I was in a high school for CARE last week when one of the teachers asked me for my opinion about home warranties.  I acknowledged that I was starting to see more television commercials advertising them, and that I was curious, but that I had not yet done any research. We agreed that extended warranties, on all but a few things, were generally not a good financial decision, even though they might provide peace and comfort for some people, regardless of the economics. I promised him that I would do the research, share it with him, and discuss it in this column.

Before we look at those warranties, however, I have to say, I am afraid we are clearly still suffering from an epidemic of financial illiteracy in this country. This is my 19th year in the high schools and colleges, and now even middle schools — by the way, they are more ready for the information than they ever were in the past — and I don’t see that things are any better. You realize how important this work is, and how much we are falling down on the job of teaching and modeling good financial habits, when you get up one morning at 6:30 a.m., turn on a cable television network and see a personal finances writer answering viewers' questions. The first question made me shake my head. “We are $14,000 in debt, but we really want to go on vacation. The vacation would cost $2,000. Should we go?” Thankfully the woman said “No," but I have to admit that I was holding my breath for a moment.

Of course no one would have asked that question in the 1950s or '60s, but why are they asking it now? Same old things, including that consumer debt is not so bad, especially if you can afford the low monthly payments; many wants, wishes, luxuries and conveniences are now our “needs,” like going on a “much needed" vacation that we haven’t saved for; and delayed gratification is a thing of the past for too many Americans.

After doing some research on home warranties, it should not surprise you to hear that there are many pros and cons, and that it comes down to an individual decision, based upon your circumstances, after you have done your homework.

A home warranty service contract is not an insurance policy that protects you in the event of loss. It is a service contract which provides service, repair or replacement on a home’s appliances and major systems, like heating and electric.

In real estate transactions, these warranties are becoming more common. A survey reported in the Los Angeles Times claims that homes which come with such a warranty sell on average 11 days quicker and for $2,300 more. So if you are a seller, the on average $400 cost for the warranty may very well be worth it. As a buyer, it is free and may provide you with some peace of mind, but the question is, should you renew it after a year, or should anyone buy one?

The most important thing to me in considering a home warranty is to read the contract very, very carefully, so that you can “manage your expectations.” What is excluded; what contractors will be used and is there a time guaranty for their arrival and completion; is there a maximum the company will pay for a replacement; are there deductibles; are there service fees for calls?  If you do that, and you have a pretty good idea of the condition of your appliances and systems that would be covered, you will have a sense of whether a warranty is for you, or whether you should just put a certain amount aside each month in “a home repairs fund,”in addition to your emergency fund and general savings. By the way, you can learn the average life expectancy of appliances and systems from the Home Inspectors Association at www.nachi,org/life-expectancy.

Beyond that, I personally would not seriously consider purchasing a home warranty without checking out the company with the appropriate Better Business Bureau and Attorney General’s Office, and reading some of the many comments of home warranty customers on the internet. As a heads up, home warranty service companies have been one of the “worst graded” categories on Angie’s List, according to one of its writers.

Of course, if you can afford it, and you are flexible about things like which contractor comes to your house, how promptly the contractor shows up and finishes the work, and whether there should be a repair or a replacement, there is that “peace of mind” factor for some people that doesn’t depend upon a financial analysis.

John Ninfo is a retired bankruptcy judge and the founder of the National CARE Financial Literacy Program.