Military Poverty, Personal Debt, and Financial Literacy

The United States military makes itself an appealing option for low-income people in the United States. It offers job training and security, housing, benefits, decent pay, and an opportunity, a chance at something larger than might be otherwise available to someone who can’t afford college or would struggle to survive in a series of low-wage jobs. There’s a reason recruiting targets low-income communities hard, and why people speak of a poverty draft focusing on low-income people for enlisted positions.

One consequence of the military’s recruiting practices, though, is that many people enter the military with limited financial literacy. They haven’t been provided with opportunities to learn about personal finance in school because that kind of education tends to be thin on the ground in low-income communities, and they may not have learned it at home from their family members if they’ve been struggling to survive on low wages, thinking about the next meal on the table, not long-term financial planning. In a world where you’re living paycheque to paycheque, the idea of long-term planning, or managing credit, is rather alien and abstract; no one needs to be prepared for it because it’s an impossible eventuality.

Yet, when people enter the military, their financial lives can change. With housing and other needs provided for, people may find that their salary is larger than they’re used to, and that they suddenly have access to credit and opportunities to spend money in ways they didn’t before. They’re not helped by temptations specifically set in front of them by companies eager to exploit them, aware of their vulnerability because of their lack of financial literacy and suddenly changed position.

It’s not a coincidence, for example, that credit card companies target members of the military with special offers. They may wrap these offers up in all sorts of enticing language complete with commentary about patriotism and thanks for service, but the fine print comes with annual fees, high interest rates, late fees that can quickly balloon if people miss payments, and more. It’s a honey-covered trap, and someone who’s tired of being poor, who joined the military to stop being poor, who hasn’t received much training in how to handle money, might put a hand right into that trap. Here’s free money come knocking, might as well take advantage of it.

Once ensnared, it can be very, very difficult to get out. Balances rack up, and negotiations are difficult to make when you’re at a financial disadvantage and your lack of understanding of the system makes it difficult to advocate for yourself. The same person who didn’t understand how the interest rate worked or what to expect from billing cycles would have a difficult time working with a representative on a payment plan or trying to negotiate a single payoff in exchange for closing the account and moving on. Credit card companies know this, and are eager to exploit what they see as a potentially juicy population.

It’s also not a coincidence that buy here, pay here car dealerships, predatory furniture stores, payday lenders, and similar businesses tend to boom in base towns. They’re just providing a service, they might claim; when members of the military change stations, move off base, or make other big life changes, they need to be able to stock up on supplies. Which explains, of course, why they’re sold cars they can’t afford, pushed to buy pricey furniture they don’t need on tick, or enticed with exploitative home loans, assured that of course as members of the military they will get the best possible deal. The smarmy salesperson will thank them for serving their country while smoothly robbing them, and they’ll have no idea until weeks or months later, when the situation finally implodes on them and they’re left struggling to figure out what happened.

It pushes people onto food stamps and other benefits, because they’re too poor to afford basic needs, since so much of their income goes to debt service. For people in low pay grades living in areas with a high cost of living, personal debt can be especially devastating. It can start to feel like a rock, slowly crushing you, making it impossible to imagine a future in which you’re not deeply indebted; and you may regret your decisions, but that doesn’t change your current situation.

Financial literacy training is offered in the military, but clearly whatever system the Department of Defense has now for that training, it’s not working. People are entering the credit market unprepared, and it’s become a big enough problem that there are some concerns about the security issues posed through personal debt in the military. People who owe a lot of money, especially those who see no way out of that debt and feel exploited and helpless, can be easy targets for manipulation, and that is potentially very, very dangerous when those people are supposed to be handling national defense and dealing with sensitive information.

Thus financial literacy is not just a problem in terms of what it does for morale and how it affects individual members of the military who can struggle with personal debt, but it’s also an issue for the larger military. Clearly financial literacy training should be available to all, making it more likely that people entering the military will have a better understanding of personal finance issues, and the military’s practice of recruiting heavily from low-income communities also urgently needs closer examination. But the DoD also needs to take more responsibility for protecting members of the armed services through education and advocacy, and through pushes for crackdowns on exploitative lending practices targeted at military personnel.