I was sorting out banking statements the other day and realized I had papers from 3 different banks (customer of 4 actually but that's just a zero balance account not tied to any debit card so no statements). One of them is for an old account used for paycheck deposits that I haven't bothered to terminate since it needs to be done at the exact branch close to where I used to work. Another is for the one credit card I own and the debt that comes with it (sigh) and the third is my main account with its debit card and i-banking activated and all that. No loan, no mortgage, no time deposits or something. Still I find that 3-4 banks is too much.
Then you hear on the internet or TV about people tied with several banks owing money to quite a few with numerous credit card and sometimes loans. On one end that can be explained by the overall economic situation here in Greece for the last few years. On the other end though I think it's for the most part bad financial education/behaviour. The last 10-15 years there has been a banking services boom where everyone wanted to have his/her credit card, people would get loans to pay for stuff that you could otherwise plan ahead and save instead (vacation, redecoration etc) or even worse just to go shopping. For a time the consumer would get bombarded with ads for new credit cards and small loans to be paid in like 5 years (60 monthly payments for amounts like 3000 euro or so) Everyone would pick the longer payment plans - spend today, payback tomorrow. There are a lot of cases of people that started out with one or two credit cards and a small loan, cards to the limit, paying minimum payments (like 2.5-3% of balance) interests rolling in and well you know the rest... said people either get buried in debt or go deeper by using more credit card or getting new loans.
A lot of people get easily carried away when it comes to financial responsibilities simply because they're not good with basic arithmetic. For example they can't weigh if getting a loan of X amount paid over Y months at Z interest rate is a good plan. Or when managing a credit card debt, minimum payments may seem like a be-done-with-it solution but most people don't realise that minimum payments favour the bank and not customer who usually pays about 50% interest and 50% capital with each payment. Very often it also comes down to discipline and how well you are determined to stick to big payment to get rid of debt fast, or careful consumption in the first place so you don't build up debt itself.
Leaving income and spending aside - which by the way I see a lot of people have it very wrong - I think a lot of us have a poor understanding of financial and banking matters, hence the title of this post. We don't get taught much of that stuff at school and later on we don't take the time to learn about them until we find out the hard way. Personally I find banking is not as evil as people put it out to be (well ok some of those interest rates are downright theft) but rather people aren't well educated on what to do with banking products and how to manage their finances.
First of all you need to have some income of course. You can't manage finance if you're a grad student living off your parents at 25 and never made a buck. Then you need some financial discipline/planning. Sure everybody wants to buy this, do that, go there but you obviously have to prioritise and figure out what you can do without (for now anyway). When you got those two you can put banking products to use so you can reach goals, make everyday expenses easier and keep your finances in check.
So do your reading and learn about stuff like time deposits, savings accounts with minimum monthly deposits, credit card with benefits, investing and all that comes with it (bonds, stocks, real estate, mutual funds etc) loan consolidation, i-banking and many more. You don't have to use all of them but it's good to know what they are how they work and then when the time comes you can decide if you want to go that way or not.
