics. Nick Green wants nice things and isn't afraid to charge things. He's a little more careful now -- because he got into trouble when he was in school. "There's a different mentality at private school. I wanted more because other kids had more," says Green. "A TV, VCR, my own phone, clothes, name-brand book bag, Doc Martin shoes. You can go on."

Green says it took him six months to pay off a $1,000 credit card bill. He also returned several items that he didn't really need.

"Kids aren't the only ones who get caught up in the peer pressure of having things," says Jodie Anderson, a credit counselor at Lutheran Social Services.

"They may come from a family background where mom and dad are caught up in the peer pressure of having things, which might be a big screen TV, and a larger house, and a lake home, and Caribbean vacations and a $40,000 SUV," says Anderson. "If they grow up in that environment, when they go away to school they have their own peer pressures."

Anderson says the average college senior carries four credit cards with a balance of $1,000 each. She says credit companies target college students because they're a good risk. Nationally, there's a only 6 percent default rate on credit cards.

But no one tracks the rate by age group, and there aren't any statistics for bankruptcies by age group. It's impossible to tell how many young adults are in financial trouble.

Paul Richard is the executive director of the Institute of Consumer Financial Education, which teaches students about personal finance.

"The institute's position is that anyone who does not have a full-time income has no business making an application for credit," Richard says. "Credit cards have a message, and the message is 'Spend.' Young people hear that message loud and clear."

Richard says parents should not co-sign credit card applications, and need to make a stronger stand when their children are young.

"You should not bail your children out of financial trouble, especially when they get into it on their own. It should start when they're teenagers," says Richard. "Let's say you give your kid an allowance of $10 a week, and you make them accountable for their own entertainment. And they run out and they want to go to a concert. You should not bail them out. Make them suffer. That's the only way kids are going to learn how to make these tough decisions."

Credit counselors admit that's not easy. Jodie Anderson says parents usually do whatever they can to protect their child's future credit rating.

"I think mom and dad still have a tendency to bail out the college student. Their rate of repayment and delinquency is pretty consistent with the average consumer population," says Anderson. "We know that college students aren't working, so we know that mom and dad are helping them out, or they're using student loans to stay on top of things. And that's a whole other issue."

Anderson calls student loans a necessary evil. Many creditors look at student loans as "good" debt, since it's an investment in a student's future. But if someone defaults on their student loan, that stays on their credit report forever. It cannot be written off in bankruptcy court.

Many young adults start out in debt. Nate Helling has a $20,000 student loan. He tacked on the expenses from two trips to Europe with the Augustana Choir to that loan. He doesn't see it as a bad debt, because he's able to pay a little extra each month to pay it off sooner.

"It's weird, because I have more money now than I ever had. Just because I've gone to an expensive school and I have a high-paying job, I just never -- I get it from my dad -- he's never been a big spender," says Helling.

Helling says his parents taught him how to manage money well. He's learned too, by watching friends get into money trouble. His roommate Nick Green got in that spending trap. Green is trying to look to the future now.

"I'm seeing someone now that I definitely plan to marry," Green says. His roommate Nate Helling interrupts, saying, "You know, this is on the radio."

"Just kidding!" Green laughs. Nick Green and Nate Helling say they plan to pay off their loans before taking a step like marriage. But they both admit they don't think about the unexpected expenses. An accident or medical expenses are furthest from their minds. They don't know what they'd do to pay for it.

But they're convinced they're on the right track and have a sound financial footing many of their friends don't have.

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