(Host) A rising number of college students are struggling to pay off credit card debt. Financial experts say this is partly due to a lack of education about money management early in life – both at home and at school.
Today, in the first of two parts, VPR’s Nina Keck examines the young person’s financial education.
(Keck) Sure, money makes the world go round, it’s just that no one wants to talk about it.
(Joline Godfrey) “Kids will say to us, my parents will talk to me about sex and drugs before they will talk about money.”
(Keck) That’s Joline Godfrey, the author of “Raising Financially Fit Kids.”
(Godfrey) “When it comes to sex and drugs we know what to say – just say no. But when it comes to money, it’s a much more complicated conversation.”
(Keck) Godfrey says most people feel uncomfortable and intimidated when the subject turns to money, so she says it’s often easier to just ignore it. Gregory Stone, dean of students at Castleton State College, says the subject is also fraught with personal values.
(Stone) “I think all of us are uncomfortable about our place in the culture based on what we earn. It isn’t about the money. It’s about what the money means in our culture that makes it difficult to talk about.”
(Keck) But Stone and Godfrey say parents who don’t talk to their kids about money are making a big mistake.
(Godfrey) “Even if you’re not talking about money with your kids by the age of five or six, in developmentally appropriate ways, then the back of the cereal box will be talking to your kids or the Cartoon Network will be talking to your kids.”
(Keck) Godfrey has made a career out of teaching kids about money and she says the lessons don’t have to be complicated. An allowance is a great way to start, she says, and parents can begin with kids as young as five or six. But remember, Godfrey says, think of an allowance as a tool to help your child learn to save, share and spend wisely. Don’t tie it to chores or behavior.
(Godfrey) “It’s much easier, then, when kids say, But gee, Mom, that’s my money, for the parent to come back with, No, that’s money to show me that you’re learning to manage money smartly. It’s not money to do anything you want with.”
(Keck) How much to give, says Godfrey, depends on the child and the family situation. Once you’ve set the amount, decide with your child how the allowance will be allocated, so that a certain percentage is set aside for saving, for spending and for charitable giving.
(Godfrey) “Teaching kids the word philanthropy. You would be amazed at the number of 13, 14 year olds who have no idea what that word is. And yet it’s a very effective tool not just for teaching a child about sharing but for helping them make the leap to understanding that it’s not just about me, the child, it’s about something that has a higher purpose.”
(Keck) When a child does want to spend money, Godfrey says help them do it wisely. Teach your kids how to look for bargains. Explain the difference between wholesale and retail. And celebrate with your children when they make smart purchases. If you get your teenager a credit card, which Godfrey says can be a good teaching tool, monitor its use closely. Develop a plan with your child as to how the bill will be paid, and explain how credit cards work with late fees, compound interest and minimum payments.
Gregory Stone, dean of students at Castleton State College, says he’s amazed at how little students really know about personal finance.
(Stone) “They think of it as, I want that. I’ve got this plastic in my pocket and I guess I’ll buy it. The ATMs, they keep sticking their card in the ATMs and one day they see that they don’t have any balance left and they say, Well, what do you mean? You’re not going to give me any money? I thought you just had to put your card in. I mean there is that level of naivete with a lot of students. They just don’t understand how it works.”
(Keck) It’s after 1 p.m. and the lunch rush in the main cafeteria at Castleton State College is winding down. To get some input from the students themselves on money matters, I go from table to table throwing out questions. About half of the students I talk to have at least one credit card. Most of them say their parents pay their bills. One laughingly admitted, though not on tape, that she’d like it to stay that way forever.
Ryan Ayers, an 18-year old freshman from Northfield, is different. She doesn’t have a credit card, she pays her bills and she limits her spending. Like most of the students I talked to, she said her parents never formally sat her down for a talk about money. But Joline Godfrey would be proud, as money lessons were obviously there.
(Ayers) “When I was younger I always got an allowance. And they said, Here’s your $10 a week – it’s your money, do what you want. But, we’re going to the races on this day and we’re going to the fair and if you want to have money for it, you’re going to have to save it. And I just learned, it was more a matter of survival than anything.”
(Keck) “The average college student has a debt on their credit card of about $3,000. Does that surprise you?”
(Ayers) “No. I mean, when you said $3,000, it was like, wow – $3,000! How can you spend that much money? But it definitely makes sense. Everybody just spends and spends and spends. Even my roommates, they go out and they go to restaurants all the time, they go to movies. They’re doing all this stuff and I just sit in my room and go, Wow, how can you afford to do that?”
(Keck) The reality is most college students can’t. According to the National Credit Research Association, college students owe almost half of the nation’s $285 billion credit card debt. Castleton State College Dean of Students Gregory Stone says one of the biggest recommendations he makes to parents of new college students is to sit down and have frank talk with their kids about money, especially if they’ve never had one before. And if parents can’t do this, he says a trusted relative, friend or neighbor may be able to step in.
(Stone) “I think establishing a conversation allows young people to explore the issues in a non-threatening way. Not coming in and saying, You can’t possibly afford this. But say Okay, how do you use your credit card? When the bill comes, do you always have enough money to pay it? Do you pay the minimum ever? Do you understand that the minimum will never really pay the bill? That’s common knowledge but a lot of students you talk to will say, What do you mean? So, you get them to start having conversations with people who can just challenge their reality about it.”
(Keck) Financial experts say if we don’t start talking about money, the debt will just keep growing. And for many young people, the problems associated with that debt could haunt them for years.
For Vermont Public Radio, I’m Nina Keck.
(Host) Tuesday in our series, VPR’s Nina Keck explores how some Vermont teachers and schools are trying to incorporate money lessons into their curricula.